The Great Divorce: The Freeing of Markets from Moral Constraint .... 6 Robert
Heilbroner, The Worldly Philosophers: The Lives, Times, and Ideas of the .....
Thomas Aquinas was the first major Christian thinker to justify individual
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The Great Divorce: The Freeing of Markets from Moral Constraint By Kenneth W. Stikkers (Southern Illinois University Carbondale)
From antiquity until the twentieth century, economics was considered part of moral philosophy, as illustrated by the fact that Adam Smith held the Chair of Moral Philosophy here at the University of Glasgow when he wrote his magnus opus. Until the late nineteenth century, indeed, there were no departments of economics, and if one wished to study that subject, or politics, one would specialize in moral philosophy. So, if we are to follow the theme of this World Congress for Social Economics and move “towards and ethical economics and economy,” it might behoove us to consider first, how did economics sever itself from ethics in the first place? And, how did economists come to conceive of their discipline as other than an ethical undertaking, a moral science? How did things change? How is it that economists today think of themselves as strictly empirical, mathematical scientists with nothing to do with ethics or even philosophy? What were the historical causes for this great divorce? And, moreover, how was it possible to conceptualize the discipline of economics so as to imagine that one could put all ethical considerations and to think that, as an economist, one has no need for philosophy at all, something which seems preposterous to anyone educated in philosophy? Such are the questions that I have been attempting to answer for many years, and here I wish to offer my current, condensed answer. I wish to look first at the historical forces that led to a general divorce of economy from morality and then, second, at how economics was conceptually separated from ethics by moral philosophers and social theorists, following those historical developments. First, there were historical causes for the separation of economy from morality: indeed, the history of modern Western economy might be read productively, as some, such as Warner Sombart, have done, as the history of economic forces tearing themselves free from traditional
moral constraint, breaking loose from custom and tradition. The beginning of modern economy, of “capitalism,” is often dated with the first acts of enclosure. Under the medieval system, land was said to belong to all the people. Feudal lords were not considered “owners” of the land in the modern sense: the land was not their private property to do with as they pleased. Rather, they were but stewards of the land, entrusted with the responsibility of administering it for the common good. As economic historian R. H. Tawney notes, in medieval society, “Property is not a mere aggregate of economic privileges, but a responsible office. Its raison d’etre is not only income, but service.” 1 No doubt the lords often failed to exercise good stewardship, but they were held socially accountable, by the peasants, the church, and even the crown, for making sure that all the people were provided for, that all had proper access to the land so that they could provide adequately for their families. The medieval notion of a “right to life” entailed a right to livelihood, and in an agrarian economy, that meant the right of access to the land: denial of access to the land, to farm, graze livestock, hunt, or fish, was a death-sentence. There are two central features of medieval agricultural economy that are especially relevant for our analysis here. First, land was not “owned” by individual families but was assigned by the lords so that there was relative equality in the quantity and quality of land available to each family. All the best land was divided into strips, and each family received a strip in accordance with its size. Then the next best land was similarly divided and assigned. And so it was that all of the land was distributed equally in both quality and amount. Occasionally, the land would be redistributed as families gained or lost members or as land changed, for example, due to flooding. (Such practices can be found still in Africa today.) So the land was divided up into a quilt-like patchwork of “strips,” covering the countryside. 1
R. H. Tawney, Religion and the Rise of Capitalism: A Historical Study (1926; Gloucester, MA: Peter Smith, 1962), p. 149.
Second, common pasture areas were available for all families to graze their cattle. Some historians claim that the first acts of enclosure--decrees by which the common lands of strip farms and pastures were converted into “private property”--occurred in fifteencentury England, 2 but some claim the practices already began in the thirteenth century. Others still claim a precedent for such actions occurred when Saxon and Norman conquerors took land from British lords to reward officers and supporters. Indeed, William the Conqueror claimed all the land as his own and parceled it out as he saw fit, 3 and he claimed some lands as his exclusive hunting grounds. In any case, the practice continued and spread into other parts of Europe, especially Germany, well into the nineteenth century and claimed not only the strips and common grazing lands of the peasants but even whole villages and also lands of the monasteries, including their schools. So ironically an economic system that would make the right of property one of its sacred cornerstones began with enormous acts of theft—such was what the anarchist Pierre Proudhon suggested when he famously asked, “What is property?“ and answered, “property is theft.” (Jean-Jacques Rousseau offers a similar story in his Discourse on Inequality.) What were the causes of enclosure? With the collapse of trade throughout Europe, following the fall of the Roman Empire, there was no strong incentive for feudal lords to exploit the peasantry to create surpluses for export in order to purchase luxuries from abroad. In the tenth century the entire annual trade between England and continental Europe could have fit in a few modern shipping containers. The reemergence of trade, spawned especially by the building of the great Italian merchant fleets, created incentives for the production of surpluses, and those incentives also provided incentive for exploitation of the peasantry, to see the peasantry as a
2 3
Tawney, p. 138.
