Richard T. Ely was an especially gifted and effective Progressive Era reformer. No other progressive worked so energetically, for so long and in so many ways, to effect change in America.

• As an educator, he taught many future progressive statesmen and academics.
• As a scholar and public intellectual, his arguments for political and economic reform reached hundreds of thousands of Americans by way of scholarly and popular books and articles.
• As an organizer and activist, he was instrumental in founding the American Economic Association and a number of public policy organizations.
• As one of the premier Social Gospel activists, he spread his vision of the secular redemption of the Earth to a great number of Americans, both clergy and laymen.

Ely’s efforts bore fruit. He helped to alter the political principles of the nation away from natural rights and limited government and toward a progressive view of a vastly larger government that heavily regulates the economy, redistributes income, and assists in the positive development of each citizen. His scholarship and activism and the effect that they had on the nation demonstrate the truth of Ely’s belief that “ideas govern the world.”[1] In our day, his legacy includes an eroded attachment among Americans to private property and contract rights, a more progressive Christianity, and a significant departure from the natural rights regime of the Founders.

Life

Ely was born on April 13, 1854, in Ripley, New York, to Ezra Sterling Ely and Harriet Gardner Mason Ely. He taught country school in Mayville, New York, in 1871 and enrolled at Dartmouth College the next year. He then transferred to Columbia College, from which he graduated in 1876 with a degree in philosophy. He was raised a Presbyterian but converted to the Protestant Episcopal Church while at Columbia.

Like many other promising American college graduates of the time, Ely went on to do graduate work in Germany. In 1877, he spent a year studying philosophy (with a political economy and history minor) at the University of Halle. While there, he studied with Johannes Conrad, a German Historical School political economist. He then transferred to the University of Heidelberg and studied with the distinguished German Historical School professors Johann Bluntschli and Karl Knies. Ely graduated from Heidelberg in 1879 with a PhD in political economy, summa cum laude.

Ely returned to America and in 1881 joined the faculty of Johns Hopkins University as a lecturer, later becoming an associate professor of political economy. At the time, Johns Hopkins was one of the few American schools that offered doctoral degrees. Ely taught mainly graduate students, and a stream of future Progressive Era luminaries passed through Johns Hopkins’s prestigious program and his classroom. Among his many famous students was Woodrow Wilson. He also informally educated other important Progressive Era figures, including Theodore Roosevelt and Robert M. La Follette. Ely had a significant influence on the nation through his students and political connections.[2]

Ely wanted progressive economics to be taught more widely, but for all of his influence, no one person could singlehandedly reform the American economics profession; Ely needed allies. In the late 19th century, American economists were divided, with laissez-faire advocates on one side and progressives on the other. Ely’s response to laissez-faire professors such as Simon Newcomb and William Graham Sumner was to help found the American Economic Association in 1885 as a reform-minded organization of progressive economists. Ely served as its first secretary and later as its president. The AEA rapidly fulfilled the hopes of its founders and became an effective progressive alternative to the laissez-faire school.

In 1892, Ely left Johns Hopkins and became director of the School of Economics, Political Science, and History at the University of Wisconsin. At Wisconsin, Ely’s advocacy of progressive economics attracted censure from his colleagues.

In 1894, Ely was subjected to a hostile review by Simon Newcomb that included a call for his removal from academic life.[3] The review left Ely relatively undisturbed, but that same year, he was accused by the state education superintendent, Oliver Wells, of teaching radical socialist doctrines. Because there was no tenure system at the time, Ely was academically unprotected. He was subjected to an academic “trial” before the Board of Regents but was eventually exonerated, and the Board of Regents issued a statement defending academic freedom.

Ely never wavered in his calls for political and economic reform, and he had a prodigious scholarly output. He wrote many books and many scholarly and popular articles. He also co-authored Outlines of Economics (1893–1937), a widely used textbook that went through six editions and sold hundreds of thousands of copies.

