A History of Homo Economicus : The Nature of the Moral in Economic Theory 9780415595681

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A History of Homo Economicus

A key issue in economic discourse today is the relation (or lack of it) between economic behaviour and morality. Few (presumably) would want to deny that human beings are in some sense moral or ethical creatures, but the devil is in the detail. Should we think of economic behaviour as an essentially amoral process – a process adequately characterised by a means–ends rationality – into which any number of subjective ethical concerns or orientations may be intruded to give a particular action its determinate moral content? Or is it rather the case that our moral being runs deeper than this, in the sense that all of our behaviour – ‘economic’ or otherwise – is enabled or capacitated by a competence that is fundamentally ethical in character? With new analyses of the work of Hobbes and Smith, Wilson and Dixon offer a fresh approach to the debate surrounding economics and morality with a novel discussion of the self in economic theory. This book calls for a change in the way that the relation between economic behaviour and morality is understood – from an understanding of morality as a kind of preference that informs certain types of other-regarding behaviour (the way that modern economics understands the relationship), to an idea of morality as a competence that enables or, rather, conditions the possibility of all forms of human behaviour, other-regarding or not. Offering a new insight into homo economicus, this book will be of great interest to all those interested in the history of economics and of economic thought. David Wilson and William Dixon are Senior Lecturers at London Metropolitan University, UK.

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141 A History of Homo Economicus The nature of the moral in economic theory David Wilson and William Dixon

A History of Homo Economicus The nature of the moral in economic theory David Wilson and William Dixon

First published 2012 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN Simultaneously published in the USA and Canada by Routledge 711 Third Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2012 David Wilson and William Dixon The rights of David Wilson and William Dixon to be identified as authors of this work has been asserted by them in accordance with the Copyright, Designs and Patent Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Dixon, William, 1954– A history of homo economicus: the nature of the moral in economic theory/David Wilson and William Dixon. p. cm. 1. Economics–Sociological aspects. 2. Economics–Moral and ethical aspects. I. Wilson, David, 1952 March 30– II. Title. HM548.D597 2011 1749.4–dc23 2011027402 ISBN: 978-0-415-59568-1 (hbk) ISBN: 978-0-203-14287-5 (ebk) Typeset in Times by Wearset Ltd, Boldon, Tyne and Wear

Contents



Acknowledgements

1

Ways of being moral

2

The idea of homo economicus

11

3

The modern commonwealth

25

4

Economic behaviour and the moral sentiments

44

5

Cover stories

66

6

Hobbesworld

94



Bibliography Index

112 118

xvi 1

Acknowledgements

The debts incurred in the writing of this book are many and various. We are deeply grateful to the editors and reviewers of the following journals: History of Economics Review (and John King in particular); Social Epistemology; Arthur Edwards at Talking Economics and the Journal of Associative Economics; the Journal of Critical Realism (and Kathryn Dean); the American Journal of Economics and Sociology (and Laurence Moss); the International Review of Economics; the International Review of Economics Education (and Andy Denis); the History of the Human Sciences (and James Good); the History of Political Economy (and especially Anthony Waterman); Studi e Note di Economia. Special thanks also to Valeria Mosini, who organised the Dissent in Science meetings at the LSE over a number of years and edited the book Equilibrium in Economics: Scope and Limits (Routledge, 2007), to which we contributed. We are also grateful to the organisers, chairs and discussants at the numerous conferences over the years at which we have presented papers related to the issues dealt with herein. It was in these journals and at these conferences and meetings that the ideas developed in this book were given their first airing. Paul Turpin read and commented on a long summary of the arguments presented in the book. His perceptive and encouraging comments, as well as the accommodating and efficient work of our editors at Routledge, Thomas Sutton and Simon Holt, not forgetting the trouble taken by two anonymous referees, all helped to move things along. Thanks are also due to Aleks Sierz, Lia Ghilardi, David Gorman and to our students in recent years, particularly those on the BA degree in Politics, Philosophy and Economy. We learnt much about what we are trying to say here from their questions and the essays that they wrote. For good or ill, you should see yourselves in the pages of this book. Our place of work, London Metropolitan Business School, its organisation and its (all-too-numerous) academic managers, also find reflection in this work, but perhaps in less complimentary fashion. We should also acknowledge our own place in this work. This book is part

Acknowledgements   xvii of a long-term, on-going project into the conceptual and historical foundations of economics and related disciplines. We long ago reached the stage where we can each hardly recognise our own individual intellectual contributions to it. Some outputs go down as Wilson–Dixon, some as Dixon– Wilson. The order of the names has no intellectual significance. Our final acknowledgements come in pairs. First, we acknowledge and are deeply grateful for the support and forbearance of the Two Lynnes, or, more precisely, of Lynne Barry and Linda Wilson. They experience too often the absence-in-presence, the feeling that one is in conversation with another who, whilst supposed to be listening, appears to be attending to matters elsewhere. But they do not complain. We want to acknowledge the wisdom and love that that absence of complaint signifies. We do not take it for granted. Honest. We also want to thank the Two Geoffs. Geoff Cole read and commented on our brief excursion into evolutionary theory in Chapter 5 below, in the context of an on-going collaboration between the three of us on related matters, and we made adjustments to our text on the basis of Geoff’s comments. Our debt to Geoff Kay is of a more general kind. Geoff is an exemplary scholar and intellectual: erudite, imaginative, generous. One cannot help but learn in his company, a pleasure we have both enjoyed over many years now. Our final thanks must go the Two Smiths for providing the topic of this essay. The Two Smiths is a long-standing parody according to which one Adam Smith is supposed to have given two contradictory accounts of human nature and homo economicus. But, as we hope to show below, the essential idea behind the Two Smiths goes way back beyond Smith himself and the subsequent misunderstanding of his work, and also goes beyond the Adam Smith Problem, understood as an arcane topic in the history of ideas. We have to live with the misconceptions that lie behind the Two Smiths: those misconceptions continue to shape our institutions and ourselves. We suspect that the One Smith would say of the Two Smiths that they give the right answer(s) to the wrong question. They ask: why do we want to do what we do? How are we motivated? And whereas the Smith of The Theory of Moral Sentiments says we are other-regarding, that we (at least sometimes) act out of concern for the welfare of others, the Smith of The Wealth of Nations says that our actions are directed only towards our own well-being. The One Smith, we suspect, would acknowledge that a reasonable debate can be had around these answers; arguably he contributed to it. But he would also say that in attending to that debate alone a more essential question goes missing: how are we able to do what we do? This is a question about the competences or capacities of humans as actors, and

xviii   Acknowledgements about the competences and capacities of homo economicus in particular. For the One Smith and for ourselves, this is the essential question. And in attending to this second question we come across a sense in which one can say that homo economicus is a moral creature – a sense that finds no echo in the discourse surrounding the first. Homo economicus gets by in the way that she does because she takes a perspective on things wider than is commonly supposed. She pre-reflectively takes in and acts on the views of others, now re-presented as views of her own. Whether she then acts out of a concern for others is beside the point: the point is that whether she does or does not, she is only able to act at all in the way that humans do because she holds within herself expectations that others already have of her behaviour. It is in precisely this sense, we will want claim, contra the conventional wisdom, that homo economicus is a moral creature.

1 Ways of being moral

A recognisably modern social thought begins around the time of Aristotle. ‘Man is a political animal’, he writes, and in so doing registers the insight that, amongst other things, human beings distinguish themselves from other species in virtue of the way that they associate (Aristotle, 1252b27). It cannot be clear today, however, how it was supposed to begin. The words of the fourth-century (bc) Aristotle, understood in social epistemological terms, can be made to fit all kinds of social theory, from his day to ours. Aristotle’s dictum can be made to fit the intellectual imperialism that is modern economics if one reads into Aristotle’s ‘political animal’ the distinctive capacity to deliberate. Marx, whose relation to economic science is hardly straightforward, in this instance at least lines up four-square behind the modern economist: ‘what distinguishes the worst architect from the best of bees’, he writes, ‘is . . . that the architect raises his structure in imagination before he erects it in reality’ (Marx 1974, p. 74). It is this, he continues, that makes his act ‘exclusively human’. Though neither author would be flattered by the comparison, it is striking how closely Marx’s characterisation of the human act anticipates Ludwig von Mises’s highmodern attempt to rebuild economic theory, bottom up, from first principles (see, in particular, von Mises 1996, chapter 1, section 2, paras 1–3). Actually, we should say first principle, for he begins his treatise: ‘Human action is purposeful behaviour’ (1996, p. 174). Economics does not claim purposive or instrumental rationality to be the only characteristic of the human act. It also recognises the human being as a moral creature – a creature who distinguishes right from wrong, and where that distinction draws on considerations that go much wider than self-interest. Indeed, another way of understanding the idea of purposeful behaviour is to say that we regularly act on that distinction. For the modern economist, though, the point is that our morality has no economic significance. Economics is supposed to study the process whereby we try to

2   Ways of being moral realise our values, moral or otherwise, not those values as such. Moral positions (understood broadly) may motivate our behaviour but they do not capacitate or enable it. And since economics studies how we are capacitated as purposeful actors – how we establish means that (we hope) will further our (possibly moral) ends – a consideration of the moral aspect of human behaviour has no place in a distinctively economic inquiry. On this view, then, homo economicus – economic man – is a misnomer. For the homo economicus that the high-modern neoclassical theorist has in mind is not a form or type of human being but rather an abstraction from it: it is human being considered in regard to its economic aspect or capa­ city. Those who criticise economics (at least in its high-modern form) for assuming an actor with immoral or even amoral motives are therefore wide of the mark. The motives of high-modern homo economicus cannot be unduly base or noble for the simple reason that, whilst motives may bring capacities into play, capacities as such do not have motives. The actions of homo economicus (as against homo sapiens) can no more be judged immoral than can a Stradivarius be blamed for making a bad tune. But two wrongs do not make a right. The conventional economic view – that the moral aspect of human behaviour is not its proper concern because it (economics) is supposed to attend to the matter of economic capacity rather than to motive – only holds good on the assumption that morality might drive our behaviour but does not enable it. It is in precisely this regard, we will want to contend, that economics is in error.

Substantive and formal morality Notwithstanding the attempt by von Mises, Robbins et al. to resolve the matter once and for all, speculation on the nature of the relation between economic behaviour and morality remains a live issue. The spate of scandals, from BCCI to bank bonuses, taking in on the way Parmalat, junk bonds, colossal mortgage fraud and, just for good measure, the discovery that the vast majority of our elected representatives here in the UK were over-claiming their expenses, raises obvious moral-economic questions. So, also, do results in experimental economics; for, as recent experiments have shown, we are apparently quite prepared to reward those who do good to others, and to punish wrongdoers at some cost to ourselves. Many, like Lopes (2008, p. 287), claim that all of this makes life difficult for the high-modern, rational-choice economicus. We are not so sure. One way of thinking about morality in relation to economic behaviour is to think of the values or ends that our economic behaviour tries to realise as informed or framed by some kind of moral stance. This is how Charles Taylor thinks about things: human beings, he claims, are ‘strong

Ways of being moral   3 evaluators’, drawing and acting on distinctions according to the moral worth of different desires (Taylor 1989). According to this distinction we may think of old-school (low) neoclassical preferences – preferences that are supposed to order our base needs and wants – as being subject to a higher ordering that brings our moral commitments into play. So, for example, I may actually enjoy the taste of bacon but refuse to eat it because of the way that farmers treat their pigs. Or again: I may prefer the taste of a certain kind of coffee but buy another brand instead because the growers are paid a fairer price. Many economists, in an attempt to escape the grim logic of behaviour modelled on the assumption of a base selfinterest, have followed Taylor’s lead. We may, for example, weigh up the good that we do others through our actions in utilitarian-consequentialist fashion, and this may come to frame our preferences. So too, according to Kant, might reasoning about (deontological) rules that, as potentially autonomous beings, we should give ourselves. But just as moral reasoning may inform our preferences, so also may our moral sentiments. As Hume reminds us, we may be sentimentally disposed to choose the other-regarding good over narrow self-interest. Or again, we may choose to behave in a certain manner because we feel that such behaviour is constitutive of a (collective) life worth living. This kind of virtue ethics, then, supposes a substantive vision of the good life, and the kind of roles that would support it, and then understands moral or virtuous behaviour as that which conforms to those roles. It goes without saying that, in exploring the moral or social motives for economic behaviour – in attending to what might be called its moral substance – our contemporary moralists depart a good way from the hack micro-text and its ground in the assumption of a crude self-interest. But, as noted earlier, the neoclassical train had in any case left that particular station some time before, and it is just that no one had bothered to tell the hack. The whole point of the high-modernist departure was to leave behind (for economic theory at least) the question as to whether economic behaviour, understood as pure process, is moral or not; or, if so, in what sense. After von Mises, after Robbins, it appears to make no sense to discuss the morality of economic behaviour because to think of instrumental rationality as either moral or immoral is to commit the grossest of category errors. Of course, what this thinking does is to slip past, unnoticed, the reduction of economic capacity to instrumentally rational action without remainder. But as far as the moralist is concerned, it has indeed slipped past: she wants to make less of the basic anthropological assumptions that constitute the hard core of high-modern economic theory – indeed these go wholly unchallenged – and more of the auxiliary postulates that it may happen to employ. As it turns out, once the basic anthropological assumptions are

4   Ways of being moral attended to, then the auxiliary postulates will come into much sharper focus. These are questions that should be raised and discussed, but in the main they are not; for emphasising the possibility that the economicus may serve moral as well as immoral purposes just leaves unchallenged the basic assumption that economics makes about how it is supposed to serve at all. Talk about the substantive morality of homo sapiens just happens to leave untouched the assumption the economist makes in regard to the formal amorality of homo economicus. The story the economist wants to tell is that the way that ends get realised in life is through the choosing of (apparently) efficient means: that this is the distinctively human way of acting. To say in riposte that some, if not many, of those ends might be or should be moral is to do no serious violence to that story. There is another story one can tell about economics and morality, however, that considers morality not in relation to our wants as such but relative to how those wants are actualised. Never mind the substantively moral character of the human act – how motives may be shaped by moral considerations – we will want to argue that the form of economic behaviour is moral; that economic behaviour – still understood as ostensibly instrumental activity – must bring into play distinctively moral competences in order to be made effective. Our claim is that morality is not just part of the story of being human, but rather a decisive part of the story of being economic.