Larry Patriquin, “The Agrarian Origins of the Industrial Revolution in England,” Review of Radical Political Economics 36, No. 2 (Spring 2004): 201.
means for the creation of surplus value and profit. Furthermore, from a modern business perspective, whose concern is primarily one of profit-making, the traditional strip system appears highly “inefficient”: the strip system was labor-intensive and could not accommodate new technologies, such as the steel-bladed plow. It was thought to be more “efficient” to devote large tracts of land to single agricultural products, at that time, wool, which was then in great demand on the continent. 4 Indeed, already in the seventeenth century defenders of enclosure claimed that this increased efficiency would eventually benefit everyone—the earliest version of “trickledown” economics. So, through acts of enclosure, large tracts of land were claimed by feudal lords who sometimes themselves turned into agricultural capitalists but more often sold their land to merchants who had gained large profits from the growing trade--the “bourgeoisie”--and who had much stronger aptitudes for profit-making than did the lords. Enclosure produced several effects. It simultaneously meets two needs for the rise of modern economy, or capitalism. First, it creates more “efficient” forms of agricultural production. However, to say that it is more “efficient” is to beg the question of what should be the measure of economic “efficiency.” Efficiency is a ratio of outputs to inputs, or costs, such as miles per gallon of gasoline. What, however, ought we to consider as our outputs and costs? If the primary output is production for trade and our costs are labor, then indeed enclosure appears very efficient, but if the more important output is sustaining the peasantry and their communities, then enclosure was horribly inefficient. As a result of enclosure, large tracts of land could be devoted to the raising of sheep for the highly profitable wool trade. Only a fraction of the peasant farmers (typically 10 to 25%) were needed and retained to tend the sheep: most were driven from their traditional lands and communities and left to fend for themselves--there were
4
Joseph Lee, the rector of a parish church in Leicestershire, who had himself benefited from enclosure, early and famously advanced the argument defending enclosure on the basis of such improved “efficiency” in A Vindication of a Regulated Enclosure (1656). Stephen A. Marglin, The Dismal Science: How Thinking Like an Economist Undermines Community (Cambridge, MA: Harvard University Press, 2008), p.89.
not yet any manufacturing jobs in the cities to employ these displaced people. As Thomas More described, the sheep devoured the peasants: Sheep…. These placid creatures, which used to require so little food, have now apparently developed a raging appetite, and turned into man-eaters. Fields, houses, towns, everything goes down their throats. To put it more plainly, in those parts of the kingdom where the finest, and so the most expensive wool is produced, the nobles and gentlemen, not to mention several saintly abbots, have grown dissatisfied with the income that their predecessors got out of their estates. They’re no longer content to lead lazy, comfortable lives, which do no good to society--they must actively do it harm, by enclosing all the land they can for pasture, and leaving none for cultivation. They’re even tearing down houses and demolishing whole towns--except, of course, for the churches, which they preserve as sheep houses. 5 The peasants displaced by enclosure would form three new, overlapping social classes unknown in the medieval world: the permanently poor, the criminal class, and the mad. At the end of the sixteenth century Queen Elizabeth returned from a tour of her kingdom complaining, “Paupers are everywhere!” In less than a century much of England’s free, prosperous peasantry, the envy of all Europe, had been transformed into roving bands of beggars and thieves. 6 As Thomas More protested earlier, “you create thieves, and then punish them for stealing!” 7 Furthermore, displaced from the land, severed from their communities, adrift in the countryside or in the anonymity of the newly growing cities, unable to support their families, and even forced to abandon their children, many were driven to madness. Michel Foucault describes, in his monumental study of madness, how initially the poor, the criminal, and the mad were all lumped together as the “unproductive class,” but as these groups became sorted out and placed under the jurisdictions of difference authorities and disciplines, the madhouse, the poorhouse, and the 5
Thomas More, Utopia (1516), trans. Paul Turner (Harmondworth, England: Penguin Books, 1965), Bk. I, p.