In all of his many writings, Ely made the case against laissez-faire capitalism and for progressive economics and politics. His activism also included work with many state and city commissions and even extended to influencing the Supreme Court of the United States: In 1922, Justice Oliver Wendell Holmes, Jr., adopted Ely’s progressive “bundle of rights” theory of property in the Court’s important Pennsylvania Coal Co. v. Mahon decision.[4]

Ely had his greatest influence from the time he arrived at Johns Hopkins in 1881 until the outbreak of World War I. After the war, he experienced personal tragedy and professional changes. His wife of 39 years died in 1923. Two years later, he resigned his position at the University of Wisconsin and became an honorary professor of economics at Northwestern University. He married Margaret Hale Hahn in 1931. The next year, he retired from Northwestern, but he continued his economic research and public advocacy for the rest of that troubled decade. He died on October 4, 1943, in Old Lyme, Connecticut.

Political Economist

Ely taught that America was founded on flawed political and economic principles. Under the regime bequeathed to us by the Founders, men have the negative right to the protection of their life, liberty, and property, and government is limited to protecting these rights. For Ely, this is a cramped view of the task of government.[5] It permits the economically strong capitalist to exploit the economically weak workers. It protects the property of the rich from redistribution to the needy many. Therefore, we need to alter our view of government, beginning with first principles: Men are not by nature equal;[6] government is natural, not an artificial creation grounded in a fictitious social contract;[7] and limited government is a mistake that hinders our progress.

Ely rejects both capitalism and the belief in a natural right to property as mere dogmatism.[8] In his understanding, capitalists improperly begin by assuming that men are governed by self-interest. From there, they deduce economic principles and then enforce and protect them with a laissez-faire legal regime that improperly claims to be of universal benefit.

Instead, Ely argues, laissez-faire exacerbates natural human inequalities and results in the exploitation of the many by the few.[9] Only the talented few profit from capitalism. Precisely because they are talented, they come to own the means of production and grow rich. The less naturally talented many must make do with whatever jobs and wages are offered to them by the capitalists. If workers balk at the terms offered, the capitalists, with their deeper pockets and ready access to a reserve army of more compliant workers, will outwait them. The recalcitrant worker will starve.

Ely here has in mind the urban industrial conditions in Gilded Age America, with the nation having overtaken the era of the self-sufficient American farmer who was quite a bit freer to refuse hard terms offered by another. The blue-collar worker of Ely’s day—and ours—cannot return to the farm if he is unable to find a job at a living wage. Therefore, according to Ely, capitalism coerces workers by giving them a Hobson’s choice of hard terms or starvation.[10]

Moreover, as workers are compelled to put in long hours and a seven-day workweek, bad moral effects arise. Their family, social, religious, and intellectual life suffers. The capitalist thus degrades both the worker and himself. He degrades himself because he becomes callous to the suffering of workers and fails in his Christian duty to help others.

Ely erred in his analysis of the condition of workers under capitalism. During the period of laissez-faire, ordinary men experienced great increases in prosperity as a growing and increasingly productive economy gave them unprecedented opportunities for economic advancement. These benefits extended down to the most vulnerable Americans. Ely, however, did not see these benefits of laissez-faire. For example, he believed that the absence of a minimum wage resulted in economic coercion of the economically weak by the economically strong. In fact, the right to contract freely meant that a poor and underemployed worker could at least hope to find a job and then proceed to work his way up to a higher rate of pay.

Ely’s alternative to laissez-faire came to be identified as the Institutional School of economics, an American offshoot of the German Historical School of economics. Both schools were steeped in Hegelian historicism, a philosophical view that all intellectual and political development is governed by impersonal historical forces that are progressive and directional and that propel us toward greater wisdom, rationality, and justice. On this view, past thinkers who believed that they had discovered permanent philosophical truths were wrong; they had at most a partial grasp of the truth and were at most a mere stage in the progressive unfolding of greater truth and justice.

German Historical School and Institutional economists adapted historicism to economics by teaching that there are no permanent economic truths that are valid for all times and places. All economic postulates are at most conditionally true and depend on the period of historical development under way in the particular society under study.