Morality as an economic competence If we are to reconsider – from an action-theoretical perspective – what it means to be human – then perhaps we should first consider what it is like to be an ape. This is roughly how primatologist Frans de Waal comes upon the question and, in the process, begins to formulate (at least implicitly) a critique of modern economics much more adequate than the moralising tendency within modern economic discourse itself. Evidently de Waal’s apes and monkeys employ a form of instrumental and strategic thinking in making their way in the world. But it is what else they do that is more striking: how their emotional responses seem to play a key role in coordinating their behaviour, as against merely expressing preferences. Displays of what he calls ‘emotional contagion’ go way beyond apes and monkeys, of course. Birds taking flight in unison – as one bird responds to an external threat, and the others follow suit as they ‘catch’ its fear, so to speak – is a classic case in point. It is a different matter, however, for an ape to feel the distress, or joy, of another creature, whilst remaining aware that the distress or joy that it sympathises with is not its own. Empathising or sympathising involves an imaginative change of places with another creature

Ways of being moral   5 that puts the operation on a completely different cognitive – and (we would say) economic – level to merely catching the distress, fear or joy of another. But still the point is that individual behaviour gets modified in a way that increases its chance of success because it is more in tune with the behaviour of others. The sense of fairness – or, if you will, the sense of just deserts – that some of de Waal’s subjects seem to display may be understood in a similar light. An ape whose rations are cut may refuse what it is given until the ration is increased again. Or an ape who is offered food that it deems inferior to that offered to a colleague may refuse until parity is restored. This is odd behaviour because in both cases the ape hurts or punishes no one but itself. But one can see how carrying around a sense of how things should be – a sense of proper order or propriety – and nursing a sense of injustice when they are not, will make the coordination of new acts much less problematic. Whether one should speak of such behaviour as ‘moral’ is a moot point. Arguably, properly moral behaviour should reach further than kith and kin. Also, if it really is a moral conception of the good that is being acted upon, then it should be one more widely shared than just by donor and/or recipient; and in any case it is not clear that de Waal’s subjects have conceptions of any kind. We would also worry about the way that de Waal’s understanding privileges the coordination problem, as though the ape’s other-regarding competences modify for the sake of society an already existing ‘private’ act, rather than constituting the ape’s behaviour as such. He also comes too close for our comfort to equating these competences with a tendency or impulse to act benevolently, when in fact the capacity for making an imaginative change of places with the other is quite different to wanting to do the other good. But he hits the mark when he says that just because most modern textbooks on animal cognition fail to index empathy or sympathy, [this] does not mean that these capacities are not an essential part of animal lives; it only means that they are being overlooked by a science traditionally focused on individual rather than inter-­ individual capacities. (de Waal 2006, p. 27) And we need hardly add that de Waal’s comments apply a fortiori to modern economics and its approach to the study of human behaviour; for, like the animal cognition theorists, so also the modern economist: ‘[t]ool use and numerical competence . . . are seen as hallmarks of intelligence, whereas appropriately dealing with others is not’ (de Waal 2006, p. 27).

6   Ways of being moral

Being and knowing There is then an ontological lesson here for the economist, though we would put it somewhat differently to de Waal. It is not just that modern economic discourse privileges individual capacities at the expense of social ones (though it does this as well), but rather that so much of the time capacities are not discussed at all. Both the orthodox economist and her moralising dissenter remain for the most part at the level of motive: the former with her postulate of self-interest and the latter keen to point out (anomalous) instances of other-regarding behaviour. Neither seems to realise that arguments about what we want to do ignore the fact that wanting of any kind presupposes powers, capacities, potencies, that enable those wants to be realised. Bhaskar’s transcendental, or critical, realism acknowledges what much of modern economic discourse does not, that there are different levels of reality: the empirical: what is observed; the actual: what might be observed – the empirical possibilities, so to say; and the real: those capacities or powers whose existence would account for events at the more superficial levels (Bhaskar 1978; see also Lawson 2003). Unfortunately, much of the discussion concerning morality in relation to economic behaviour fails to get beyond a typology of possible (empirical) action, consisting in own-regarding and other-regarding behaviour, and a record of (actual) ‘moral’ (or ‘non-moral’) events. When it does go beyond and acknowledge a deeper, non-empirical level of powers and potencies – capacities that might account for the empirical world of data sets and experiments – it fails to acknowledge anything other than the power of instrumental/strategic reason: Marx’s ‘deliberation’; von Mises’s ‘purposeful behaviour’; Morgenstern’s (1974) ‘formal process of maximising’. If de Waal needs to tell a story about moral competence, about social or emotional intelligence, in order to make sense of primate behaviour, then why not the economist in relation to human action too? According to our lights, the economist does need to tell such a story – in which instrumental/strategic behaviour, as well as ostensibly ‘irrational’ departures from such behaviour, is taken to be parasitic on a more fundamental moral-communicational competence (see, for example, Habermas 1979) – but fails to do so. Instead strategic action – albeit (sometimes) in the service of a morally informed attitude – is treated as the only primitive in a barely credible account of society that determines not just discretionary forms of behaviour but those behaviours ostensibly governed by institutions too. Yet such is the power of this foundation myth that it spawns not just modern economics but counter-discourses besides (see Chapter 5 below).

Ways of being moral   7 The ontological shallowness of modern economic discourse goes hand in hand with its epistemological naivety. Again, de Waal’s primatology is revealing. Just to be clear: when we say that de Waal’s work with apes points in the direction of a view of the primates, including us, as creatures with moral or ethical competences, and of our economic behaviour enabled by these competences, we mean something like the following. We do not want to deny that human beings are strategically rational creatures, with the ability to work out in fine detail the consequences associated with certain types of action, and of choosing accordingly; or of building into our feasible set of choices the ability of others to do the same. Indeed, if monkeys can ‘monkey around’ then surely humans can do it in spades. But if we suppose that this is all we are capable of, then, on the basis of this competence alone, it is difficult to see how we would ever get out of the bed in the morning, having to (deliberately) weigh up the advantages and disadvantages of one course of action over another. That most of us do manage to get up in the morning and make our way through the rest of the day speaks of competences other than that of strategic rationality. The inferences that de Waal makes about his apes we can just as well make about ourselves: we must have a sense of what kind of behaviour is appropriate in given circumstances and what is not; and we must also have a way of reaching a common or shared sense of these things. Drawing inferences of this kind is no more or less scientific than the claim(s) that economic agents are strategically rational or are motivated by self-interest. Strategic rationality or self-interested behaviour are no more observable than the moral competences of which we speak; but, by the same token, those moral competences are no less knowable. And once the ontological considerations, alluded to above, are properly understood, it becomes clear how they are supposed to be known: they are to be inferred, ‘abducted’ or ‘retroduced’ from the pattern of events that they produce – which is why, since such a pattern is itself the result of a corrigible empirical inquiry, the retroductions from that inquiry must itself be corrigible. According to Lawson, ‘if there is something fundamental to scientific explanation . . . it is the move from phenomena at one level to their underlying causal conditions’ (2003, p. 24). Science aims to ‘increase our understanding . . . [of] underlying powers, mechanisms and/or tendencies, etc., responsible for the events we produce or otherwise observe’ (Lawson 2003, p. 24). Or again: ‘if anything is essential to the scientific process it is this movement from a surface phenomenon to its underlying cause’ (Lawson 2003, p. 24). On this view, then, positivists, though right to insist that an adequate scientific procedure is about the empirical evidence, misunderstand its role. The positivist idea (presumably) is that the ‘empirical evidence’ be brought to bear on the issue of whether an event that is said

8   Ways of being moral to have taken place really did or not – a process somewhat analogous to the re-running of history to check on the accuracy of someone’s description. Of course, quite often we do ask such questions of the evidence; but to suggest that this is the whole of scientific theorising or explanation, or even its overriding moment, is simply to debase those terms. A ‘matter of fact’ is not a successful theory: a matter of fact, even when attested to, just is; and, likewise, two matters of fact, conjoined or not, just are. The interesting question is why they are, and an answer to that question is not an event, conjectural or otherwise: indeed, ‘the primary concern is not with the production of an event regularity per se, but with the empirical identification of an underlying mechanism (co-responsible for any regularity so produced)’ (Lawson 2003, p.  24). Contra positivist doctrine, ‘empirical identification’ here does not mean an observation of something in the world that corresponds to an item in somebody’s description of the actual. Rather, it means that the way the empirical is configured tends to suggest the existence of some definite power or capacity at work. The postulation of the existence (and exercise) of this (unobservable) capacity then (literally) makes sense of that which one does observe. This is retroduction. According to Hanson, retroduction is a ‘cluster of conclusions [i.e., observed events, ‘facts of the matter’] in search of a premiss’ (Hanson 1958, p.  90). The modern-economic idea of homo economicus as the (amoral) process of rational maximising is no less a form of retroduction than the competing idea of an agency enabled by moral competences. It is just that, in our view, the latter conception is demonstrably superior.

Outline of subsequent chapters From the beginning – which in terms of extant text means fourth-century Athens – homo economicus is the idea of an agent charged with bringing order to the world. As we explain in Chapter 2, Xenophon’s economicus is one who brings order to his estate and, with his fellow-citizens, order to the polis. He knows order to be useful but also to be good in itself. And he knows that an eye for order is an eye for proportion: for how one thing should stand in relation to another; for propriety; for justice. From the beginning also, the bringing of order was in some sense a moral affair. But Xenophon’s Athena speaks with different voices on this matter. The discourse of the time tells of different but coexisting notions of personal interest in relation to the moral, of different notions of the divine in all of this, but, still, a general understanding that moral vision is not given to all predominates. The apparently respectful tone in which matters pertaining to craftsmanship are addressed hides a darker side. Plato’s attitude to the carpenter, for example, tells its own story. Can the

Ways of being moral   9 carpenter be left to his own devices? According to Plato, the answer is both yes and no. On the one hand, he can and should be trusted to know and to choose the appropriate kind of wood and tools for the job. On the other hand, however, he has no conception of the role that carpentry plays in the wider scheme of things, and so his ignorance (wilful or otherwise) in regard to the latter requires a separate caste of moral/political guardians to direct and oversee his work. In our view it is not difficult to see here an early form of the attitude that would much later firm up into the notions of ‘public choice theory’ and ‘producer interest’. By the mid-seventeenth century the issue of social order had become one of expediency rather than aesthetics. The imposition on unwilling communities of, first, Roman justice and then feudal injustice had emptied public institutions of their intrinsic goodness; but it had also underlined their instrumental value in maintaining the security of the now thoroughly privatised individual and her property. But the apparent reduction of the public good to matters of security is not the only remarkable feature of this new (economic) discourse of modernity, for it was not just that the public good would now have to serve a clearly delineated notion of the private good but also that private interest could delineate (and act on) its own good for itself. On the other hand, the euthanasia of the moral guardian – which is one way of understanding the predominant theme of the political economy of modernity – presupposes a whole new way of understanding the economic competences of the citizen. This is the story that we take up in our Chapters 3 and 4. Yet, as Chapter 4 explains in more detail, there was never in fact just one way of understanding homo economicus in modern discourse; almost from the start one understanding was challenged and supplanted by another of a very different kind. In the beginning there was the calculating ego, the rational maximiser, that dominates Hobbes’s Leviathan: a creature that makes its way in the world by second-guessing the strategies of its fellows. Hobbes’s agent may have moral intentions but no moral competences. Hobbes offers a neat, mathematically tractable model of economic behaviour but it was challenged almost at once because, notwithstanding its apparent resonance at the level of the individual actor in Civil War Britain, it ultimately makes no social sense. As is well known, Hobbes’s theorems call out for an all-seeing, all-powerful, top-down rule-giver. Yet Cromwell’s commonwealth lasted little more than a decade, and Charles II’s attempt to build something similar failed to get off the ground as the decentralised discussions in the coffee houses refused to move back to a centralised Whitehall court. Evidently, what was required of an adequate theory of the economicus is a body of operators and cooperators capable of making their own rules as they go along: effective strategists, yes, but all

10   Ways of being moral of this underpinned by basic moral competences that enable the agent to pick up and take within the kind of expectations that others hold of her behaviour. It is one of the great tragedies of modern social discourse that though Hobbes wants to leave no room for the intrusion of external authority into properly private affairs, this is precisely what he ends up doing. Another tragedy – the one that concerns us in our final two chapters (5 and 6) – follows from the first. Despite the palpable superiority of the counter-discourse (to Hobbes) that makes moral sense central to economic behaviour, the future was to belong to Hobbes in the form of the revitalised egoistic theory that is modern economics and its close relation, the theory of games. As it turns out, then, the moral guardian of Plato’s Republic was not so much dead as waiting in suspended animation, to be given his first modern outing by Hobbes in Leviathan, and then reactivated in more recent times in the form of a (woefully inadequate) revisionist understanding of Smith, which in turn helped to shape the discourse of modern economics and that of its malcontents, both within and without. But, as we will want to emphasise in Chapter 6, this result is of more than academic interest, for, in taking to heart the lessons of modern economics, we have gone on to reshape not just our discourse but ourselves.