46. 6
Robert Heilbroner, The Worldly Philosophers: The Lives, Times, and Ideas of the Great Economic Thinkers, 6th ed. (New York: Simon & Schuster, 1986), pp. 31-32, and Heilbroner, The Economic Problem (Englewood Cliffs, NJ: Prentice-Hall, 1968), p. 66. 7
More, p. 49.
prison emerged as the West’s three distinguishing institutions of confinement at the dawn of the “Age of Reason.” 8 Caribbean anthropologist Edward W. Blyden already noted in 1908 that African peoples early observed that a central and distinct feature of European culture was its “three permanent elements—Poverty, Criminality, Insanity—people who live in workhouses, prisons, and lunatic asylums.” 9 To this list we might add the orphanage. Second, the huge class of dispossessed poor created by enclosure would be recruited into England’s expanding military, which would create the British Empire. On this point More commented, “thieves do make quite efficient soldiers, and soldiers make quite enterprising thieves. The two professions have a good deal in common.” 10 Later, the dispossessed poor would become the cheap labor that would fuel England’s industrial revolution in the seventeenth and eighteenth centuries. Here are a few descriptions of enclosure by three noted economic historians with no strong ideological leanings--Karl Polanyi, Robert Heilbroner, and R. H. Tawney. Polanyi, the founder of economic anthropology, described enclosure as a "catastrophic dislocation of the lives of the common people.” 11 Enclosures have appropriately been called a revolution of the rich against the poor. The lords and nobles were upsetting the social order, breaking down ancient law and custom, sometimes by means of violence, often by pressure and intimidation. They were literally robbing the poor of their share in the common, tearing down the houses which, by the hitherto unbreakable force of custom, the poor had regarded as theirs and their heirs’. The fabric of society was being disrupted: desolate villages and the ruins of human dwellings testified to the fierceness with which the revolution raged, endangering the defenses of the country wasting its towns, decimating its population, turning the overburdened soil into dust, harassing its people and turning them from decent husbandmen into a 8
Michel Foucault, Madness and Civilization: A History of Insanity in the Age of Reason (New York: Random House, 1965). 9 10 11
Edward W. Blyden, African Life and Customs (Baltimore: Black Classic Press, 1994), p. 37. More, p. 45.
Karl Polanyi, The Great Transformation: The Political and Economic Origins of Our Time (Boston: Beacon Press, 1944), p. 33.
mob of beggars and thieves.12 Robert Heilbroner commented: “The market system ... was ... born in agony. Never was a revolution less well understood, less welcomed, less planned. But the great market-making forces would not be denied. Insidiously they ripped apart the mold of custom, insolently they tore away the usage of tradition,” that is, traditional morality 13 Tawney perhaps most succinctly and pointedly described enclosure as "an acid dissolving all customary relationships,"14 for enclosure entailed not only physical destruction, upheaval, and dislocation, but also, as the passages from Polanyi and Heilbroner too make clear, the radical dissolution of moral constraints upon economic activity rooted in traditional social relationships and customs. This new economic class of agricultural capitalists and then industrial capitalists-the bourgeoisie--adamantly refused to be bound by traditional morality and to bear the traditional responsibilities of the feudal system in tending to the well-being of the peasants and the community, such as caring for the elderly, the disabled, widows, and orphans. Indeed, they would rather allow themselves to be taxed than to bear such personal, moral responsibilities. Thus, those responsibilities would fall at first to the churches and then to the State when the churches became overwhelmed by the needs of the displaced peasantry. Proudhon and Marx correctly describe the rise of the modern state as an organizing of power in defense of private property, but the modern state arose also in part to fill the moral void created by the bourgeoisie’s refusal to bear feudal lords’ social responsibilities and to care for the people. Hence we see that the separation of economics from ethics began with the efforts of economic forces--the rise of this new class, the bourgeoisie--to pull themselves free from moral constraint, initially the constraints of tradition, custom, and religion, but later also from the 12
Polanyi, p. 35. Emphases added for the sake of later analysis.
13
Heilbroner, The Worldly Philosophers, p. 33.
