John Rae, 1796-1872.

Scottish-American adventurer, schoolteacher and briefly economist.

A Scottish shipper & shipbuilder's son, John Rae was educated at the University of Aberdeen (already after the twilight of the Scottish Enlightenment), receiving his M.A. in 1815.  He proceeded to study medicine at Edinburgh, but left without taking a degree -- apparently, his ideas about physiology contrasted too sharply with the received medical theories of the day and felt he needed further preparation to defend his thesis.  So, in 1817, Rae proceeded to Paris, where he continued his medical studies.  But, for some unexplained reason, he abandoned them and was next found touring Norway in 1818 (possibly relating to his father's shipping business)

After a brief sojourn back in Edinburgh (where he married humbly), the young  John Rae emigrated to Canada in 1822 and set himself up as a schoolmaster at Williamstown,  a fur-traders' town near Montreal.  But around 1831-32, he was apparently residing in Quebec, then Montreal and, finally, Boston, Massachusetts. 

Rae's stay in young upper Canada filled him with an interest about development, and he contemplated beginning one of those typical Scottish "natural histories" of the progress of mankind.  But he narrowed it down to economic development, which he believed was the key to the rest.   He read Adam Smith's Wealth of Nations and, perhaps informed by his Canadian observations, found it rather disappointing.  So Rae wrote his Statement of Some New Principles, which appeared in Boston in 1834 to lay out his own ideas and criticize Smith's.  Rae's work introduced some rather remarkable economic insights, made all the more astounding given how little background he had in the subject (although Rae is one of the few English-speaking economists to cite Cantillon as a source).  Against Smith's enthusiasm for free trade, Rae introduced  the "infant industry" argument for protectionism.  The publication of Rae's work was sponsored by New England industrialists to promote the "American System"  

The central feature of Rae's book  is his remarkable theory of capital, combining time preference and capital productivity, which anticipates the theories of Böhm-Bawerk and the Austrian School and Irving Fisher (they both generously praised Rae later).   Rae noted that a capitalist must weight the greater productivity of longer production processes against the wait for them to bear fruit.  He links the interest return -- the sacrifice of present money for future money -- on the rate of time preference, a concept he introduced and mused much about.  He also identified technological innovation (rather than sheer capital accumulation) as the key to economic development.

Raw partitions classes of capital -- what he calls "instruments" -- into different "orders", depending on their "capacity" (output produced by that instrument), "cost of production" (which he measures in wage labor units) and "time to exhaustion". Or, more briefly, he classifies them effectively by their yield.  He measures the total supply of capital as the total capacity of all instruments.  He notes that the capacity of an instrument can be increased by two margins: by extending "durability" or by increasing "efficiency" (productivity per unit of time).  But extending capacity by either margin entails greater costs of production (i.e. more application of labor). 

Soon after his book was published, Rae left Boston and headed back north to Hamilton, Ontario, where he took up a post as a headmaster in a local grammar school.  In 1837, when the Canadian rebellion broke out, Rae joined the Canadian militias and fought near the Niagara. The very next year, he was ousted by the school authorities in Ontario, ostensibly on the grounds of unorthodox thinking on religious matters.  

In 1849, after his wife's death, Rae moved to Boston, then to New York, and then caught a ship to Panama.  From there, he hitched a ride to California as a ship's doctor.  California was then in the height of the gold rush, but Rae settled down as a teacher in Sutton's Creek and made gold-washing cradles and balances for the miners. 

In 1851, he got itchy feet again and sailed to Honolulu and settled in Maui, Hawaii, where he worked as a schoolmaster, medical agent and district judge.  He would remain there for a while.  He died in Staten Island, New York, while visiting a former student. 

This John Rae should not to be confused with his namesake John Rae, author of the Life of Adam Smith, nor the nearly contemporaneous arctic explorer John Rae, another Scottish physician-adventurer in Canada.

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