2 The idea of homo economicus

According to the modern conception of things, economic activity is that which has no value or virtue in itself but is rather an attempt to realise those aims or ends that do; it is a means or instrument to realise valuable ends externally given or chosen. On that understanding, then, economics deals with means, and ethical theory with ends. As such, ‘it does not seem logically possible to associate the two studies in any form but mere juxtaposition. Economics deal with ascertainable facts; ethics with valuations and obligations. The two fields of enquiry are not on the same plane of discourse’ (Robbins 1945, p.  148). Thankfully, Putman (1981), amongst others, has long since disabused us of Robbins’s crude (and erroneous) positivist distinction. There is an undeniable ‘triple entanglement of facts, theory, and values’, and we had better just get used to it (Putnam and Walsh 2007, p.  181). But still, a more general point that Robbins was at pains to make lingers, ‘entanglement’ or not. Homo economicus, by Robbins’s time, has come to mean the ‘ascertainable facts’ of the agency or aspect of human endeavour charged with that task of turning (by definition) amoral means into (possibly moral) given ends. But the name is not new, and in its earliest connotation it signified a rather different form of activity and understanding of the world. That earliest usage – at least in textual form – is in Xenophon’s Economicus, a work of the early fourth century bc. Xenophon is of the classical Greek era of Socrates, Plato and Aristotle, and indeed the Economicus takes the form of a Socratic dialogue. In some respects the subject-matter of Xenophon’s text conforms to our modern understanding of the economic agent, for his economicus is concerned with the management of a farm or estate and therefore with the material reproduction of that unit, as well as with the material provisioning of the polis to which its owner belongs. As a matter of fact, Xenophon’s economicus is one who is good at managing an estate, one who is exemplary in that regard. In other respects, however, Xenophon’s conceptions are very unlike ours, as befits

12   The idea of homo economicus an author who, alongside a book on economic principles, also writes treatises on the art of the cavalry commander, the huntsman and the tyrant (Strauss 1998, p.  87). Like Borges’s Chinese encyclopedia, Xenophon’s intellectual interests tell of a very different order of things to our own (Foucault 1989).

Xenophon’s Socratic dialogue Xenophon does not present the reader with a definition of the economicus – a definition which can then be examined and elaborated. Rather, in the beginning he pretends not to know the how and the why of economics, and invites us to follow the route whereby he came to know. He wants to persuade us of the notion that his view is a reasonable one; and to do that he assembles a cast of characters, each of whom one might expect to know something but not all of the matter. Even his principal discussant, Socrates – wisdom personified – has only a partial view. But it is his view – of the nature of wisdom, of how we come to know – that determines Xenophon’s discursive strategy and therefore the structure of the piece. To begin with, even Socrates cannot know the economicus, but he does know how we might come to know. He will discuss the matter with the aspiring economist, Kritoboulos, whom, in due course, he introduces to a ‘perfect gentleman’ of his acquaintance, Ischomachos. Each of these perspectives has a case to put, and the case will always be decided by the force of the better argument. Socrates seems to be there to ensure an amiable discussion, but not too amiable: sometimes awkward questions have to be asked, and new perspectives sought. When the arguments have been had, and the questions asked and answered, then we have an agreement, and share an objective, third-person view of things. When we reach this agreement, then we know. To begin, Socrates wonders whether the management of the household or estate – the ostensible function of the economicus – can be delegated to another, or whether the owner must always remain in charge. This question will emerge as an important theme later in the discussion. For the moment, though, the nature of the household needs to be clarified. Let us say then that the household is just possessions, and so the function of the economicus is to increase the mass of these. But even those that do us harm? Evidently things are not so simple: we may ‘possess’ enemies; but would we want to increase their number? Let us say instead, then, that he should be concerned with augmenting the quantity of possessions that are of benefit. Let us say also that ‘[w]hatever benefits is wealth’ (Xenophon, p.  4); but the wealth of things is evidently ‘knowing how to use each of them’ (Xenophon, p. 5). In this way, Socrates turns the issue of economic agency into one regarding the very nature of the good.

The idea of homo economicus   13 He also wants to turn the issue into one of managing people as well as things; and properly managing not just others but also oneself. For free men may also be slaves to inappropriate, distracting passions (what Socrates calls ‘mistresses’), and so the economicus needs epimeleisthai, meaning concern, diligence – a concern and a due diligence towards the discharge of his public obligations as well as his private ones (Xenophon, p. 9). How he may come by these virtues will be elaborated later. For the moment there is the question of order. There are of course utilitarian issues at stake here but also aesthetic ones, for ‘[n]othing is so useful or fine for the human being as order’ (Xenophon, p. 36; all page references in this paragraph are to Xenophon). Order is divine but also very human: the gods only bring disorder (13). And orderly relations as well as orderly things are human rather than god-given. Slaves who stay voluntarily, slaves who ‘willingly obey’ (21), do so because they are treated properly: they are the ones who come to see the benefit to themselves from their master’s fortune and come to see something of themselves in his accomplishments. So, too, wives: they should be instructed in domestic management but then given complete responsibility for that domain. The wife should be the manager inside just as the husband manages outside. Estate management is a partnership between man and wife that rests on trust and mutually acknowledged competence (13): it is ‘ownership in common’ (31). There is a more general point at stake here, though, as will become clear later in a discussion on stewardship. The estate-owner and his steward, unlike man and wife, are not ‘owners in common’: the steward is a servant, a slave. But still, once instructed, the steward should also be left to his own devices, left to make the decisions. He is the one, after all, who is closest to the action. The principal-agent problem is recognised but then dismissed, on the grounds that a steward, if treated in a just and generous manner, can be trusted to do the right thing by his employer. If, on the other hand, he has not been so treated, then incentives will not really help matters. The principal concern of the economicus is the wealth of the household. But how precisely is that responsibility to be discharged? Some activities are just not suitable, however conducive to money-making they may be. We should consider the deleterious effect that the mechanical arts have on the person (Xenophon, p. 17). The ‘mechanical arts . . . ruin the bodies . . . and enervate the souls’ (Xenophon, p. 26). And, in any case, the wealth of the household is not simply about money-making: it is rather about ‘increasing the household by good and just means’ (Strauss 1998, p. 22). Farming, on the other hand – as opposed to the de-formative effects of the mechanical arts – forms in a good way. The fact that Cyrus engages in such pursuits is revealing. As king of Persia, clearly he does not have to so

14   The idea of homo economicus engage, but he is proud to call himself a farmer, recognising the good it does to himself as well as to his estate (Xenophon, p. 22). ‘Farming educates in helping others’ (Xenophon, p. 24). It helps in ‘[j]oining in the concerns of friends and cities’ and more. ‘This manner of living [farming] is . . . held in the highest repute by the cities, for it seems to provide the best and best-willed citizens to the community’. It is at this point that Socrates introduces to his interlocutor, Kritoboulos, the living embodiment of the economicus, the ‘perfect gentleman’, namely, Ischomachos. Though farming is not economics (Xenophon, p. 27), it is, it transpires, the perfect occupation for an economicus. It furnishes the time, the material wherewithal, as well as the inclination for one to discharge one’s public duties. But having the time, of course, depends on the ability to delegate, and again Socrates’s thoughts turn to stewardship. It is all very well, he suggests to Ischomachos, to teach someone to oversee work in your place but ‘mustn’t he first feel goodwill towards you and yours . . . for without goodwill what benefit is there in a steward’s having any kind of knowledge . . . and . . . how then is this taught?’ ‘Generosity’, Ischomachos replies: ‘Those who enjoy your goods come to feel goodwill and want to do something good for you in return’ (Xenophon, p. 52). And just as Ischomachos instructs and delegates to stewards, so his wife instructs and delegates to housekeepers, with goodwill again the basis of the relationship: [w]e taught [the housekeeper] to feel good towards us . . . how, by gratifying us in some way, she might be honoured in return . . . sharing our delights when we were delighted in some way, and when there was something painful, inviting her aid. We further educated her to be eager to increase the household, making her thoroughly acquainted with it and giving her a share in its prosperity. And we inspired justice in her, honouring the just more than the unjust and displaying to her that they [the just] live richer and freer lives than the unjust. (Xenophon, pp. 42–3) As befits a treatise on economics that puts human relationships and their management at its centre, Xenophon closes with a discussion of the nature of leadership. By now it is no longer absurd that his bibliography should also include tyranny, horsemanship and war, for these are overarching themes. For one: it is always ‘under the master’s eye that fine and good works are done’ (p.  55). Yet, as Strauss’s commentary makes clear, for Xenophon, ‘[m]ere beholding, as distinguished from practicing, is utterly insufficient for learning any art’ (Strauss 1998, p. 110). ‘The good ruler . . . owes his being a good ruler not to his being the best soldier in the army’

The idea of homo economicus   15 but to his ‘great-mindedness’: not the best soldier, nor even the best strategist, but a moral exemplar. But in any case he is still a soldier. He is a good ruler because he has the ‘ability to inspire the soldiers with eagerness to follow him through fire and through every danger’ (p.  206; our emphasis). The economicus is not a soldier, nor a farmer as such. But there is in him something of the soldier, and also something of the farmer. The good farmer learns the ‘nature of the earth’ (Xenophon, p. 60), and enjoys the ‘praise and honour’ that this knowledge draws forth from others. Analogously, the economicus must learn the nature of his ‘earth’ – the people he must work with: his wife, stewards, housekeepers and others – if his work is to draw ‘praise and honour’ from his fellows. He learns, like the general and the tyrant, the art of leadership: the ‘good . . . [that is] to rule over willing subjects’ (Xenophon, p.  80; our emphasis), and to instil in those subjects his eye for diligence and justice. For, though he must be capable of doing the things that he asks of them – how else could he instruct and moralise? – it is they, not he, who must take responsibility for what they do. Ultimately, his responsibility is to take his place as Aristotle’s political animal.

Context For us moderns, economic activity is the very prose of life, turning one material thing into another, and the measure of its success is the extent to which we economise on the former in producing the latter. Xenophon’s Socratic dialogue is also concerned with precisely that process – in which one’s activity is directed towards some external end – also then concerned with a process of turning one material thing into another. But the subject of Xenophon’s treatise, unlike modern treatises on the nature of economic activity, is to be understood as neither abstract nor prosaic The economic discourse of Xenophon and his Greek contemporaries speaks of a world in which life is lived aesthetically, in which work is poetry and the community revered. As Hegel (quoted in Rose 1995, p.  112) says: ‘Athena herself is Athenian life [and thus in worshipping her we worship that life, its customs, etc.] – the happiness and wellbeing of the state is not her end. . . . These beings which have divine nature are those very powers and activities themselves.’ This is a people ‘which recognises its ethical life [customs, etc.] as divine . . . the substance of political life was merged in individuals just as much as they sought this their own freedom only in pursuing the universal aims of the whole’ (1995, pp. 113, 131). This is a ‘political religion’ (1995, p. 113).

16   The idea of homo economicus The economicus sees himself as engendered by and necessarily partaking of a larger form of life; and sees his economic activity as an elaboration of self and society that is generally pleasing, that is, pleasing according to shared and accepted rules. Xenophon recognises that economic activity produces people as well as material products, that the economicus is himself a work in progress. It does not follow, therefore, that the most materially productive technique of tending sheep or growing grapes is the most economically efficient. Work is educative, as well as personally and therefore politically formative. Economic activity, like all else in this world, must answer to the degree that it makes one ready for political life: through the effect it has on the personality, its subject, the efficacy or otherwise of a certain type of economic activity answers to the flourishing of the polis. This is why Xenophon (and Aristotle) so take against the ‘mechanical arts’. Mechanics – because of the nature of the work that they do, or rather the circumstances in which the work is done – are rendered singularly unsuitable for political life: they work under cramped, intellectually debilitating conditions and, more importantly, they don’t get out much. Ultimately, then, the exoticism of Xenophon’s seminal economic treatise derives from his exotic understanding of the good. It is not that the individual good of the economicus is not at stake here; it is rather how it is at stake. The economicus comes to see that he cannot do good for himself if he is not doing good for the polis: his own well-being and that of the polis are not separate enterprises.

Discourse and counter-discourse: the economy of observance The life of the Athenian citizen, as described by Xenophon, is a life lived aesthetically. It is also – within the terms of the last chapter – a substantively moral life: there is a generally shared conception of the common good, which in turn determines the individual good (and not the other way around, as it is for us); and, moreover, this (moral) good that determines a life well lived for the economicus and his fellows is not so much a subject for reflection as a working principle. The last two points take it beyond the mere idea of substantive morality, in which a discursive rationality dispenses principles that we ought to live by: a discussion of how things should be but generally are not. Xenophon’s treatise is effectively a training manual, an attempt to inculcate in the aspiring economicus the economic principles that would fit a world that he already knows to be good. The kind of training or inculcation to which Xenophon’s text speaks, however, presupposes certain competences within the trainee – the formal morality to which we

The idea of homo economicus   17 alluded in the last chapter. It presupposes on his/her part the capacity to take within and to dispense to oneself, as if they were one’s own, principles that do in fact come from elsewhere. Xenophon says next to nothing about this process, save for his references to ‘willing’ subjects and the like. But these references alone situate him within a debate about the nature of human behaviour that is with us still. In his day that debate gets played out in Plato’s Republic, as Plato recounts the issues he has with the sophists. The issue of interrelationship arises as soon as we leave behind the godgiven world of kinship. How is social conduct established when socialevolutionary development has taken us past the stage of (more or less) predetermined behaviour? We may call bees and ants social insects but the degree of predetermination suggests that sociality is in the organism as a whole rather than in its constituent parts. The social question proper arises when what was once automatic becomes a matter of self-determination. But then can interrelationship be resolved in such a way that each is given her due? Is there an objective viewpoint by which the relationship can be understood and, in a sense, justified? It is as if each two-party relationship needs a third-party perspective for its consummation. Central to the understanding of homo economicus and more, from Plato’s day to ours, is how that perspective arises. Plato addresses the issue in his Republic. The problem is in the freedom of the respective parties, each having her own distinctive interest. From the standpoint of the first person, then, justice might seem to consist in securing his or her own interest. This is precisely the manner of the sophist argument, made through the character Thrasymachus when he says that injustice ‘has more strength and freedom and mastery than justice’, so that in fact, ultimately, ‘justice is the interest of the stronger’ (Buchanan 1976, pp.  306, 307) Here then the two party problem is resolved by collapsing the relationship into the perspective of just one: the ‘stronger’. Justice is collapsed into interest and consists then in the weaker obeying the stronger who is the ruler. Socrates’s counter to this view depends ultimately on his understanding of the division of labour and the distributed nature of expertise. The stronger may be in error about their interest or about how best to achieve it, so that Thrasymachus’s ‘justice’ would then be caught in an absurdity, requiring, as it would, a true, objective, third-person understanding of interest. Without that, without avoiding error, the weaker, in following ‘justice’, would in fact be going against the interest of the stronger. Thrasymachus is forced to qualify his position: he means to refer to only those who do not mistake their own interest. But he is not out of the woods, for there is still the question of what it is that the ruler does; and not just the ruler because it is the problem for all within a division of

