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RAE, JOHN, economist and author; b. 1 June 1796 in Footdee, a suburb of Aberdeen, Scotland, son of John Rae and Margaret Cuthbert; d. 12 July 1872 at Staten Island, New York.

John Rae, the second youngest of seven children, was the son of a well-to-do merchant and shipbuilder who suffered financial reverses and became bankrupt in 1820. Rae’s childhood was marred by marital discord in his family, and some undefined mental or physical problem barred him from normal activity and encouraged his interest in intellectual pursuits very early.

Rae entered Marischal College in 1809 or 1810 and in 1815 was granted an ma. In this period he was keenly interested in science and invention, and he invented a number of devices including an apparatus for measuring ocean currents and a device for feathering paddle wheels on steamboats. He became a medical student at the University of Edinburgh in 1815 and continued his studies there until 1817. His dissertation, entitled “De vita,” expounded some novel views on human society and natural science. Rae’s opinion was that the medical and physiological theories of the time were irrational and burdened with traditional non-scientific notions. His theories of the origin and development of man – based on his understanding of the extreme antiquity of the earth – his experimental bias, and his belief in the virtues of comparative studies, placed him in opposition to established doctrines. He recognized that it would be imprudent to challenge the medical profession in Edinburgh and, as a result, postponed the presentation of his thesis pending further study. It was never presented and he never received his medical degree. Rae toured Norway in 1818 and probably spent some time in Paris pursuing his interest in the study of natural science. He married at about this time but all that is known of his wife is that her name was Eliza.

Rae had expected that he would inherit one of his father’s estates and be able to devote his life to study. His father’s bankruptcy and the loss of the property changed his plans; in the spring of 1822 he and his wife emigrated to Canada. He later wrote: “I exchanged the literary leisure of Europe for the solitude and labors of the Canadian backwoods.” Rae went first to Montreal where his older sister, Ann Cuthbert*, was living. She had published two books of poetry, in 1815 and 1816, and through her second husband, merchant James Fleming, provided Rae with an entrée into the intellectual and commercial life of Montreal. He doubtless knew John Fleming*, the brother of James, an author and political commentator of some force who was an early president of the Bank of Montreal. He soon left Montreal, however, to open a boys’ school in Williamstown, Upper Canada, in 1822, giving as his references the Reverend Henry Esson*, of the St Gabriel Street Church in Montreal, Alexander Skakel* of the Royal Grammar School in Montreal, and the Reverend John Mckenzie*, Presbyterian minister in Williamstown.

Williamstown had the largest Presbyterian congregation in Canada at that time and Rae became a spokesman for the Presbyterian Church in Canada in Connection with the Church of Scotland. He was intimately involved in the clergy reserves controversy, and in 1828 he published a long open letter in the Canadian Miscellany to E. G. Stanley (later the 14th Earl of Derby) on the disputes between the Church of England and the Presbyterians in Canada. Rae argued that the revenue from the clergy reserves, if managed properly and supplemented by modest public contributions, would provide ample support to both the Church of England and the Presbyterians. He also claimed that the use of 21-year leases was unsuitable in an undeveloped country and proposed instead leases extending from 70 to 100 years. This would provide an inducement for the heavy investment in clearing wild lands. Rae served briefly as one of the coroners of the Eastern District (Stormont, Dundas, and Glengarry counties), and may have practised medicine in Williamstown.

While living in Williamstown Rae travelled extensively throughout Upper Canada investigating its geology and economic prospects. In 1832 he petitioned the lieutenant governor of Upper Canada, Sir John Colborne*, for financial support for his explorations and research and announced his intention of publishing a work on the present state and resources of the colony. He intended initially to include an appendix dealing with the theoretical aspects of economic development and with Upper and Lower Canada’s economic relations with England.

In 1832 and 1833, Rae contributed a number of polemical letters to the Montreal Gazette on current affairs. A vigorous letter on colonial policy late in 1832 attacked the faction which would destroy the ties between Canada and Britain. This was an emotional appeal for loyalty which buttressed his view that the economic development of the colony depended on the maintenance of the close commercial relations. Shortly after, he wrote two letters vigorously supporting high levels of immigration and attacking the anti-British group who were fearful of the effects of pauper immigration. Rae also contributed a bitter essay on the inadequacies of the educational system of Lower Canada early in 1833: he denounced the education bill of 1832 for its restrictive and parochial character and for its completely inadequate provisions for encouraging the supply of competent teachers.