14
Tawney, p. 137.
constraints of law and moral philosophy, which they would claim are interferences with “free markets” and “the invisible hand.” In this regard, German sociologist Warner Sombart poignantly wrote, Those who believe that the giant Capitalism is destroying both nature and man cannot but hope that he will be captured and put within bounds that restrained him of old. Some people, indeed, expected to overcome him by appealing to ethical principles; I, for my part, can see that such attempts are doomed to utter failure. When we remember that capitalism has snapped the iron chains of the oldest religions, it seems to me hardly likely that it will allow itself to be bound by the silken threads of the wisdom that hails from Weimar and Koenigsberg. 15 Since modern economic forces--”capitalism”--have been so successful in breaking the iron chains of tradition, we cannot expect the relatively weak forces of law, represented by “Weimar,” and moral philosophy, represented by “Koenigsberg,” to contain them, for example, through the efforts of anything like “business ethics.” As Tawney put the matter sharply, “The upstart aristocracy of the future had their teeth in the carcass, and, having tasted blood, they were not to be whipped off by a sermon.” 16 Joseph Schumpeter takes Sombart’s and Tawney’s point a step further, suggesting that, because the history of capitalism is so deeply a history of the utter disregard for moral constraint upon economic activity, that it eventually turns on itself, and comes to disregard even the inner moral requirements, such as honesty and fairness of competition, that make it possible for the invisible hand of markets to function: thereby, and not in the manner suggested by Marx, does capitalism dig its own grave. By contrast to Western capitalism, capitalists in Japan tend to be much more the descendents of Japanese feudal lords--as evidenced by the fact that many of the largest Japanese businesses bear the names of those lords--and in Japan capitalism maintains much stronger ties to 15
Warner Sombart, The Quintessence of Capitalism: A Study of the History and Psychology of the Modern Business Man, trans. M. Epstein (New York: Fertig, 1967), pp. 357-58. Sombart’s comments raise reservations about anything like “business ethics.” 16
Tawney, p. 143.
medieval customs and codes of honor than in the West. Thus, Japanese corporate leaders tend to assume the social responsibilities of the feudal lords for the well-being of their employees, unlike their Western counterparts. 17 A sacred bond of trust connects Japanese businessmen with their employees, and Japanese businessmen consider it dishonorable to fire their employees, while Western businessmen, especially those in the U.S., consider it a shrewd business practice for cutting costs. Japanese businessmen will be the first to absorb the hardships of economic recession; in the U.S. businessmen are the last to do so (as we see with the recent U. S. recession). Enclosure often met with resistance, not only by the displaced peasants themselves, but also by some of the clergy, such as Bishop Hugh Latimer, members of Parliament, such as John Hales, and even some of the nobility, such as More and Lord Protector Somerset. Often the resistance was violent, such as the peasant revolts in Germany (1524-26), fueled by the Reformation. In England alone between 1610 and 1619 32 riots against enclosure erupted, 18 and earlier already Robert Kett, a large landowner who experienced a dramatic change of conscience, led the most famous of these rebellions, which was crushed in 1549: 3500 of Kett’s followers were slaughter on a single day, and Kett was executed for treason. Somerset was executed three years later. Occasionally acts of enclosure were repealed and efforts were made to return land to the peasantry, but such instances were but temporary. It is important to note that enclosure continues today and lies at the heart of much of the social unrest that we find in the Philippines, Latin America, Africa, and other places. It began with wool in England but later included wheat, corn, sugar, coffee, bananas, pineapples, peanut
17
“The Japanese corporation is more closely derived from the feudal estate [than in the West] …. In Japan, paternalism and the responsibility of the feudal lord for all in his demesne have been carried over in the modern corporation. For example, in Japan the corporation is responsible for a number of welfare activities that are the responsibility of the state in Europe.” James Samuel Coleman, Foundations of Social Theory (Cambridge MA: Harvard University Press, 1998), p. 442. 18
R. B. Manning, Village Revolts: Social Protest and Popular Disturbances in England, 1509-1640 (Oxford:
oil--"cash crops"--and also mineral wealth (e.g., throughout South America; oil, in Nigeria), swelling the cities of the developing world, including Mexico City. Indeed, almost 500 years after he wrote it, More’s description of enclose in England applies equally to these later instances: enclosure is like a malignant growth, absorbing field after field, and enclosing thousands of acres with a single fence. Result--hundreds of farmers are evicted. They’re either cheated or bullied into giving up their property, or systematically ill-treated until they’re forced to sell. Whichever way it’s done, out the poor creatures have to go, men and women, husbands and wives, widows and orphans, mothers and tiny children. 19 As with the early instances in England and Germany, there is often resistance to these modern forms of enclosure. Sometimes the resistance is peaceful, as with Bishop Oscar Romero, Rutilio Grande, and Ignacio Ellacuria in El Salvador and Sister Dorothy Stang in Brazil, although all four of these persons met violent deaths for their resistance. In other cases, such as in the Philippines, Nigeria, and Chiapas and Oaxaca, Mexico, resistance is armed. To be clear, there is no effort here to romanticize medieval economy. It is uncertain to what extent feudal lords of Europe met their social and moral responsibilities to the peasants. Some seem to have done so better than others. What is clear, though, is, such responsibilities were socially expected. By contrast, in Western capitalist countries today, but not in some other capitalist nations, such as Japan, there is no social expectation that business leaders have a moral responsibility for the well-being of their workers and their community. Some do, but it is considered supererogatory. Rather, responsibility for the general well-being of the community, especially the disadvantaged, is left largely to the state and to private charity. Even early advocates of “philanthropy,“ such as Andrew Carnegie, were not concerned with helping the
Oxford University Press, 1988), p. 82. 19
More, p. 47.