Moreover, they argued that economics must be an ethical—rather than a deductive and scientific—discipline. On Ely’s telling, laissez-faire only describes the world as it is—and then hides behind the claim that economics is merely descriptive. By contrast, the German Historical School argues that economics should be prescriptive. It must be guided by an ethical ideal. Its economic prescriptions should consciously be aimed at what ethics requires of us: social reform by means of state intervention.[11]

In order to understand existing and prospective property relations and the means by which to reform them, Ely argued that one must understand how human conventions condition our uses of and beliefs about property. The primary conventions or institutions that mediate or affect property are (1) the actual distribution of “[p]roperty, public and private; (2) inheritance; (3) contract and its conditions; (4) vested rights; (5) personal conditions.” The secondary ones are “(1) custom; (2) competition; (3) monopoly; (4) authority; (5) benevolence.”[12]

For Ely and for progressivism, this means that property and contract relations are entirely conventional and not natural. For example, if times are hard and wages fall, then the government can impose a minimum wage—an artificial measure—in order to correct a failing of another artificial arrangement, a maldistribution of property that gives the rich an artificial advantage over the poor. All economic arrangements are therefore subject to reform by the government, as are the social, political, and economic factors and institutions that affect property.

When coupled with the ethical ideal of progressivism—social reform through state intervention—this new economic understanding opens up an enormous space for progressive economic reforms, from the minimum wage to health and retirement benefits, workplace safety regulations, price controls, and so on. Regrettably, however, these reforms harm vulnerable, less-skilled workers by making it unprofitable to hire them.

In Ely’s view, property and contract should be regulated by government so as to align with the “general welfare” of society, the term he uses to describe his understanding of the progressive ethical ideal.[13] In its most elaborated form, the “general welfare” theory of property and contract looks to maximizing everyone’s individual potential. Each person has a certain human potential that he or she can reach under the right environmental circumstances, shaped by social science. Ely wants us to promote the maximum possible development of each person physically, culturally, economically, spiritually, and educationally. We should aim for “the most perfect development of all human faculties in each individual, which can be attained.”[14]

Of course, that maximum possible development might vary greatly from person to person. Ely knows that men have different natural capacities. It is the task of the exceptional few to develop themselves above—perhaps even far above—the common man, but then they must turn to raising up the common man as much as possible in all the dimensions of human development.

We might describe Ely’s high ideal as progressive individualism. The economy must be regulated and the rich must be taxed so as to move us toward Ely’s positive goal of progressive individualism. If we merely protect a so-called natural right to life, liberty, and property, the government will not have the authority and resources to pursue progressive individualism. Nor will it have the constitutional warrant to regulate the economy. These coercive tax and regulatory measures morally taint Ely’s idealist vision.

Social Gospel Advocate

Ely believed that economics was incomplete without an explicit ethical goal, and he found his moral ideal in Christianity. For this reason, his extensive work in political economy represents only half of his vocational commitment. Ely was just as much an advocate of the Social Gospel as he was a political economist, and he saw the two roles as inextricably linked.

The Social Gospel is a Progressive Era Protestant reform movement centered on, in the first instance, a reform of Christianity’s self-understanding. On its traditional self-understanding, Christianity is the way to salvation. Christians are enjoined to seek redemption and make themselves worthy of entrance into Heaven after this life.

In the traditional Christian view, this world is temporal, inherently imperfect, a vale of tears, and in many respects a mere stepping stone to the next. Social Gospelers, however, aim to redeem this world. As Ely puts it, “The mission of the Church is to redeem the world, and to make peace with it only on its unconditional surrender to Christ.”[15]

Social Gospelers do not deny the afterlife and the need for the redemption of the soul, but they place the redemption of this world ahead of this traditional mission of Christianity. Ely tells us that “Christianity is primarily concerned with this world, and it is the mission of Christianity to bring to pass here a kingdom of righteousness and to rescue from the evil one and redeem all our social relations.” The “common impression that Christianity is concerned primarily with a future state of existence” is an “error.”[16]