18   The idea of homo economicus labour. Is it sufficient to consider each merely in terms of their self-interest, as Thrasymachus seems to propose, or is there some other way of understanding each person’s role in a division of labour? Thrasymachus’s argument would homogenise what each does within a discussion of selfinterest. Plato approaches the question by asking whether the physician is ‘a healer of the sick or a maker of money’ (Buchanan 1976, p. 302). Following this line of argument, we find that each art has its domain by which it is distinguished from others. They do what is peculiar to their art and, excellence consisting in this, we find that ‘the true physician is also a ruler having the human body as a subject, and is not a mere money-maker’ (Buchanan 1976, p.  304). The point here is that, as he puts it, ‘each art gives us a particular good and not merely a general one’ (Buchanan 1976, pp. 308–9). So each art provides not for its own interest but for the interest of its particular subject as in, for example, the body. The physician who is not paid still confers a benefit. But, maybe, he cannot see that. Evidently what this view of the division of labour throws up is a relationship between the person who performs it and the art itself. For, if there is no money reward, then why do it? This is posed by Socrates in terms of the ruler, for whom the only payments are money, honour or a penalty for not so ruling. For ‘good men’, the first two are ruled out since ‘money and honour have no attraction for them’ (Buchanan 1976, p. 310). The matter is simple enough: ‘good men do not wish to be openly demanding payment for governing and so to get the name of hirelings, nor by secretly helping themselves out of the public revenues to get the name of thieves’ (Buchanan 1976, pp. 310–11). Ultimately, the good must rule, for if they do not then the bad will, and, by argument, the bad ruling for money and honour should be replaced by those who rule out of necessity. It is this ruler who is wise and knows justice. The argument for the strength of injustice, made by the sophists, is effectively an argument for interest that is drawn out by Socrates to the point where he can ask Thrasymachus: ‘whether you think that a state, or an army, or a band of robbers and thieves, or any other gang of evil doers could act at all if they injured one another’ (Buchanan 1976, p. 318). Of course they cannot since ‘injustice creates divisions and hatreds and fighting’ (Buchanan 1976, p. 318). We reach an interesting point here, for in following what is an anticipation of the Machiavellian route – from the argument based on the justice or interest of the stronger we reach the Hobbesian consequence of hatred and fighting. Clearly, a resolution is still required. The physician heals and the carpenter carpents. The end of anything would be that which could not be accomplished, or not so well accomplished, by any other thing. Each, then, to his part. Indeed for Socrates it is

The idea of homo economicus   19 a matter of the part to which they are best suited, for the differences in arts are matched by natural differences. How, though, is all this to be brought together? It is Glaucon who puts the Hobbesian argument. For, whilst we may well otherwise ‘prefer’ the ‘justice’ of the first person, we know full well that our immediate preference will come back to haunt us in the form of others who would want to impose their own first-person idea of ‘justice’ on us. That is to say, we have entered the world wherein we are all Machiavelli’s prince, a world anticipated in Machiavelli’s own understanding of the people as naturally undifferentiated. How then do we respond? Glaucon’s answer is that we must agree to make arrangements for giving up the (subjective) good of injustice in order also to avoid its evil effects. He puts the matter as follows: ‘they think they had better agree among themselves to have neither; hence there arise laws and mutual covenants; and that which is ordained by law is termed by them lawful and just’ (Buchanan 1976, p. 326). But this new idea of the ‘lawful and just’ sits uneasily with a continued interest in the old (in)justice of superior subjective force. It is a matter of ‘mean’, a matter of ‘compromise’; justice is the ‘lesser evil’ and ‘those who practise justice do so involuntarily and because they have not the power to be unjust will best appear as if they imagine something of this kind’ (Buchanan 1976, p. 327). Lacking inner principle, all that holds them in check, apparently, is that external third-party view. All follow their interests and ‘are only diverted into the path of justice by the force of law’ (Buchanan 1976, p. 327). Our natures are supposed to require this law, our natures of course meaning just, is reduced to, the sense of self-interest. This – the sophist point – is illustrated to good effect by Glaucon with the case of the shepherd Gyges. He discovers an invisibility ring and thus, no longer needing to show observance, no longer needing to comply with the law, does just as he pleases. The moral of the story is of course that we have no real commitment to justice. Injustice is our true calling: ‘all men’, says Glaucon, ‘believe in their hearts that injustice is far more profitable to the individual than justice’ (Buchanan 1976, p.  328). This reintroduces Thrasymachus’s injustice argument and also reproduces the conclusion of the sophist Antiphon that we should do what the (positive) law requires of us in the presence of witnesses, but just as we please when the witnesses disappear. We are supposed to learn through these arguments that justice (proper) is useful but does not come naturally. Of course, this is how we would become sophisticated. We take the third-party view on sufferance, just as needs be, but know it to be needed. If we want justice – and we should – then we must deliberately construct it as well as the institutions that will ensure its survival. Again, this social constructivism is Hobbes, avant la lettre.

20   The idea of homo economicus It is also, as we shall see in Chapter 5, below, an anticipation of modern economics. For the modern economist, too, justice is an impostor in a natural world of first-person interest. Just as for Plato and Hobbes, so for the economist also: we need a third-party view, an objectivity, without which our ‘natural’ interest would be self-defeating, as it is in the state of nature. We cannot be expected to act on behalf of others – and therefore ultimately in our own interests too – in the absence of some kind of external compulsion. But, pace Hobbes, we have market incentives and punishments to keep us on track; this is the third-person, external witness in the economist’s world. ‘Self-interest’ of course presents a powerful argument capable of puncturing much wishful (and moralising) thinking. Even so, as Plato sees, through Socrates’s argument, there is no real specificity in self-interest as such. We end up speaking of what a person desires and not of what they do. Once an argument is assembled through the division of labour, however, the matter takes on a rather different complexion. Then each is involved in particular arts and they have particular ends. And each art has its own internal discipline and domain. We may still do what we do for payment but it remains some specific kind of doing. Indeed, even if we do not get paid there is still some benefit to the subject of our art from our doing of it. This is the basis for the conception of justice as grasped in relation to the city. In this way an objectivity is brought into the argument, for in doing what we do we realise a special excellence (Buchanan 1976, p.  321). Of course, the question is then: how is all of this to be kept in shape? Justice for the city must consist in each doing what is natural to him: ‘each individual should be put to the use for which nature intended him’ (Buchanan 1976, p. 419), ‘and furthermore not to be interfering with others’. ‘When the trader, the auxiliary, and the guardian each do their own business, that is justice, and will make the city just’ (Buchanan 1976, p. 435). Or rather, ‘we affirmed that justice was doing one’s own business, and not being a busybody’ (Buchanan 1976, p.  433). This has a certain appeal. In this way needs will be met, and, with an extending division of labour, in an increasingly opulent fashion. Plato’s ruminations on the division of labour furnish him with an understanding of how different occupations each have their own special excellence, and therefore a discipline, an objectivity, specific to the art. But this does not ensure that the discipline is followed. We may well speak of the true physician but departures from the true are always possible. Socrates is well aware of this possibility. It is the purpose of the guardians to ensure a proper operation of the division of labour. They should ensure, for example, that there will be neither excessive poverty nor excessive riches, for either would undermine the performance of the art in question.

The idea of homo economicus   21 The possibility of corruption also determines how the guardians themselves are chosen and the circumstances that would ensure their proper conduct. There is the familiar proviso that the guardians should not ‘touch gold nor silver’. Also, their education and their habitations ‘should be such as will neither impair their virtue as guardians, not tempt them to prey upon the other citizens’ (Buchanan 1976, p.  411). The guardians should stand apart – in a position to hold the third-party view – maintaining the objectivity by which the relationship, the city, can work. But in standing apart they do more than merely witness events, since the idea of the witness itself has already been shown to be defective, implying as it does a notion of justice as compromise. The guardians must themselves hold the principle on which the city is founded. This requires a knowledge that itself stands apart, that is itself objective. The nature of this objectivity is part and parcel of Plato’s idealism. The knowledge that the guardians must foster is knowledge of the absolute: a knowledge of that which does not change but then underlies a world that does. Its acquisition takes the form of what Plato calls an ascent, culminating in the knowledge of the good. Without it – without absolute knowledge – they would go to the administration of public affairs, poor and hankering after their own private advantage, thinking that hence they are to snatch the chief good, order there can never be; for they will be fighting about office, and the civil and domestic broils which thus arise will be the ruin of the rulers themselves and of the whole state. (Buchanan 1976, p. 555) Knowing the good, taking the ascent, is one thing; its realisation as an appropriate division of labour is another. Its realisation demands that they dispense justice; that is their part in the division of labour. They must then ‘descend again amongst the prisoners in the den and partake of their labours and honours’ (Buchanan 1976, p. 553). Their task, their art, is to look after the well-being of the whole state and for that a return to the dark is essential. Because of the knowledge they have acquired of the good, however, this will be a reluctant journey, requiring as it does a return to the world of partial understanding and partial, one-sided interest, a world incapable of self-organisation. But now they will be on hand. As we will want to show, Plato’s views, then, on closer examination, are not so different to those of Hobbes or of the modern economist. Substitute for Plato’s guardians Hobbes’s sovereign or, in the case of modern economics, an impoverished idea of the market and an inflated view of the corporate manager. These are imperfect substitutes, to be sure; but each in its own way sees a fundamental moral shortfall in Joe Average that needs to be

22   The idea of homo economicus compensated for by the external imposition of the third-party view. Justice is something on behalf of the punters, those dwellers in the den. In all cases it is a question of establishing and maintaining an adequate social order, and in all cases it is, apparently, an order that we are incapable of establishing and maintaining by ourselves.

Reformation The passing of the city-state also marks the passing of Xenophon’s economicus, and from thereon in homo economicus begins to take a shape that Lionel Robbins would have recognised. The Greek and Roman worlds are often represented as a unified entity known as ‘classical civilisation’ but their natures are very different. The Roman state ‘embraces the world in an external way’, as Hegel puts it (quoted in Rose, 1995, p.  114), as its laws are imposed upon communities with very different customs. Roman law is an external imposition (on prevailing custom). As such the individual is made aware of itself, comes to know itself, in opposition to something other. As such, the individual recognises itself as a subject. In Greek Sittlichkeit, the individual knows itself only as part of a larger form of life, and as indistinct from it. Within the Roman empire, however, unable to recognise itself in a now alien institutional landscape, the economicus turns itself and its activity inwards, serving the private good of the citizen that, though underwritten by public institutions, is understood to be quite separate from them. ‘Unity is . . . achieved by imposing on custom an external law which grants rights’ (1995, p. 130). Activity is thus debased, but so too is politics, which also becomes an instrument in service to private good. But at least Rome acknowledges and protects the good of the private citizen; at least rights are granted in a lawful way. With the fall of Rome, even that consolation goes, as the objective right of the state is replaced in the feudal world by the contingency of superior force. Rose puts it nicely: the relation of vassal to vassal is based on the purely subjective relationship of one individual to another. There is no law to guarantee this relationship, no Greek consensus and no Roman legality. The state is a ‘patchwork’ of private interest. (1995, p. 165) Or again: ‘state and law . . . [are] . . . a matter of private possession and personal sovereignty. Fiefs were not “conferred” on vassals . . . [rather] the weaker were expropriated by the stronger and then received their possessions back encumbered with feudal obligations . . .’. And finally:

The idea of homo economicus   23 [f]eudum is connected with fides: the fidelity implied in this case is a bond established on unjust principles . . . the fidelity of vassals is not an obligation to the commonwealth but a private one . . . subject to the sway of chance, caprice and violence. (Hegel, quoted in Rose 1995, p. 166) Despite the agonising of contemporary moralists, there is no going back to the substantive morality of Xenophon’s economicus, no way back to a world in which good behaviour may be understood without remainder in terms of its conforming to an objectively determined role. But still, the feudal tendency, whether expressed in the post-Roman but pre-modern European state, or as the command-and-control rentier/manager within the modern organisation, according to which goodness is nothing but a thoroughly subjective affair, is just as mistaken: as we show in our next two chapters, that early-to-middling modern discourse that came to be known as political economy established beyond question that, even in the absence of moral guardians, economic behaviour remains a fundamentally moral affair. And the failures in modern management, as we show in our final chapter, merely confirm that fact.