Rae continued the work on his book meanwhile. He visited Boston in 1834 and with the encouragement of a number of Boston literati, including Alexander Hill Everett, the editor of the North American Review, decided to issue the appendix first as a separate publication. It appeared in 1834 with the title Statement of some new principles on the subject of political economy exposing the fallacies of the system of free trade, and of some other doctrines maintained in the “Wealth of Nations.”

The main achievement of this remarkable and brilliant book was to present a theory of economic development and to analyse the influences governing the accumulation of capital. Rae’s view was that individuals could become rich by acquiring greater shares of existing wealth but that nations had to create new wealth before they could become richer. They could only do so with the help of the “inventive faculty.” It was thus of cardinal importance to encourage invention and to facilitate the transference of new industrial techniques from one country to another. His concept of external economies could be used to justify the adoption of protective duties, bounties, and other forms of state intervention. Rae’s analysis of capital accumulation rested heavily on his concept of the “effective desire of accumulation,” governed by the following influences: first, “the prevalence throughout the society, of the social and benevolent affections, or, of that principle, which, under whatever name it may be known, leads us to derive happiness, from the good we communicate to others”; second, “the extent of the intellectual powers, and the consequent prevalence of habits of reflection, and prudence, in the minds of the members of the society”; and third, “the stability of the condition of the affairs of the society, and the reign of law and order throughout it.” Rae’s analysis of the role of invention, of durability in capital formation, and of the economic role of the state was admirable from both a technical and a literary point of view. Many of the ideas he advanced remain applicable to the problems of developing countries in the mid-20th century.

Rae’s book was not an easy one to understand and attacked the entrenched views of the followers of Adam Smith. As a result it did not achieve any popular success and did not bring Rae the acclaim he had hoped for. In England, Rae’s criticism of some of the established economic doctrine and his espousal of state intervention to foster new technologies were received coldly and he was, for the most part, dismissed as presumptuous. So far as Rae’s protectionist sponsors in the United States were concerned, they found his arguments too moderate and reasoned, and unsuited to the shrill and simple-minded controversy in which he had become involved. This cool reception was matched by indifference in Canada, not surprising in view of the colonial mentality and primitive economic ideas which prevailed at the time. There were two favourable references in the Montreal Gazette but this is the only direct and recognizable impact which Rae’s book had on economic thought in Canada in the 19th century. Twenty years after its publication Rae wrote to John Stuart Mill about his book, “I have not looked at it for many years, and have no copy of it.” His disappointment with the reception of his book was great but, having to earn a living, he turned again to schoolteaching and, late in 1834, was appointed headmaster of the Gore District grammar school in Hamilton. He remained in this position until 1848.

Rae was active in the work of the Hamilton Literary Society, which was one of the centres of intellectual life in the community. He began a lifelong friendship with Hugh Bowlby Willson after moving to Hamilton. Roderick William Cameron*, the son of Duncan Cameron*, and at one time a pupil of Rae’s in Williamstown, moved to Hamilton to begin a distinguished mercantile career; their friendship was to last until Rae’s death. Rae was also well known to Sir Allan Napier MacNab* and claimed the acquaintance of Sir Francis Bond Head. Rae’s loyalist sentiments remained firm in the face of the reform agitation of the mid-1830s. During the armed insurrection in December 1837 Rae joined the militia to help suppress the rebels and participated in a number of skirmishes on the Niagara frontier.

During his life in Hamilton, Rae’s intellectual activities continued unabated. In the summer of 1840 an announcement appeared in several newspapers that Rae’s book “Outlines of the natural history and statistics of Canada” would be published in England. The manuscript was evidently rejected and later submitted for publication in New York where it was lost. He experimented with balloons using solar heat (the first recorded aeronautical experiment in Canada) and published the results in the American Journal of Science and Arts (New Haven) in 1838. He became involved in the educational and religious controversies which bedevilled Upper Canada in the 1840s and wrote a number of spirited articles in this field. He also contributed several graceful essays to the Literary Garland of Montreal and entered into a controversy in 1845 over the geology of North America with the Reverend William Turnbull Leach* in the British American Journal of Medical and Physical Science.