Ely begins his elaboration of the Social Gospel by focusing on the two commandments of Christ: Love God and love your neighbor. Those two commandments capture for him the whole teaching of Christianity. He tells us that the church traditionally has focused on the first commandment—love God—and more or less ignored the second.[17] To love your fellow man means to help him, to lift him up in a tangible, measurable, earthly, verifiable, palpable, and effective way. If he is sick, hungry, cold, and ignorant, then he must be healed, fed, clothed, and educated.[18]

This is a great challenge, and Ely wants results, but the modern world offers us a way to get such actual results: social science. Loving your neighbor means using social science to help him solve earthly problems. As Ely puts it, “[T]he second commandment…in its elaboration, becomes social science or sociology.”[19]

It was not possible adequately to practice the second commandment of Christ prior to modernity, according to Ely, because we did not then have social science. He therefore does not condemn past Christians for their failures in loving their neighbor. But with the discovery of social science, there is no longer any excuse. The change to Christian self-understanding, in line with the authentic teaching of Christ, has opened new possibilities for reform in the modern world.

The connection between the Social Gospel and Ely’s understanding of political economy now comes into view. Ely’s historicism, absorbed from his German Historical School professors, grounds both the Social Gospel goal of eventual secular redemption and the more purely mundane goal of rational political and economic administration. Politics, economics, and religion all move toward a historically determined end point.

Ely’s Hegelian historicism is perhaps most evident in his description of evolving ethical concerns: “[W]hat is includes what ought to be. The ideal exists, but not universally. The ethical aim of reformers is to render general that excellence which at the time is isolated. Past, present, and future are organically connected. The germs of a better future always exist in the present.”[20] What the Social Gospel indicates as a moral ideal—the redemption of the Earth and the secular uplifting of each person in it—can and must guide the new economics.

In fact, the flow of history assures us of the triumph of this ideal. To the extent that capitalist arrangements are at variance with Social Gospel ideals, they are immoral and, prudence permitting, subject to rejection and reform. To the extent that a progressive economic reform can help to fulfill the moral ideal indicated to us by the Social Gospel, then it becomes, prudence permitting, morally imperative to seek that reform. To the extent that the U.S. Constitution stands in the way of reform, the U.S. Constitution must be reinterpreted so as to permit reform. In short, history is fulfilled by the interplay of Social Gospel teachings and the new political economy.

Some might fear that men will balk at fulfilling an enlarged Christian duty that imposes on them heavy taxation, the heavy regulation of their business, and perhaps even very extensive personal obligations, but Ely is confident that men will cooperate if they understand and accept the message of Christ in its Social Gospel interpretation. Christ shows us the highest possibility of human love. He is history’s greatest philanthropist.[21] If you accept Him and His ethical teaching in your life, you will say with Christ, “My burden is light.”[22] You will cheerfully dedicate yourself, your talents, and your resources to others. Years and decades may have to pass as we undergo a slow cultural change in the truly Christian direction, but we can look forward to such a wonderful reward: a redeemed Earth.

The great reforms that the Social Gospel calls for must happen through the state. We need the coercive power of government if we are to redistribute income, qualify capitalism, and implement the second commandment of Christ in the form of social science. Because the state is natural and not artificial, we have moral and philosophic space for its enlargement.

We must abandon the Founders’ fear of an enlarged state. Instead, we must see an enlarged state as a moral institution and, indeed, the most important institution: “God works through the state in carrying out His purposes more universally than through any other institution…. [I]t takes the first place among his instrumentalities.”[23] Ely believes that in time, church and state must become one; he hints that the state will come to absorb the church. The state is therefore a sacred institution with a sacred mission.[24]

For all the ambition in his efforts to reform the United States, Ely dares to look beyond the nation to the world at large. A nation must reform itself before it seeks to redeem other nations, but Christianity calls on us to redeem the whole world: “[W]e can never stop short of entire humanity.”[25] Ely looks ahead to a system of world federalism—a sacred, global state—that can spread Social Gospel reforms to all men.[26]

Ely’s Social Gospel teachings are deeply problematical. Christians are certainly enjoined by their faith to love and help their neighbor, but there is no Biblical support for the view that Christians should be more concerned with this world than with the next. Moreover, the secular redemption of the Earth requires a degree of effectiveness from social science that it has not yet demonstrated. If secular redemption is not attainable, then Ely also errs in sacralizing the state and giving it the mission of bringing about that secular redemption.