Concluding remarks It may seem as though the understanding of homo economicus has undergone a radical make-over between Xenophon’s day and ours. But in one major respect that understanding has remained constant: it was then and is still (now) understood as the personification of instrumental activity: the personification of activity directed towards ends or values outside itself. That said, however, we learn much from revisiting the somewhat exotic world of Xenophon’s economicus. We learn from Xenophon’s Socratic dialogue, and pace Robbins, that there is a conceptual space between those external values and its instrument that allows the instrument itself to take on value of its own. Of course this inner significance may take the form of Frey’s (1997)‘intrinsic motivation’, where, in spite of the fact that our activity may aim at some external end, we take pleasure from the act itself. Note, however, that this is not exactly what Xenophon had in mind, for Frey’s pleasure may be entirely subjective, entirely private, whereas for Xenophon the point is that the work of the economicus is generally pleasing, a pleasure to all who watch. Actually, as Adam Smith pointed out, there is a residue of this today in the pleasure we take in seeing a job well done, however we view the consequences of that job. Actually, we learn more than this. Xenophon teaches that for objects and activities to show up as instrumental – to show up as ‘economic’ –

24   The idea of homo economicus presupposes a certain aesthetic or way of viewing things: a disinterested field of vision, so to say, against which certain kinds of interest become disclosed. When Hegel says that in Xenophon’s world, life is lived aesthetically he may be read as saying that its inhabitants recognise and honour the disinterested basis of their lives, now enshrined in particular laws and institutions. But, just because in our world we fail to acknowledge that our interests must have aesthetic conditions of possibility, this does not mean that we have somehow lost those competences on which the economicus’s ‘aesthetically lived life’ rested. We may come at this last point from a different angle. The economicus is no more or less ‘self-interested’ than the modern economic understanding of homo economicus. However, what Xenophon acknowledges, and we apparently cannot, is that the self and its interests are not primitives but are rather constituted by the aesthetic-moral background against which economic activity takes place. Recent calls in the press for a remoralisation of economic life would strike Xenophon as barely coherent. This brings us nicely to our final point. We also learn from Xenophon and his contemporaries that economic behaviour is formative, that we are formed as agents (and not just our preferences) by the kind of work that we do and the way that we do it. Xenophon’s economicus is known by Xenophon’s contemporaries as a performative creature, and Xenophon’s Socratic dialogue as the text that he performs. We will want to make much of this later (see Chapter 6 below in particular). For, though Xenophon’s world is long gone, the formativity of activity and, thus, the performativity of texts remain. According to our lights, modern economic texts are just as performative as Xenophon’s Economicus; it is just that, unlike Xenophon, their authors do not acknowledge the fact.

3 The modern commonwealth

Between the moral hierarchy of Greek thought and the amoral levelling of modern economics lies a different kind of flatness, one in which moral capacity is given to all. This moral democracy of eighteenth-century political economy is neither idle speculation nor part of some wider utopian wish-list but rather a pragmatic response to actually existing social developments. The (relatively) liberal and prosperous order of eighteenthcentury Britain precipitated a radical reconceptualisation of the presuppositions of economic behaviour: a reconceptualisation that would lead ultimately to moral competence taking centre-stage. This chapter and the next tell the story of that reconceptualisation. We begin with the historian Pocock’s reflections on the English Civil War.

Pocock and the English Civil War Pocock’s approach is interesting. Rather than emphasising the changes taking place in the composition of society around this time, he wants rather to consider in and of itself the breakdown in authority. This breakdown had to be somehow dealt with and understood by the people, and there was no simple historical template that opened up to replace what had been lost. Pocock argues that it is just because of such difficulties that, for example, Ireton could be so persuasive at the Putney debates (Pocock 1985, p. 58). The point of interest for us is that radicalism in this period was necessarily concerned with the question of authority. The break-up of authority posed the issue of how any sort of order could be constructed; talk of liberty was meaningless without this concern. Central authority could not be depended on, so authority had to be searched for elsewhere: ‘the origins of all Puritan political thought are largely to be found in the search for the godly magistrate, and there is a sense in which the true meaning of antinomianism was that the individual must be prepared to act as his own magistrate’ (1985, p. 54).

26   The modern commonwealth For Pocock, then, whatever social changes were under way they had to be considered in the light of the internal life of individuals, or, as he put it, ‘if the law had been withdrawn from men, it was that the spirit might take its place, and we can think of antinomianism as egg as well as chicken, as effect as well as cause of the English dilemma’ (1985, p. 55). A political aspect of this increasing reliance on the qualities of the individual was a turn to a previous model of the virtuous citizen but, as Pocock argues, in its original form this model was inappropriate to the times. This older, Roman, political version of virtue required an independence founded on property, especially land – a version inadequate for a more generalised system of commercial exchange relations. In particular, there was now a new ruling elite of ‘stockholders and officeholders, whose relations with government were those of mutual dependence’ (1985, p.  48). Virtue required independence. The austere Roman and more directly political notion of virtue could not survive the development of the sphere of exchange. According to Pocock, it was transformed into a more social conception of manners appropriate to an ‘increasingly transactional universe’ (1985, p.  49), and the actual task of ruling was to be deputed to professional representatives. The modern personality developed in this new and more complex world of interactions. The role of the state, according to Pocock, was to guarantee ‘the liberty of the individual’s social behaviour’ (1985, p.  50). It was not, however, the purpose of the state to confine behaviour to ‘the rigorous assertion of ego-centred individual rights’ (1985, p.  50). For our purposes, Pocock’s emphasis here on ‘social’ is important. The individual had become a vital resource for a broadly considered order, one that rested on the achievement of a ‘commercial humanism’ (1985, p. 50). This is not, however, what many have looked for from the period. Problems of interpretation, argues Pocock, have appeared from both left and right: ‘both socialist and classical anti-liberals have been so intent on the location of economic man that they have taken account only of those phenomena which indicate his presence.’ The supposed key moment is ‘when political man died and economic man reigned in his stead’. But, he continues, ‘[i]t is now in doubt if such a moment ever occurred at all’ (1985, p. 70). Let us be clear about this: Pocock is not denying that something did happen; rather the problem is: what? The search for that private individual pursuing just his own goals (1985, p.  60) merely muddles the historical issue with a modern (anti-)liberal agenda. Possibly part of the muddle has been stirred up from the liberal perception of self having become mired in neoclassical economics. But, be that as it may, there is something about the general problem of the relation between individuals and the social that cannot be understood merely in terms of the appearance of some economic

The modern commonwealth   27 man or the emergence of a bourgeois class. The search for or aspiration to an internal magistracy went hand in hand with the problems posed by the existing governmental forms and their interrelation with dominant interests. The status of self-interest was bound to the issue of the form of government through the figure of corruption. Pocock argues that from 1688 to 1776 (and after), the central question in Anglophone political theory was not whether a ruler might be resisted for misconduct, but whether a regime founded on patronage, public debt, and professionalization of the armed forces did not corrupt both governors and governed; and corruption was a problem in virtue, not in right, which could never be solved by asserting a right of resistance. Political thought therefore moves decisively, though never irrevocably out of the law-centred paradigm and into the paradigm of virtue and corruption. (1985, p. 48) Indeed, as we shall see, this close relation between the conception of the self and of government continued for a considerable period after 1776. It also provides a frame within which we can grasp the significance of the rise of political economy.

Prolegomena to homo economicus: Hobbes and the self Hobbes is no political economist. Arguably (however, see, for example, Myers 1983), the story of a peculiarly modern theorisation of the self begins with him. Pocock appears to share this view that it was Hobbes, followed by Harrington, who made the first significant response to the breakdown of authority. Hobbes and Harrington were both answering the question of how ‘men left with nothing but the sword could restore the rule of reason and authority’ (Pocock 1985, p. 56). For Hobbes, there are two separable aspects to be considered in understanding a breakdown in social order: first, that all are equal, and second that all are sovereign. So rather than the problem consisting in a lack of authority, it is for Hobbes that authority is naturally dispersed. After all, it is not that in his state of nature there is no authority but rather that all have authority. This double conception is consistent with the economics textbook vision of the egoistic self. It has a superficial realism for its robust refusal to rely on what Smith criticised as a moral ‘overplus’, the hoped-for redeeming feature of humanity. But, actually, whilst it manages to avoid the moralism that Smith was to to take against so intensely, it merely steps off in a (Mandevillian) direction equally repellent to him. We still have a

28   The modern commonwealth ‘plus’ but it is now an ‘underplus’. Hobbes defends himself against anticipated criticisms by appealing to the reader’s own concerns, asking him, ‘what opinion he has of his fellow subjects, when he rides armed; of his fellow Citizens when he locks his dores; and of his children and servants, when he locks his chests. Does he not there as much accuse mankind by his actions, as I do by my words?’ (Hobbes 1968, p. 187). This underplus continues through modern thought with so little remark that von Neumann (quoted in Wigner 1967) was not being controversial when he described the self as (naturally) ‘treacherous’. Yet the language itself seems to imply some form of normal behaviour from which the traitor departs. Hobbes, though, is alert to the inconsistency here when he continues his argument by claiming that no accusation is intended: ‘The desires, and other Passions of man, are in themselves no Sin. No more are the Actions, that proceed from those Passions, till they know a Law that forbids them’ (Hobbes 1968, p. 187). So Hobbes both appealed to his reader’s conception of normal behaviour, yet also presented action conceived in some original state, in isolation, prior to its being modified by society. Here is a passionate self, free from the curb of others. We find Hobbes imagining such a pre-social context: ‘Where there is no common Power, there is no Law: where no Law, no Injustice. Force, and Fraud, are in warre the two Cardinall virtues’ (Hobbes 1968, p.  188). What appeals to Hobbes and continues to appeal today is a starting point in the search for the social that does not smuggle in elements of that which it seeks to explain. Hobbes can be interpreted as going backwards in the light of how Pocock identifies the social problem posed by the Civil War. The problem for Hobbes is not how to reinstitute authority as such but rather how society could be formed on the basis of individual authority. Here was a very significant change, for it signified a move from externally validated structures to the search for an internal source of order. This posed a question regarding the nature of the self. Hobbes’s answer was to posit a self outside the social and ask how the social would then come about. Of course he did still posit this as coming from the individual, that much is certain, but given the way he did so there could only be one response: the self had to relinquish its authority in favour of a single sovereign. Fear of death and the desire for peace would be sufficient motivation. However, it is clear that Hobbes could see no capacity for order existing between individuals, and that is why he is no political economist. Hobbes takes the loss of authority to be actually the loss of a single authority, hence he understands the loss as a condition in which all have sovereignty; not just that all are equal but, effectively, that everyone is Louis XIV. This mode of presentation must favour a single sovereign as the means of attaining the peace. Indeed, the way the problem is posed comes after the solution.

The modern commonwealth   29 The sleight of hand here is to combine two aspects, constituting individuals as both equals and each a sovereign power. This sovereignty interests us for it signals that each individual is abstracted from interaction, stands above it and is thereby atomic. This implies a multitude of orders, which is no order, whilst each keeps their power. Then, when a single common authority is established it has no additional powers; its powers are simply those of any individual but standing alone. It is not given the power of death by constitution for it never relinquished this power from its own natural state. Order then comes from an individual who is allowed full scope without interference from other individuals. Their giving up of power (but not their authority, which is now vested in this one individual) is the condition by which one individual can impose an order.

In the wake of Hobbes Hobbes’s understanding of the self set in train a vigorous inquiry. Hobbes’s vision was too stark, being of a self both too strong and too weak. It was too strong, for all selves were sovereign, but too weak, for this self was atomic and without social sense or capacity. It is when all individuals, each in itself sovereign, are raised above norms that the world is nasty and brutish. The reaction to Hobbes has been explored by Milton Myers. As Myers explains, what we have here is a story, with different strands running from Cumbernauld to Smith. Following on from the Platonists, who supposed that people could distinguish wrong from right, Cumbernauld rejected Hobbes’s stark vision of the self but not the appeal to laws of nature on which it was based. He set out to prove that moral law derived from natural laws and just as the physical world is organized, like the solar system, so also the social world: ‘men in their social motions follow a path conducive to the preservation of society’ (see Myers 1983, p.  43). For society, then, Cumbernauld looked to additional features alongside selfinterest to produce acts that serve others in a direct manner, hence benevolence. This anticipated modern concerns about economics that look to augment self-interested maximising with other characteristics of the self that account for non-egoistic acts. Cumbernauld’s add-on approach to the self is further developed by Shaftesbury and Butler (see Myers 1983), both of whom look to resources within the individual to argue for a sociality in man. Shaftesbury sees the universe as an ‘an exquisite system of self-governed matter’ (quoted Myers 1983, p. 53). For the social world again he looked to additional features alongside self-interest to keep the show on the road. Indeed it is just this approach that Smith would later describe as appealing to an overplus

30   The modern commonwealth in humanity. Butler, who followed Shaftesbury, did attempt to bring the two sides, of social and self, together, so that there was no ‘rivalship’ between ‘self-love and benevolence’ (see Myers 1983, p. 60). But, as we have argued elsewhere (Wilson and Dixon 2006), it was Smith who completed this process for political economy by conceiving of a self already poised for action and reaction, one already a social self. Such a self does not need to be added to since it does not start from that situation set out by Hobbes or latterly Mandeville. Hobbes patently sets off an oscillation between underplus and overplus in his positing of some abstract pre-social egoistic self, one that patently needs additional features in order to function. Even to conceive of it requires confusion; to conjure this pre-social self, appeal is made to a normalised, even if unsavoury, self. Smith, who accepted an aspect of Mandeville’s provocation on vice when compared to ‘overplus’, was not, though, constrained by the abstract pre-social self. Even if the distinctiveness of Smith was not fully realised in Myers, it would be wrong to suggest that he presents a narrow view. He does point out that political economy answered a question posed in moral philosophy. The division of labour was crucial to this view. This, however, tends to treat the moral question as finished with and does not capture how distinctively Smith went beyond any notion of pre-social self and how the social self he had in mind was itself the basis of human interaction from which the division of labour sprang. We should add that for Smith the division of labour rests on a moral basis. Myers, in contrast, goes looking for the emergence of a merely economic realm so that it appears to him that the division of labour is somehow an end of the matter. Myers’s story finishes with Smith. But still, the moral question that he refers to is about social order as a whole and hence the political arrangements that might be entered into. It would be difficult to fault an endpoint in Smith if one was considering theoretical achievement alone; but in falling short of the French Revolution and its aftermath he also underestimates the practical problems of order that arise between his achievement and modern economic man, problems that had to be confronted in the further development of political economy.