disadvantaged generally but only those who, in their judgment, “helped themselves,” that is, those who aspired to become capitalists. Thus these “captains of industry” built libraries, universities, and research institutes, not health clinics, soup kitchens, shelters, or low-cost housing--those would be left to churches and other charity and “socialist” groups. Business leaders are expected only to pursue their own self-interests by maximizing profit, even when that means inflicting hardship upon their workers and their community. As Milton Friedman famously put the matter, “The social responsibility of business is to increase its profits.” 20 Economy’s refusal to be restrained by traditional morality, traditional values, custom, and religion, was accompanied by a radical redefinition of the very meaning of morality: the social “good” would be redefined as whatever best promotes efficient production within the new economic order, “efficient,” in turn, being defined by “profit.” How economic forces redefined morality is best seen in changing notions of property, especially the rise of notions of “private property.” Let us first note some traditional, pre-modern distinctions regarding notions of ownership. First, “property” was often distinguished from “possession.” “Possession” pertains to what one owns by virtue of power (Latin, posse = to be able or to have power), whether it be physical force or civil law. Having power over something, however, does not give one rightful, moral authority over it. “Property,” by contrast, pertains to what one owns properly, that to which one is morally entitled. “Private property,” then, is the notion that the owner of something is morally entitled to exclusive use of something and has a right to deprive others of its use, regardless of their need or the needs of the community (Latin, privates; privo = to exclude, to deprive). Early Christianity taught a communistic ideal, as described in the Acts of the Apostles, 20
Milton Friedman, “The Social Responsibility of Business Is to Increase Its Profits,” The New York Times Magazine, September 13, 1970.
and as taught by Saints Ambrose, Basil, John Chrysostom, Gregory the Great, Clement of Rome, and Augustine, as liberation theologians often note. 21 God gave all of creation to everyone to share; we are but the stewards of what is God’s, entrusted with Creation for the good of all. Need is what gives one a right to use. The right of exclusive use was part of ancient Roman property laws, but Jews and early Christians prided themselves on the fact that they did not share such exclusionary practices and advocated the free sharing of what one had: such was what made Jews and Christians morally superior to the mighty Romans. Thomas Aquinas was the first major Christian thinker to justify individual ownership of property. He used the same arguments that Aristotle used against Plato’s communism in The Republic: both Aristotle and Aquinas argued that stewardship of property is more effective when responsibility is assigned to individuals rather than when left to the amorphous, general responsibility of the community as a whole. 22 The right to property, however, is always limited by the needs of others and of the community, according to Aquinas: there is no right to exclude someone from something that he needs and which its current possessor does not need. So Aquinas asks if it is theft when someone takes something that he needs from the surplus of another. He answers, no, it is not theft for someone to take what he needs from the surplus of another because his need makes him the rightful owner of that thing. On the contrary, if someone tries to deprive someone from taking what he needs from another’s surplus, that person would be the thief. 23 Also, when one gives to the needy out of one’s surplus, such giving is “justice,” not “charity”: one is only returning to the person in need what is rightfully his to begin with; one is only returning stolen goods. “Charity” occurs only when we share out of what we ourselves also need. Furthermore, for Aquinas justice can be enforced by the power of law,
21
E.g., Charles Avila, Ownership: Early Christian Teaching (Marykmoll, NY: Orbis Books, 1983).
22
Thomas Aquinas, Summa Theologiae, Pt. II of Pt. II, Ques. 66, Art. 1.