Beginning in 1832, the Presbyterians were concerned about the lack of a theological seminary in Canada. In 1837, as a stopgap, arrangements were made to have four young candidates for the ministry begin their studies under John Rae at the Gore District school. In 1842, when Queen’s College at Kingston opened, four of Rae’s students were among those enrolling in theology. On two occasions, in 1841 or 1842 and in 1845, Rae applied for a teaching post at Queen’s but was turned down.

In the late 1840s Rae’s relations with the trustees of the Gore District school became strained. He had become involved in the controversy with the educational authorities, spearheaded by Church of England Bishop John Strachan*, concerning the attempts to impose centralized control over the operations of the grammar schools. The board of trustees of his school, at one time dominated by Presbyterians, had changed as a result of the disruption of 1844 and Rae found himself under the control of an unsympathetic board consisting of the Reverend John Gamble Geddes, a Church of England minister in Hamilton, and Dr William Craigie*. There were allegations about Rae’s “inefficiency” as a teacher, as well as disagreement over religious matters and accommodation. The upshot was that the trustees closed the school, effectively dismissing Rae. Rae moved to Boston and then to New York where he took a teaching post. In August 1849, Rae’s wife, who had stayed behind in Hamilton, died of cholera and in December Rae set off for the gold fields in California. He spent some time in Panama en route and remained in California until the spring of 1851 when, finding the gold fields unrewarding, he sailed to the Hawaiian Islands.

At some time prior to 1847, Nassau William Senior, the English political economist, acquired a copy of Rae’s book and praised it highly to John Stuart Mill. Mill recognized Rae’s significant contribution to the theory of capital and incorporated some of Rae’s views in his Principles of political economy. Mill wrote: “in no other book known to me is so much light thrown, both from principle and history, on the causes which determine the accumulation of capital.” Professor Francesco Ferrara of the University of Turin also recognized the quality of Rae’s work and translated it into Italian in 1856. Copies of Rae’s Statement of some new principles were scarce and its general theme was known mainly because of Mill’s copious quotations. Rae himself learned of Mill’s interest in 1853 and exchanged some interesting correspondence with him in 1853 and 1854.

Not long after Rae’s arrival in the Hawaiian Islands he settled down on the island of Maui and began to operate a small school. He was appointed medical agent of the Board of Health in 1853 and acquired a farm in Hana. Late in the 1850s Rae was made district judge of Hana, a notary public, and a coroner. He became a close friend of Robert Crichton Wyllie, a fellow-Scot and the Hawaiian minister of foreign relations, and strongly supported Wyllie in his contests with the American missionaries. Early in 1861 he completed a long and profound article on the legislative system of the Hawaiian Islands, published in six instalments in the Polynesian. In the fall of 1862 Rae also contributed to this newspaper an essay on the “Polynesian languages,” in which he developed the theory that human speech originated in facial gestures. The essay was praised by Mill, who felt that the paper would “place Dr. Rae very high among ethnologists and philologists,” and by Friedrich Max Müller. Rae continued to develop his ideas on this subject and a long manuscript on languages was found among his papers. It was so badly mixed up that it could not be properly assembled and it has since been lost. He wrote voluminously on the geology of the Hawaiian Islands and enunciated some novel views on tides and volcanoes.

In the summer of 1871 Rae returned from Maui to spend his remaining years on Staten Island with his lifelong friend, Roderick William Cameron. The next summer, in his 77th year, Rae died and was buried on Staten Island in an unmarked grave.

In 1897, Charles Whitney Mixter, a student at Harvard University, published an article in the Quarterly Journal of Economics on Rae in which he ascribed to Rae some of the views of Eugen von Böhm-Bawerk set forth in the Positive Theorie des Kapitals. The resemblance was exaggerated but stimulated Böhm-Bawerk’s interest and led him to include a long chapter on Rae in the second edition of his Geschichte and Kritik der Capital-zinstheorien (1900). Irving Fisher wrote an appreciative note about Rae in 1897 and dedicated his book The theory of interest (1930) “To the memory of John Rae and Eugen von Böhm-Bawerk who laid the foundations on which I have endeavoured to build.” He described Rae’s Statement of some new principles as “truly a masterpiece, a book of a generation or a century.”

R. Warren James