Corruption, revolution and economy Pocock poses the problem like this: About 1789, a wedge [was] driven through this burgeoning universe, and rather suddenly we begin to hear denunciations of commerce as founded upon soullessly rational calculation and the cold mechanical

The modern commonwealth   31 philosophy of Bacon, Hobbes, Locke, and Newton. How this reversal of strategies came about is not at present well understood. (1985, p. 50) The main complainants would be Carlyle, followed by Ruskin and authors such as Dickens. However, to understand what happened after 1789 we need also to grasp how the issue of political order was intertwined with the conception of the self, of the form of government and of administration. Or we might put it that to understand political economy we should understand opposition to Old Corruption. In fact we shall find that although we can indeed see ‘denunciations of commerce’, it is also after 1789 that many looked to the free market as an essential component of a widely considered social order and such a component necessarily required grounding in an appropriate form of individuality. The link between the attack on Old Corruption and the rise of a ‘scientific’ political economy is not fully recognised. This is evident in The Making of the English Working Class (1980), in which E. P. Thompson does write about political economy in the sense that it appears in the role of enemy to the working class; yet what he actually means by it is illdefined. So, for example, we could look at the issue of wage-cutting amongst weavers. Thompson explains that ‘Wage cutting had long been sanctioned not only by the employer’s greed but by the widely diffused theory that poverty was an essential goad to industry’ (1980, p. 306). It is apparent here that political economy is supposed to stand crudely against the workers. But Thompson himself undermines this view, for we find that ‘Even adherents of the new “political economy” were appalled’ (1980, p. 309). Also, one of the agitators arrested for inflaming the weavers was an employer (1980, p. 308). The problem is that Thompson has not properly specified what ‘political economy’ is, so that he leaves it as a lumpy mass such that apparent inconsistencies are heralded in the form of ‘Even adherents’. Political economists are seen as overcoming their discipline, apparently with an ill-thought-out compassion, an unprincipled turn to humanity. It may well be that many, and especially in agriculture, looked for lower wages and that this tied in with a reaction to the French Revolution that helped to push forward enclosures (Thompson 1980, pp. 242–3). But this is not enough to define political economy. If we regard Senior as representative of an inhumane political economy, we may be diverted from important aspects of his work. His advice that weavers should leave the industry, typical, in Thompson’s view of an inhumane political economy, was clearly meant to lead workers to ending their miseries, not prolonging them. For Senior, weavers were kept in their debased position by the

32   The modern commonwealth intervention of the Poor Law, and this highlighted a general problem, since ‘the labourers of England were treated not as freemen but as slaves or domestic animals’, and what signified this fate was that they received ‘not strictly speaking wages regulated by the value of their labour, but rations proportional to their supposed wants’ (Senior 1841, pp. 63–4). He protests their status, claiming that this leads to their condition. The Poor Law Report in which Senior was involved was not a mere recapitulation of pessimistic Malthus, but was optimistic as to the good effects for workers of a new Poor Law. Chadwick, who also worked on the report and was singled out by Thompson for his attitude to workers, defended the new Poor Law as a means to improving wages (Chadwick 1836, p. 491). This had been Ricardo’s point in arguing for a free political economy (Dixon 2008) and Chalmers’s point in his sustained opposition to the old Poor Law (Dixon and Wilson 2010). Clearly these political economists had in mind a bourgeois society in which workers shared the benefits, and for these to arise workers necessarily had to act freely on their own behalf. Certainly this involved a new form of social discipline that Thompson (1980, p.  243) pays attention to, but it was one that worked through free activity. Not surprisingly, then, many argued for rising rewards, as both condition and result of improvement. For sure, employers did take advantage of miserable conditions and that made a more reasonable policy very difficult for other employers. But we need not conclude that political economy, or rather its advocates, supported such practices. The issue is clouded by the way political economy is presented; David McNally (1993, p.  95) points to Ricardo’s ‘doctrinaire opposition to any support for wages’ and to his opposition to the proposal by John Maxwell MP for taxation on machinery. But this is all too easy for it fails completely to understand Ricardo’s views. For example, Thompson (1980, p. 320) reports the argument of weavers for taxation to level competition since so much of their daily consumption articles were already taxed. Only a brief study of Ricardo shows him to be an enemy of such taxes as contributing to a system distorted in favour of one privileged interest to the detriment of the working class (Dixon 2008). Without any theoretical discussion of wages it is McNally who is doctrinaire since he has no means of assessing what Ricardo has to say. Indeed, if we start from his dismissal of the doctrinaire we are soon stranded in confusion. Are we supposed to support the old Poor Law? Is that what it is to be an acceptable person? If so, then we will be in interesting company, for, as Thompson (1980, p.  244) points out, the Speenhamland system was supported by large farmers because it kept a reserve of workers with low wages. Also, Thompson reports labourers from the ‘Speenhamland counties’ as saying that farmers ‘keep us here [on the poor rates] like potatoes in a pit, and

The modern commonwealth   33 only take us out for use when they can no longer do without us’ (1980, p. 247). It is plausible to argue for political economy as carrying a positive vision of the direction and development of the working class, towards both material and moral improvement, that rested on free activity, not potatoes, and, arguably, ran counter to the immediate, partial, interests of many employers. Indeed, it is relevant that McNally, amongst other omissions, says nothing about Ricardo’s support for a full franchise (Dixon 2008) or his argument that this would provide a secure basis for working-class improvement. Of course some might argue than even supposing a positive view, in political economy, of the working class we should consider anyway its negative consequences; that is another matter and misses thoroughly the significance of a political economy that looked to rely on the capabilities of ordinary people. The French Revolution boosted the development of political economy as the science of a self-administering system of immanent laws. The Revolution could also be seen as the starting point for a modern conservatism. In the fear that followed there was repressive legislation in Britain, whilst intellectually it has become associated with Burke’s work, a defining part of conservatism. It is from these events that we can trace an opposition to political economy, one with a moral critique of market relations carried through by such as Coleridge, Carlyle, Ruskin and Dickens. Yet despite rising doubts about radicalism, it is really only after the French Revolution that Britain sees the development of a complete free market political economy. In this respect, despite its pessimistic, indeed miserable tone, Malthus’s Theory of Population, a direct response to the hopes of some radicals, was central because it appealed to natural laws, an essential element of a free political economy. The political economic vision of order that was proposed would not only depend on the qualities, indeed competencies, of the lowest but also set out to ensure conditions in which those qualities emerged. We may put it like this: political economy set out a vision of a society that dispensed with direct interference, dispensed with administrative control and with status, and dispensed with these as ultimately threats to and not bulwarks of order. Direct control had produced direct opposition. This had been anticipated in criticism of the old Poor Law when Townsend (1971, p. 23) said that legal constraint was ‘accompanied by too much trouble, violence and noise; creates ill-will, and never can be productive of good and acceptable service’. This theme was carried through into the Poor Law Report and when Senior (1841, p. xii) reflected on the new Poor Law it was from the ending of direct coercion that he expected its benefits to arise. Indeed, administration as a whole was simply too expensive: it just provoked problems, and had also, more generally, fostered corruption. Indirect control

34   The modern commonwealth through an abstract, not personal, system of immanent laws, in which the quality of the individual came to the fore, was posed as a both more effective and less expensive option. We can grasp these issues by looking at the work of Thomas Paine. The presentation of Paine as a radical helps foster the notion that political economy and Paine were far removed, and that the causes that Paine supported were distinct from those of political economy. By default it allows an idea that political economy was the defender of low wages, intolerable conditions, wretched exploitation, etc. But this is not the case, and indeed whilst we may look to Paine as holding some high ground he is also part of the development of political economy. Paine’s Rights of Man was an intervention into a debate about the English Constitution. Here the idea of the freeborn Englishman is upheld; but whilst this was part of a radical agenda, playing its part in the London Corresponding Society (LCS), it was also an idea founded on tradition. Such a combination could be quite effective in forwarding what could have been interpreted as new ideas. The example of Major Cartwright is indicative; he proposed annual parliaments, payment of members and adult manhood suffrage in terms of a return to a Saxon past (Thompson 1980, pp.  91–6). The American Revolution, then the French, both undermined such an approach. Tradition was torn up, to be replaced by reason. Of course it could still be argued that the situation in France had been different, a point made by the LCS: ‘our persons were protected by the laws, while their lives were at the mercy of every titled individual. . . . We were MEN while they were SLAVES’ (Thompson 1980, p.  91). Clearly this had an emotional appeal, but even so, as Thompson makes clear, reformers were engaged in attempting to retrieve the former liberties to restore what John Wilkes called the ‘the pristine purity of the form of government established by our ancestors’ (Thompson 1980, p.  91). This was a radicalism, but with a soft underbelly, as found by Burke. He argued, in brief, that the French Revolution was proof of the disaster consequent on tearing up tradition, a case having greater force for having preceded the Terror. It also demonstrated that ‘The science of constructing a commonwealth . . . is not to be taught a priori.’ Any choice was between conservative tradition and principle but, given the imperfectibility of man and the difficulty of knowing the ultimate results of change, principle was ruled out. Whilst this conservative hold over tradition did not put an end to its use in radicalism it did provoke a response that set out to base radical argument on reason. This was Thomas Paine’s Rights of Man. From the start, Paine stressed ‘principle’. His target, Burke, ‘appears to have no idea of principle when he is contemplating governments’ (Paine

The modern commonwealth   35 1984, p.  49). This point is pushed forward as he distinguishes between governments that arise from society and those which come from power (Paine 1984, p.  70). It is key to his argument also that a Constitution is ‘antecedent to a government’ (Paine 1984, p.  71), for we note from this that order arises from society and not from government itself, not from power but from reason (see also Paine 1984, p. 69). Power has no principle, or rather it has ‘despotic principles’ that result, for example under Louis XVI, in an ‘augean stable of parasites and plunderers too abominably filthy to be cleansed, by anything short of a complete and universal revolution’ (Paine 1984, p. 47). If the problem falls short of that in France, the lessons were still there for Britain. Rather than the good of nations there is the ‘emolument of . . . particular individuals’ (Paine 1984, p. 156) and, says Paine, ‘it is time to dismiss that inattention which has so long been the encouraging cause of stretching taxation to excess’ (1984, p. 158). We find the greedy hand of government ‘thrusting itself into every corner and crevice of industry. ‘Invention is continually exercised, to furnish new pretences for revenue and taxation. It watches prosperity as its prey, and permits none to escape without a tribute’ (Paine 1984, p.  160). The problem is the form of government, Old Corruption, that in the hands of a few, acts for that few, and the costs rise: The amazing and still increasing expenses with which old governments are conducted, the numerous wars they engage in or provoke, the embarrassments they throw in the way of universal civilization and commerce, and the oppression and usurpation they practise at home, have wearied out the patience, and exhausted the property of the world. In such a situation, and with the examples already existing, revolutions are to be looked for. They are become subjects of universal conversation, and may be considered as the Order of the day. (Paine 1984, p. 161) Paine was confident of the direction such a revolution would take; the issues were evident and straightforward: ‘If systems of government can be introduced, less expensive, and more productive of general happiness, than those which have existed, all attempts to oppose their progress will in the end be fruitless’ (1984, p.  161). A change in system was required rather than a shuffling of personnel and that this would be achieved could not be doubted since ‘Reason, like time, will make its own way, and prejudice will fall in a combat with interest’ (Paine 1984, p. 161). The world of principle would be achieved through the play of interest and would establish this as the foundation of order, and expel unneeded attentions: ‘Great part of that order which reigns among mankind is not the effect of government.

36   The modern commonwealth It has its origin in the principles of society and the natural constitution of man’ (Paine 1984, p. 163). And this Constitution was not enacted but was an interaction: The mutual dependence and reciprocal interest which man has upon man, and all the parts of civilized community upon each other, create that great chain of connexion which holds it together . . . society performs for itself almost everything which is ascribed to government. (Paine 1984, p. 163) The point here is that man is constituted in such a way as to meet the needs of others in a system of reciprocation so that government in this light is ‘mere imposition’ (Paine 1984, p. 164). The form of government and the nature of the self are two parts of a whole, so for Paine there is such an aptness in man for society that ‘The instant formal government is abolished, society begins to act’ (1984, p. 164). The significance of Paine’s arguments is that in dropping tradition and looking to principle he poses an alternative to ‘old government’. On one side is the government from outside, what he calls the ‘imposition’, and on the other is the mass of reciprocal interchanges, according to interest, that makes society. On one side is a system of predatory taxation, on the other a system that runs itself. It is in the latter case that the qualities of the self come to the fore. And on this point Paine is confident of the outcome, not merely because people are equipped for this intercourse of activity but also because they will recognise it as in their interest: All the great laws of society are laws of nature. Those of trade and commerce, whether with respect to the intercourse of individuals, or of nations, are laws of mutual and reciprocal interest. They are followed and obeyed, because it is the interest of the parties to do so, and not on account of any formal laws their government may impose or interpose. (Paine 1984, p. 165 Thus the social self he has in mind, a social self acting through self interest, generates a society that renders old government both redundant and expensive. What Paine proposes here, and opposes to traditional old government, is a self-regulating system of personal interest. However, as part of his system he appeals to the idea of the natural rights of man. He thus dispenses with ‘tradition’ as such, invoking a tradition with a better provenance, one that reaches back to an original state. Government is an act of