23
Ibid., Pt. II of Pt. II, Ques. 66, Art. 6.
while charity must come solely from Christian love for one’s neighbor. Thus, unlimited “private property,” as defined above, does not exist for Aquinas: for him, no one ever has moral entitlement (“property,” in its original sense) to exclude (privare) others in need from one’s own surplus. 24 Rather, the restricted, individual property that Aquinas justified was a form of stewardship, a “responsible office” rather than an individual right. 25 This principle was more recently reaffirmed by Pope John Paul II in his encyclical Laborem Exercens: “the right to private property is subordinated to the right to common use, to the fact that goods are meant for everyone.” “From this point of view,” the Pontiff continued, “the position of ‘rigid’ capitalism continues to remain [morally] unacceptable [to Christianity], namely the position that defends the exclusive right to private ownership of the means of production as an untouchable ‘dogma’ of economic life.” 26 We thus see how modern economic forces--those of enclosure--redefined radically the very meaning of “property,” and such redefinition provides a prime example of how modern economy redefined the social understanding of ethics generally and specific moral categories in particular: those forces would refuse to allow ethics to serve any longer as an external restriction upon economic life but would recast ethics to conform with the needs of the regime of capital. Traditional moral concepts, such as “property,” would be radically redefined in order to be made more consistent with the new economic order. Hence, throughout the history of capitalism many defenders of “free markets” and “free enterprise,” conceive “freedom” as the absence of external constraints--customary, moral, religious, and even legal--upon market activity. The normative imperatives of this new order, however, would bear the name not of the “ethical” but of the
24
A “rich man … sins if he excludes others indiscriminately from using” something they need. Thomas Aquinas, Summa Theologiae, Pt. II of Pt. II, Ques. 66, Art. 1. 25 26
Tawney, p. 149.
John Paul II, Laborem Exercens, 3rd Encyclical Letter, September 14, 1981, III, 14. Emphasis in the original.
“economical”: the “economical” assumes the normative force of the “ethical.” As economist E. F. Schumacher poignantly put the matter: In the current vocabulary of condemnation there are few words as final and conclusive as the word “uneconomic.” If an activity has been branded as uneconomic, its right to existence is not merely questioned but energetically denied. Anything that is found to be an impediment to economic growth is a shameful thing, and if people cling to it, they are thought of as either saboteurs or fools. Call a thing immoral or ugly, soul-destroying or a degradation of man, a peril to the peace of the world or to the well-being of future generations; as long as you not shown it to be “uneconomic” you have not really questioned its right to exist, grow, and prosper. 27 Heilbroner well describes how this new ethics is concealed “behind the veil of economics,” disguising its normative claims as strictly those of an “empirical science.” 28 Having examined the historical forces that drove a wedge between economy and traditional morality, let us last examine the conceptual separation of economics from ethics. We will look now at how the modern science of economics conceptually came to see itself as no longer a branch of moral philosophy, as distinct from ethics. In the later half of the eighteenth century Adam Smith, like many other thinkers of the time, was desperately trying to make sense of a social world that no longer made sense: the traditional rules of social life, of morality, seemed to have all been thrown to the wind. The philosophers of nature, however, seemed to be making better sense of the natural world than moral philosophers were able to make of the social world: when one compared Newton‘s physics to Aristotle‘s, there appeared to be vast, undeniable progress, but when one compared Aristotle‘s ethics to eighteenth-century ethical treatises, it was much harder to make such a claim. So Smith, like other moral philosophers, such as Francois Quesnay, looked for clues in 27
E. F. Schumacher, Small Is Beautiful: Economics as if People Mattered (New York: Harper & Row, 1989), p. 44. 28
Robert Heilbroner, Behind the Veil of Economics: Essays in the Worldly Philosophy (New York: W. W. Norton, 1988), pp. 13-34.
the natural sciences for the moral sciences. Might moral philosophy model itself upon the natural sciences, or even become a natural science itself? Inspired by William Harvey’s theory of blood circulation, Quesnay imagined money to be the life-blood of economy and offered the first circulatory theory of currency: money circulates in a healthy body-politic in a manner analogous to the way in which blood circulates in an individual organism, and to this day the metaphor of circulation dominates economists’ understanding of money. Smith, however, was taken much more by the revolutionary theories of Newton in physics: they would be central for his efforts to offer a radically new understanding of economic justice. Indeed, Smith followed a long philosophical tradition, including Plato, Aristotle, Aquinas, and many others before him: he, like them, saw that a strong society and healthy economy rested upon justice, and his famous Wealth of Nations might be read as a treatise on economic justice, although few economists have done so. That economic well-being rests upon justice is a point first made by Plato. His Republic begins with Socrates asking Cephalus, the father of his friend Polemarchus and a wealthy businessman, what is the greatest benefit that he has gotten from his wealth. Interestingly, Cephalus replies that his wealth has enabled him to be a more just man: his wealth enables him to give to his friends what they deserve, whereas, if he were poor, he might be forced by his poverty to be unjust, to cheat and to lie. That, claims Cephalus, is the greatest benefit of his wealth. The rest of Plato’s Republic is then largely a refutation of Cephalus, insofar as Socrates claims that Cephalus has things reversed: wealth is not the basis for justice; justice is not some luxury that wealth allows us to afford. No, rather, Socrates claims, justice is the basis for affluence: without the social harmony that is justice, there will not be the sort of cooperation among peoples in specialized occupations that is necessary for economic prosperity. Smith agrees with Plato and the whole classical tradition that affluence rests upon justice.