Later Years and the New Deal

The Great Depression gave progressive reformers an opportunity to put their theories into practice. Ely’s response to the Great Depression and the New Deal revealed important weaknesses in his economic and political thought.

During that economic crisis, Ely published calls for intelligently conceived government intervention.[27] At the same time, he was dismayed by the New Dealers’ and radicals’ attacks on capitalists. Ely wanted a public-spirited aristocracy of naturally talented and well-educated men to govern Americans and manage their corporations.[28] He believed that the Progressive Era reforms of the previous generation had set America’s ruling and capitalist classes on the right path, and he was appalled to see capable, moral men of business being attacked in demagogic terms during the Depression.[29] Ely also believed in slow, gradual, tested change and not radical economic discontinuities. Consequently, he was dismayed at the economic incompetence of so many New Deal reformers.[30]

Despite the distance that Ely tried to place between himself and the excesses of the New Deal, however, he must share the blame for them. Progressive economics makes property and contract law vulnerable to manipulation by demagogues and passionate majorities, whereas the doctrine of natural rights offers a principled defense of property and contract. Property held by natural right can certainly be regulated and taxed, but such laws must aim at better securing one’s natural rights.

Taxes provide the government with the revenue it needs to protect our natural right to life, liberty, and our remaining property. Regulations can be used to protect people from harmful uses of property by others. For example, sanitary regulations can be used to prevent noxious intrusions on the property of others. Departures from natural rights (for example, taxpayer-funded minimal welfare programs or the draft) are aimed at coping with unusual, emergency situations. These departures do not displace the primary moral and legal claim of the property holder to his property.

To be sure, a natural rights regime, though it provides robust protection of private property, differs from laissez-faire. The Founders believed that state governments could exercise legislative powers for reasons related to health, safety, and morals; later laissez-faire theorists routinely denied or severely restricted such legislative powers. And while the Founders countenanced minimum welfare programs, laissez-faire theorists argued against any public relief efforts. Unlike the natural rights regime of the Founders, Ely’s “general welfare” theory of property permits private property only to the extent that such ownership serves broader, positive social goals such as progressive individualism, but such goals are open-ended and theoretically unlimited in scope. The result is multiple and competing claims for the primary title to property with politicians mediating the struggle. In such circumstances, it is nearly inevitable that demagogues will ride to power on the popular desire for the property of others.

Ely did not foresee the demagoguery of the New Deal; he wanted coolly rational experts to manage America’s economy. But as the Founders well knew, no system can guarantee the quality of its leaders.

Conclusion

Ely’s most central error was his historicism, a dogmatically asserted philosophy of change that assumes the eventual, inevitable, and final triumph of reason over the passions. Quite apart from historicism’s theoretical defects, any fair historical study of the decades between Ely’s time and ours should cause us to question progressive philosophical optimism. For his part, Ely never wavered in his commitment to progressive economics and the Social Gospel.[31]

Ely’s legacy is most apparent when we compare today’s America with the natural rights regime of the Founders. A once-strong belief in private property and contract rights has faded as government regulates and taxes for progressive purposes. And though the Social Gospel movement died out before World War II, we can trace today’s liberal Christianity to its influence. Liberal Christians do not speak of secular redemption, but they continue to connect their Christian duty with progressivism.

Ely’s confidence in social science is echoed today by its many defenders in academia and government. To a great extent, America today continues to be shaped by the ideas that Ely helped to advance and popularize.