The modern commonwealth   37 robbery from the start, an act clouded by the passing of time, so that ‘The chief of the band contrived to lose the name of robber is that of Monarch; and hence the origin of Monarchy and Kings’ (Paine 1984, p.  168). By pushing for principle over tradition Paine’s work became a great success and in his assertion of principle, in his confidence in a self-regulating social sphere, and opposition to interference, Paine was pushing the agenda of political economy. Of course he had a positive vision of a progress in which all could participate, and in the assertion of principle he put forward a perspective that inevitably appealed to an emerging working-class movement. This, though, was the appeal of a political economy posed as liberty from the restrictions of Old Corruption. McNally (1993, 2000) takes up Paine as the start of plebeian radicalism and in doing so is building on E. P. Thompson’s description of the Rights of Man as a ‘foundation-text of the English working-class movement’ (1980, p. 99). What they both mean by this is that Paine represents a strand of thought that is in opposition to political economy. Yet we say again: what is meant by political economy is not clear. Thompson uses the term, always with negative connotations, but the actual meaning of it is not brought out. McNally does make a closer analysis by focusing on how political economy ‘came to the fore’ as an answer to radicalism after the French Revolution. As E. P. Thompson had argued, initial British optimism for the benefits of the French Revolution were dashed in 1793. There was a significant break in the radical movement between intellectuals and plebeian elements (Thompson 1980, p. 125). The formerly reviled Burke appeared to have correctly warned of the dangers of change. However, Burke had not provided a clear alternative to radicalism. His effectiveness was hampered by what McNally calls his voluntarism, with its open dismissal of the ‘swinnish multitude’ and attempt to muster the elite for its task. This kind of voluntarism was as liable to raise opposition as to quash it. For McNally, political economy was the Whig alternative to Burke since it argued not about what was desirable but about what was possible, an argument that went away from voluntarism and, more important then, away from the elite as audience to the radicals themselves. What political economy offered was argument in the scientific tradition, of Newton, that made a case for laws of social order. Paine and Malthus do represent different viewpoints on many issues, and indeed the difference between them is significant on issues of reform and in trusting to people’s characters. This comparison is also representative for how McNally, and arguably Thompson, understand the contrast between radicalism and political economy. It is true that radicalism developed after Paine, Spence, Evans, etc., but it is still Paine who is taken as the starting point (McNally 2000, pp.  429–30) and of course it was still

38   The modern commonwealth Paine whose influence was so strong within so much of the radical movement. However, even though we can usefully contrast Paine and Malthus, their identification as representatives respectively of radicalism and political economy are insecure. Paine’s radicalism need not be distinguished from political economy. Much of what he argued for was the agenda of political economy. Paine’s disdain for the elite, for McNally a sign of plebeian radicalism, was on behalf of, not in opposition to, political economy. His book, The Rights of Man, is certainly no contribution to mainstream economic theory, but contains nevertheless a basis of economic argument that indicates his broader view and demonstrates its place in political economy. When Paine opposes the imposition of old government his case depends on, must depend on, some argument for the viability of a self-regulating society. Old government interferes and one reason is that it tends to benefit from war, for example from the taxation raised and debts raised that must be paid for from taxation. However, for Paine, people left to their own devices do not go to war and, more important, indeed have no interest in it since they are all engaged in their own pursuits through interchange with others, principally trade. Without interference this flourishes and then everyone flourishes since in trade there is a mutually beneficial advantage. This is a case made from political economy and anticipates Ricardo’s theory of comparative advantage in spirit even if not in hard analysis. Paine’s case for the wide benefits of trade, its civilising influence, underpins his confidence in a society that can dispense with old government and hence with corruption. Paine can contrast a society of interacting interests to one constituted by the placemen of old government who depend on a directed order and happily appropriate through taxation and rent. His trust in a society of free interest is also a trust in the personal qualities of people involved in trade. The very fact that it requires interaction supposes the sociability of those involved. It depends on each individual being moved ‘by means of his interior’ (Paine 1945, pp. 400–5.) For Malthus, on the other hand, there is a deep pessimism about the interior life of individuals. His pessimism is not just that there are natural laws that might act against improvement for he also believes, in the first edition, that individuals effectively cannot take account of those laws to act differently. His first version of the population theory offered little practical alternative to Burke, being an extremely grim bit of theology. It is not until the second edition, after much criticism, that Malthus included the possibility of improvement. However, although this would become the basis for a moral programme at the heart of a progressive political economy, it was not one that developed through Malthus. The central element in Malthus’s work is the attack on the right to subsistence. On this point Malthus could be seen as representing political

The modern commonwealth   39 economy against radicalism, and here Paine does represent radicalism. However, Malthus’s initial attack offered little more than Burke since his message offered nothing to those who would support radicalism. In addition, Malthus combined his attack on subsistence with support for the aristocracy as the bulwark of order. He supported what for many was the basis of the Old Corruption. This combination of a free market for labour with continuing privilege for status was closer to Burke than might be supposed. Certainly it was not until the second edition that he began to present some possibility for improvement involving the character of the working classes. Even so, it was never an optimistic vision of accumulation since he regarded it as continually constrained by a lack of demand for products. McNally claims that Malthus defined a ‘discourse of poverty which dominated political economy for fifty years’ (1993, p. 91). We can grant that, but Malthus did not dictate how that debate would go and on this McNally mis-specifies subsequent development. He says that Malthus ‘constructed a pessimistic market economics which jettisoned Smith’s hopes for material improvement for the majority. And in so doing, he made classical economics an open enemy of the working class’ (McNally 1993, p. 91). All this does is collapse classical economics into Malthus. It also serves us by making explicit a view that can be seen to run unchallenged throughout Thompson’s work. McNally presents enough to suggest that Paine was part of the political economic project yet still keeps him wholly separate from it. So Malthus and the classical economists are on one side, the dismal science, whilst on the other are Paine and his ilk, the radicals. The separation fosters a misleading view of political economy since Paine’s concerns are followed through in the development of political economy. Indeed, political economy was considered the means of achieving just the sort of order Paine had in mind. Of course in one respect political economy after Paine was thoroughly Malthusian and this was in regard to the right to subsistence, a real and shared departure from Paine. Paine’s weakness, if we may put it like that, was to attack tradition whilst also asserting natural rights so that he recreated the argument for tradition in another form. Natural rights had as little chance as tradition when confronted by natural laws. However, despite the blow to natural rights, especially the right to subsistence, other and essential elements of Paine’s work were carried through into political economy. He had attacked the placemen, taxation and Old Corruption as the burdens put on prosperity. He had made this attack in terms of a preconstitutional order, in which the interior life of individuals, driven by interest, was key, and that was the basis for an optimistic account of the results of reform. Here we turn to David Ricardo and Thomas Chalmers, both political economists, who after the French Revolution presented optimistic visions. Their visions of a free order rested on trust in the nature

40   The modern commonwealth of the people. This trust was necessary for any vision of a society ordered through immanent laws. For both, activity would be moved in orderly fashion by the interior life of interest; and this in turn required a belief in a self capable of sustaining such a life.

The consolidation of political economy It cannot be claimed that Ricardo had a sophisticated notion of the self. But he suspected enough to be assured of its capacity for self-organised interaction. It was an aspect of his difference from Trower and Malthus that Ricardo was reassured that the people ‘are both improved in morals and in knowledge, and therefore . . . are less outrageous . . . than they formerly used to be’ (Ricardo 1951, VII, p. 49). He clearly regarded reform as necessary to a process of learning (e.g. Ricardo 1951, IX, p. 261). Abolition of the Poor Law did not strip away obstacles to a true self but rather if done gradually allowed the learning of behaviours necessary for the independent self as a foundation of a free system. What Ricardo did contribute was a theoretically sophisticated analysis of interests, and in so doing he made a direct response to problems raised by the French Revolution. Before the revolution there was a confidence in the emergence of a civil, even polite, society, but subsequent events in France had led to a gloomier view. Ricardo’s contribution was to take up the concern about ‘unruly’ people and to incorporate it into a political economy of interest, a significant step forward from Smith’s reference to orders, thereby giving weight to Paine’s notion of interacting interests. Whilst landowners and capitalists would tend, on behalf of particular interests, to seek control over prices the working class depended on the demand for labour as a whole and so on the health of a truly free system. Given an appropriate process of reform, especially abolition of the Poor Law, the working class would come to an effective knowledge of political economy. Through the vote they would be guarantors of the system as a whole, not because of any tendency to be fooled and not because of any higher moral standard but because of interest (see Ricardo 1951, V, pp. 501–3). In making the case for democracy Ricardo gave Paine’s arguments a theoretical presence capable of countering Malthusian gloom. There were times when Ricardo spoke to a wider framework than economic interest. He showed complete disdain for slavery as a ‘stain’ on humanity that he ‘ardently desired to see wiped away’ (1951, V, p. 483) and he spoke up for freedom of speech and religious toleration (Ricardo 1951, V pp.  278–80, 324). This suggests a richer moral grounding for an analysis from interest. Whatever his moral foundation, however, his expectations of behaviour were not theoretically developed. Suffice to say that interest was not synonymous with narrow egoism.

The modern commonwealth   41 Like Ricardo, Chalmers was part of the reaction to the French Revolution, and was strongly influenced by Malthus, indeed was more definitely Malthusian in his economic analysis. For McNally, this is enough. Chalmers is just a part of a campaign to create ‘a public idiom of legitimation’. This downplays the real improvements that Chalmers hoped for from an implementation of political economy. Despite his closer allegiance to Malthus, and suspicion of Ricardian analysis, Chalmers shared a vision with Ricardo. Chalmers looked to the abolition of the Poor Law and, like Ricardo, regarded this as the step necessary to prosperity for the poor and as the foundation of a more stable political order. Chalmers’s vision, worked out in his practical attempts to reform the Poor Law and to explain and propagate these reforms, included a more developed idea of how people would behave without a Poor Law, and hence had a clear idea of the self on which political economy would rest. Chalmers presented a resilient account of social life as an interaction of selves. Anticipation of consequence is intrinsic to the social act, even if not per se a guarantee of good. This is, though, the kernel of a free social order able to sustain itself. Chalmers proposes this free order as an alternative to one attained by direction. His particular concern is with the old Poor Law as a failed means to order. The threat of disorder lay in forms of administration. These forms corroded the sense of interaction between people such that they could not relate to the fate of their fellows: ‘By absolving the people from all mutual care, it has well nigh stifled with them all the feelings of mutual kindness’ (Chalmers 1832, p. 406); ‘the poor man has ceased to care for himself, and relatives have ceased to care for each other’ (Chalmers 1823, p. 228). Second, this led to the supporting idea that all recourse should be to the state. This in turn opened up an argument about what was due, or constituted the right payment, an argument that had to mean conflict. Fourth, all this inevitably focused dissent on one point, making dissenters into one fractious mass. Intervention, by cutting across interactions, produced exactly the disorder it intended to prevent. Once care was a function of the state, then the self was reduced to an ego that needed only to seek its own best interests without concern for others: an ego on which no stable social order could be founded. Alternatively, without intervention the rich could recognise the poor and, perhaps more important, the poor could recognise the poor. A social order could arise from interaction given its full scope without fear of consequence. The happy results of such a system would rest on the interaction of individuals but this interaction was not to take place in a vacuum; people would be free under the abstract laws of political economy. People learnt from the consequences of their own actions, indeed this enabled them to recognise independence in others as deserving

42   The modern commonwealth of help when necessary. Under administration the operation of these abstract laws was obstructed to ill effect: Life is no longer a school, where by the fear and foresight of want, man might be chastened into sobriety – or, where he might be touched into sympathy by the helplessness of kinsfolk and neighbours, which but for the thwarting interference of law, he would have spontaneously provided for. (Chalmers 1823, pp. 228–9) Pauperism emancipates not from distress but from duty and this has farreaching results for the whole social order since it intercepts beneficence and gratitude between the classes: the whole effect of the system is to create a tremendous chasm between them, across which the two parties look to each other with all the fierceness and suspicion of natural enemies – the former feeling as if preyed upon by a rapacity that is altogether interminable; the latter feeling as if stinted of their rights by men whose hands nothing but legal necessity will unlock, and whose hearts are denied of tenderness. (Chalmers 1823, p. 229; see also p. 40) Administration then intervenes with nature but ‘So soon as the violence is removed, nature will return to her own processes’ (Chalmers 1823, p. 229). As he put the matter in an earlier article, we could look to ‘interest and necessity’ as the ‘powerful agents for giving a practical establishment to many of the virtues’ (Chalmers 1817, p. 257).

Concluding remarks In Ricardo and Chalmers, albeit with different emphases and some different theoretical positions, we see British responses to the French Revolution that turned to a vision of a free political economy. This was not just a strand of economic analysis but looked to a system that could be rid of the problems of corruption and interference that were understood not as bulwarks but as causes of an impending disorder. The free market system was seen, in part, as a political alternative to Old Corruption, but necessarily it involved a different conception of the role of the self. Our interest here is that instead of personal direction or administration it envisaged at all levels a trust in free activity, including the franchise, so all could pursue their interests; both Ricardo and Chalmers trusted in the self to support the

The modern commonwealth   43 system. They continued the radical tradition set out by Paine but rescued it for mainstream liberalism. Although they looked to an inherent sociality in the self that made the free market possible, this self could not conjure order in a vacuum. It learnt appropriate behaviour through consequences that followed from the abstract laws of political economy. It is easy to see in modern notions of the commonwealth an altogether new amoralism in which a traditional concern and care for the other has been replaced by a thoroughly privatised idea of the good. But this is misleading in a number of respects. First, as we showed in the previous chapter, when one scratches the surface of earlier, apparently moralistic conceptions of society – as in Plato’s Republic, for example – the damaged veneer reveals an understanding of human behaviour that is deeply amoral in outlook. Indeed, there may be a pattern here: systems of thought that are most concerned with issues to do with substantive morality – discussions about demonstrably moral networks of personal relationships, which exhibit personal concern in a palpable way – are most likely to presuppose an understanding of ‘basic’ human behaviour as amoral in character. Needless to say, when the demonstrably moral ties are removed – as they are in bourgeois society – the substantive moralists suppose that morality goes missing tout court. A second point follows from the first. Just because our liberal political economists and their fellow-travellers accept – and are happy to accept – that moving with the times means bidding farewell to a world in which we must live in the pockets of our elders and betters (and them in ours), this does not mean that by the same token we usher in a world devoid of morality. The choice to be made is not between a moral hierarchy on one side and an amoral pursuit of interest on the other. That indeed would take us straight back to Thomas Carlyle. Rather, what we want to draw attention to here is that with the notable exception of Hobbes and his acolyte Mandeville, our political economists are groping their way towards an understanding of human behaviour in general and of homo economicus in particular that sees the significance of morality not in our motives – not in our wanting to take account of the needs of others, or of their wants and their attitudes – but rather in relation to our human competences: the moral capacities that we cannot help but draw on if our apparently private actions are to make some kind of social sense. This process of intellectual tâtonnement that culminates in a radically new view of homo economicus is taken up with more precision in our next chapter.