In the Theory of Moral Sentiment (1759) he writes: "Justice … is the main pillar that upholds the whole edifice [of society]. If it is removed, the great, the immense fabric of human society . . . must in a moment crumble into atoms." 29 How, though, is a just society to be achieved? On this point Smith breaks radically from the classical tradition. For thinkers of antiquity and the middle ages, a just society comes from just, virtuous rulers. For Plato, this means that the just society requires leadership by the philosopher-kings, who, among mortals, best understood the true nature of justice. Just rulers, in turn, need to be properly educated, in the manner Plato describes in his famous allegory. The social chaos that marked the beginning of the modern age, however, brought skepticism regarding this tradition of moral education as the way to a just society and a general cynicism over whether a just society was even a worthwhile ambition for humanity. Niccolo Machiavelli in one stroke radically redefined “politics.” The classical tradition had defined it as the art of just rulership: Machiavelli redefined it as the artful management of power. He, followed by Thomas Hobbes and Bernard Mandeville, advised political thinkers and rulers not to concern themselves with “man as he ought to be” but with “man as he really is,” and “man as he really is,” according to their descriptions, is not a very nice person. 30 Smith, however, was not about to give up on justice, as did Machiavelli and others following him, but he did suggest that a just society might be possible without virtuous individuals, that is, despite individuals who themselves were not necessarily just. That a good, functioning society might exist without virtuous individuals was already suggested by Mandeville, in his famous Fable of the Bees, but it was Smith who attempted to describe the exact mechanism, built, as we already saw, upon the principles of Newton’s mechanics, by 29
Adam Smith, The Theory of Moral Sentiments, ed. D. D. Raphael and A. L. Macfie (Indianapolis: Liberty Classics, 1982), II, ii, 3.4, p. 86. 30
Albert O. Hirschman, The Passions and the Interests: Political Arguments for Capitalism before Its Triumph (Princeton, NJ: Princeton University Press, 1997), pp. 12-14.
which such might occur. To be clear: unlike Mandeville, whom he criticizes severely in his Theory of Moral Sentiment, Smith thinks that a society of virtuous individuals is certainly desirable and better than one without such individuals, but he nonetheless imagines the possibility of a just and hence prosperous society without them. Like the ancients, Smith conceives of justice as a kind of harmony. In The Republic Plato describes the just soul as one whose three main parts--the appetites, the will, and the intellect--all work harmoniously together, under the rulership of the intellect, for the good of the person as a whole. Analogously, Plato describes the just society as one in which its three main classes--the workers, the guardians, and the philosopher-kings--are all harmonized under the rulership of the philosopher-kings, with their minds’ eyes steadily fixed upon the Form of the Good, for the wellbeing of the society as a whole. So, too, Smith sees social justice as a harmony of some sort, but not like the one that Plato describes. Furthermore, like the ancients, Smith, too, sees the harmony that makes for a just society as analogous to the sort of harmony that makes the universe a cosmos, that is, a thing of beauty. So, impressed by Newton’s mechanics, Smith looked to it for clues about how a just society might be created: as the heavenly bodies, such as Jupiter and its moons, remain in harmonious relations as the result of the counter-balance of gravitational pull and centrifugal force, might the social harmony necessary for a prosperous society be created by the proper balance between the two great economic forces of supply and demand? A brilliant hypothesis, even if it is wrong! Smith’s proposal for a just society, in The Wealth of Nations, requires that no one--no ruler, no philosopher-king--needs to think about what justice or the common good is and then to intend actions in accord with such principles. Rather, each person needs to consider only his or her self-interest, as a supplier or as a buyer, and the counter-balancing power of the invisible hand does the rest, producing social justice without anyone intending it. In Smith’s most famous
passage, he tells us that a buyer “intends only his own gain” when he makes a purchase, “and he is in this, as in many other cases, led by an invisible hand to promote an end [viz., the social good] which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest [the buyer, and the seller as well] frequently promotes [the interest] of the society more effectually than when he really intends to promote it.”31 As John Maynard Keynes put the matter, Smith’s system allows the moral philosopher to take early retirement. Classical theories of ethics, however, saw intent as necessary, if not sufficient, for counting a behavior as “ethical.” Aristotle, for example, defines an ethical action as one in which one not only does the right thing but also does it “for the right reason,” that is, with the right intent. Thomas Aquinas is perhaps most to the point: “Any individual act has some circumstance by which it is drawn into the class either of good or bad acts, at least in virtue of the intention.... But if an act is not deliberate ... it is not properly speaking a human or moral act. ... And so it will be indifferent, that is, outside the class of moral acts.”32 Smith, however, in his Theory of Moral Sentiment, claims that only God can look into a person’s soul and judge the goodness of his intentions: humans can only judge the empirically observable outcomes of actions. “[M]en in this life are liable to punishment for their actions only, not for their designs and intentions.” 33 Smith thus breaks radically from the classical tradition of ethics by denying the necessity of intentions in considering the morality of human actions. Thus, from the perspective of classical ethical theory, he not only destroys the long-held essential connection between economics and ethics, but he actually destroys ethics altogether as it pertains to economy, although, as a moral philosopher, he certainly never intended to do so. 31
Smith, Wealth of Nations, Bk. IV, Ch. II.
32
Thomas Aquinas, Summa Theologiae, Pt. I of Pt. II, Ques. 19, Art. 9.
33
Smith, Moral Sentiment II, iii, 3, 2, p. 105.
Or, one might say, alternatively, that he radically redefines “ethics” entirely in terms of the goodness, or outcomes, of behaviors, not in terms of the agent’s motivations or intentions. He might, thereby, be considered the father of utilitarianism, or at least of consequentialism. If, however, the social good comes about as the unintended result of the self-interested behaviors of buyers and sellers in the market, then are we not at least implicitly obligated morally to act in self-interested ways? Smith does not say this directly, but he does imply it in places, such as in the famous passage that contains the “invisible hand.” Some of his followers, however, have made explicit statements to this effect. For example, Friedman, in his famous dictate, which we quoted above, clearly transforms profit-making from a simple matter of selfinterest into a moral imperative. By the logic of Smith’s theory, which Friedman follows, one is obligated ethically and ironically not to think about ethics, at least in the traditional sense, that is, as a restraint upon self-interest in consideration of the common, social good. Rather, the highest moral imperative of economic agents—buyers and sellers—is to pursue one’s own self-interest: failure to do so inhibits the free market from producing a good, just society, what economists commonly term “market equilibrium.” As Hermann Heinrich Gossen suggested, to act from a sense of the common, social good is to display the hubris of supposing that one knows better than the invisible hand--a.k.a. God--what that common good is: “How can a creature be so arrogant as to want to frustrate totally or partially the purpose of his Creator?” he asks. 34 Thus, we can say either that classical economics thereby destroyed ethics altogether, if we hold to a traditional conception of ethics that necessarily includes the intentions of agents. Kantian philosopher of economics Kenneth Lux argues such a view in his well-titled Adam Smith‘s Mistake: How a Moral Philosopher Invented Economics and Ended Morality. 35 Or, we might say instead, as Heilbroner suggests, that economics created a new sort of ethics and called 34 35
Gossen, The Laws of Human Relations (1854; Cambridge: MIT Press, 1983), p. 4. (Boston: Shambhala, 1990).
it “economic science,” a science that Smith modeled upon the natural sciences but which became later even a mathematical science, and to moral philosophy this economic science would bid not so fondly, “adieu.” In either case, we see the seeds for the conceptual separation of economics from ethics, which characterizes orthodox economic thinking in the United States today. This conceptual separation followed the historical separation of economy from traditional morality and is seen already in the theories of Adam Smith. So, if we are to move “towards an ethical economy and economics,” as the theme of our Congress suggests and as I think we should do, we will better understand the difficulty of the task before us if we understand how powerful the historical currents of modern economy and economics have been in the opposite direction. The history of modern economy has been the history of economic forces refusing to be constrained by any morality other than what the inner logic of their own demands requires. Accordingly the edifice of modern economic science has been built upon the steadily increasing separation of economic theory from ethics, as illustrated by the deeply entrenched assumption of a (false) fact-value dichotomy and the American Economics Association resistance to any sort of code of ethics for the profession. Therefore, any movement “toward an ethical economy and economics” will require nothing less than a radical and thoroughgoing critique of the history of modern economy and economics and a rethinking of the latter from its very foundations.