4 Economic behaviour and the moral sentiments

In our previous chapter, we considered the evolution of political economy, from its origins in an emerging liberalist doctrine around the time of the mid-seventeenth century, through to the beginning of its end in the 1830s. Beginnings and endings can always be challenged. But there is a clarity in Hobbes that marks him out from other early contributors who follow a similar line. And there is also a clarity, and an oddness, about Chalmers’s appeal to the relation between economic behaviour and the moral sentiments that we now know we will not see the like of again in the work of anyone to be taken seriously as an ‘economist’. There is also this to consider: Chalmers has moved as far from Hobbes as it is possible to go, whilst remaining within the ambit of modern (liberal) sensibilities: for whilst in Hobbes’s book moral competence counts for nothing, for Chalmers’s homo economicus it is (almost) everything. More curiously still, standing (temporally) between the two is the maestro Smith, claimed as master by both the moralising Chalmers and the amoralising neoclassical progeny of Hobbes. Evidently, there is a story to be told here too. In this chapter we will want to bring the role of moral competence in that beginning, middle and end of political economy into sharper focus.

Hobbes and homo economicus What can a seventeenth-century political theorist – albeit one as seminal as Hobbes – tell us about the gaps, silences and inconsistencies in twentyfirst-century economic theory? Apparently, not very much. But, as we will want to show, Hobbesian preconceptions have cast a long shadow over the development of economic inquiry. And, in any case, despite his status as political theorist, Hobbes’s orientation is essentially political-economic. To be sure, Hobbes’s immediate concern is to lay bare the minimal requirements of a sustainable social order, but it soon becomes clear that this concern is not for its own sake but rather as a precondition for the

Economic behaviour and the moral sentiments   45 flourishing of ‘human industry’. In a classic proto-modern move, Hobbes takes the individual, its security and material comfort – the latter ideally to be bestowed in proportion to the effort and enterprise shown by each – to be the lingua franca of this new universe. Society and its institutions are not to be revered, and not to be understood as formative of individual needs and capacities. But as Hobbes notes, the individual needs society and its institutions to be strong if the use of her already existing capacities is to pay her proper dividends. Hobbes’s conclusion follows (he thinks) from a careful consideration of what the world would be like without such a society, a world in which human beings exist in a ‘state of nature’. In such a state, he argues, I would have no respect for either you or your possessions, and vice versa. You become for me (and I for you) just another feature in a more or less recalcitrant environment, viewed in much the way that a farmer might view an awkwardly positioned tree in a field he wants to plough. And like the farmer with his tree, I have to consider this: are you so awkwardly positioned that I should have you removed? Or are the costs of your elimination so high that I should leave you in situ and work around you? Hobbes’s essential point, however, is that the above analogy is imperfect in one very important respect. (Almost) no matter how high the cost (and pace the farmer and his tree), I really cannot afford to let things stand, for, unlike the tree, you are able to anticipate my reasoning and act accordingly. You can see that there are circumstances under which I would have you eliminated, but since you do not know my ‘appetites and aversions’, or how exactly I view the situation, you do not know whether or not those circumstances are met in this case; for your own safety, however, you must assume that they are. So you must act against me, whether or not I really do plan, because of the degree of your ‘awkwardness’, to act against you. But in any case, because I can anticipate your line of reasoning as well as you have been able to anticipate mine, you are right: I am about to act against you. The situation Hobbes lays before us is truly tragic. It seems as though all the unpleasantness is somehow avoidable, especially if we do not begin by wishing each other harm, as in fact may be the case. But Hobbes shows that because of our nature (or rather because of what he takes to be our nature) we cannot help but bring this calamity upon ourselves. Moreover, it is for Hobbes a political-economic tragedy; for although the situation may end in violence, it does not have to: he makes it clear that the ‘war of all against all’, his other name for the state of nature, is not an essentially violent state. It does, however, have in its essence the potential for, or threat of, violence, and the political-economic tragedy lies in the only way in which, within the state of nature, this ever-present threat is stopped from

46   Economic behaviour and the moral sentiments actualising itself. Only by arming ourselves to the teeth, so that mutual destruction is the only reasonable outcome of a pre-emptive strike, can we assure ourselves of any kind of continuing existence. But what an existence: with most of our respective resources dedicated to security, we are left with a life which in terms of material comfort is likely to be ‘nasty, brutish and short’. Hobbes’s preferred solution to this dilemma is well known. We authorise a sovereign to take whatever steps are necessary to protect us and our works from encroachment by others. The sovereign commands that we leave one another alone, whenever we want to be left alone; and when we do not, commands that we do for one another what we said we would do for one another; and when we do cooperate, adjudicates in matters of dispute over the distribution of the proceeds. Freed by the sovereign from a debilitating arms race, we can now take our place in the world as fully productive economic subjects. The Leviathan is Hobbes’s attempt to think his way out of what he recognises as the political-economic tragedy that is the state of nature. The tragedy that Hobbes does not see, however, is that his answer to the economically debilitating violence of 1642 and beyond turns into the equally debilitating supervisory and disciplinary state of Orwell’s Ninety EightyFour. Our point is that the problem at the heart of Hobbes’s project – how to prevent the rational agents that populate the pages of Leviathan secondguessing one another into oblivion – generalises in a natural way. The sovereign can deliver peace but not prosperity, and this in spite of the peace dividend that social stability presumably brings in its wake. To see this, we need to reconsider the steps that the sovereign must take in order to deliver perpetual peace. This is by definition no longer a state of nature, but Hobbes has not altered his opinion of human nature. Adherence to the law is itself a matter of calculation. Hobbes recognises no sense of right and wrong: our actions are still governed absolutely by the calculation of benefit and cost. The sovereign’s commandments and adjudications would count for naught unless backed by the (near) certainty of overwhelming punishment in the event of transgression. Again, if I reason that the costs to you of transgressing the law that guarantees my safety are not sufficiently high, and/or that detection is not sufficiently likely, then I must also be reasoning that my safety is at risk. This requires in the sovereign not only the power to punish but also the power to detect. As far as Hobbes can see, the sovereign keeps the peace and, with that, its job is done. People can now go safely (and, he assumes, productively) about their private business under the protection of the law. But this is not really the end of the matter. For what Hobbes does not see is that the

Economic behaviour and the moral sentiments   47 sovereign must also scrutinise and oversee the performance of private contracts; positive law must cover everything and be unambiguous because on Hobbes’s view of the human actor loopholes will be relentlessly sought out and ruthlessly exploited. The reasoning is as follows. Before the social contract, Hobbesian agents have no respect for one another; indeed, they are incapable of that feeling. The sovereign makes them show respect, but this show is all a matter of incentives. Incapable of feeling respect before the social contract, they must be incapable afterwards because, after all, the introduction of the sovereign does not change human nature. The sovereign is supposed to deal with the violently destructive behaviour that characterises the state of nature. But now, if nothing further is said and done, that inbuilt propensity for destructive behaviour merely reasserts itself in a non-violent form. Put simply, Hobbes’s agents, inside as well as outside society, are congenital defectors. Under normal circumstances, the presence of the sovereign places some limit on the extent to which agents will defect, but, as we will show, this merely amounts to a hollow victory for common sense. Otherwise expressed, Hobbesian agents do as much as directed to do by the sovereign, but there are limits – and these limits fall well short of the seriously productive – on the sovereign’s capacity to direct. To see this, consider a particular framing of the Prisoner’s Dilemma borrowed from Hofstadter (1986). Suppose I agree to exchange some of my goods for some of your goods by leaving them in a bag in some designated place in the woods. You do likewise. Only I (you) know what’s in my (your) bag. Despite us both benefiting from a meaningful trade, it is easy to work out that the Hobbesworld solution is for both of us to leave empty bags. I reason that my decision as to whether to leave an empty bag or not has no impact on your decision. Thus if you leave goods and I do not, then I get to keep your goods as well as my own. On the other hand, if you leave no goods then I just get to keep my own. I reason that you reason in analogous fashion. Thus I reason that you will leave no goods. My decision therefore reduces to whether I keep my goods or give them to you for nothing. We really have no option but to leave empty bags (in the same way that, in the state of nature, we have no option but to arm ourselves to the teeth). Note, also, that in behaving in this manner, and on the (reasonable) assumption that the contract is of the form ‘I promise to leave a bag full of the specified goods, if and only if you do the same’, then no one is in breach of contract. Hofstadter’s example has some special features: in particular, the stipulation that neither agent can inspect the contents of the other bag before leaving his own. Under these circumstances, cheap talk becomes worthless. But, nevertheless, this should be understood as a metaphor for a more

48   Economic behaviour and the moral sentiments general malaise that characterises the world that Hobbes depicts. The exchange of activities that lies behind (a successful) commercial society relies in large measure on a process of (tacit) self-certification. And, to make use of that old adage, the buyer wants a fair day’s work for a fair day’s pay. But what is a fair day’s work in these circumstances? The logic of Hobbes’s position is that it must be that which can be so determined by the layperson. The reasoning goes as follows. The producer cannot do just as she pleases – i.e. nothing – because that is to flagrantly disregard her commitment to the buyer, and, on the assumption that the sovereign maintains an economic as well as a political presence, she would be severely punished for that. But, presumably, the sovereign is in no better a position to supervise the performance of the contract than you or I. The producer therefore only needs to perform to the standard that you or I would expect on the basis of our own capabilities. The idea of the division of labour, from Plato onwards, is that there is some general benefit from developing and deploying particular expertise in the individual. In this case, though, no such benefit accrues, as the producer, in complying with the sovereign’s demands, need only do what you or I could do in the circumstances, not what she knows she can do. (For a more detailed argument along these lines, see Wilson 2006, pp. 59–87.) As the sophists put it (see Chapter 2 above), we do what we are supposed to do only when we are being watched. The rest of the time we do less than that, and pocket the difference. And anyway the problem is somewhat simplified for, given diverse expertise, the supposing of what we are meant to do is liable to be already a curtailment of what we can do and so we also fall short in that manner. The systemic consequence of this kind of behaviour is that, in the last analysis, there is no difference to pocket: there is just pain all round.

Beyond the Leviathan Hobbes seems in two minds as to whether people might want to socialise for its own sake, as to whether they might actually enjoy one another’s company. But whether they would or would not is immaterial in his argument because in a state of nature the fact is that they cannot. In Hobbes’s book it is reason alone that leads them to consider the merits of cooperation but that same reason also tells them that the putative cooperator must be incapacitated in the interests of one’s own security. In Hobbes, reason draws people together but at the same time pushes them apart: reason both attracts and repels. It is so that reason may attract without remainder that the absolute sovereign comes on the scene. But from a political-economic perspective there is no good in this solution, it is only the lesser of two evils: putative cooperators have to be forcibly held together if their

Economic behaviour and the moral sentiments   49 cooperative aspirations are to be actualised. Hobbesian actors, recognising both the benefits of cooperation but also its condition of possibility in the all-powerful supervisory state, cannot but agree to a major top-slicing of the fruits of their industry in order to fund Big Brother. Hobbes’s immediate critics recognise (as perhaps did Hobbes himself) that only a liberal-economic order promises the good rather than just the lesser of two evils. But they also recognise that this cannot be cashed out on the basis of Hobbes’s view of the human self and its acts. Whatever else motivated his critics, then, many judged that nothing less than the future of a sustainable political economy was at stake: the Hobbesian theory of the human self and its acts had to be countered in the interests of significant and sustainable economic development. The attack on Hobbes moved forward on a number of related fronts. First there was general agreement that Hobbes’s characterisation of the human act as governed by essentially strategic concerns leads to a somewhat underdeveloped appreciation of the role of aesthetic capacities in human behaviour. Shaftesbury, Butler, Hume and Hutcheson (amongst others) wanted to claim that we have an innate sense of right and wrong, a faculty of moral perception, analogous to our ability to distinguish different colours and shapes. After all, as Shaftesbury put it: ‘[t]he Mind, which is spectator or auditor of other minds, cannot be without its eye and ear’ (Raphael 1969, p. 173). According to Shaftesbury, this moral sense is supposed to feel the soft and harsh, the agreeable and disagreeable, in the affections; and finds a foul and fair, a harmonious and a dissonant, as really and truly here, as in any musical numbers, or in the outward forms or representations of sensible things. Nor can it withhold its admiration and extasy, its aversion and scorn, any more in what relates to one than to the other of these subjects. (Raphael 1969, p. 173; see also pp. 269–70) There was also rough agreement as to how this ‘inward eye’ is supposed to operate, being akin to a spectator attuned to the effect that one person’s actions have on another. On this view, then, the dramatis personae involved in the human act consist, first, of an actor (Hutcheson’s ‘agent’), second, someone who is acted upon (Hutcheson’s ‘sensitive nature’) and, finally, a ‘spectator’ or ‘observer’ of this interaction whose moral sense is thereby brought into play (see, for example, Raphael 1969, pp. 318–20). So much for the competences that go missing in Hobbes’s account of the human act. But critics also wanted to counter his view of the self on

50   Economic behaviour and the moral sentiments motivational grounds, over the issue of human interest, so to say. It is not that these writers deny the self-regarding impulses to which Hobbes famously refers. But what tyrant is there, what robber, or open violator of the laws of society, who has not a companion, or some particular set . . . with whom he gladly shares his good: in whose welfare he delights; and whose joy and satisfaction he makes his own? [From this] community or participation in the pleasures of others . . . arise[s] more than nine tenths of whatever is enjoyed in life. And thus in the main sum of happiness, there is scarce a single article, but what derives itself from social love, and depends immediately on the natural and kind affections. (Shaftesbury, in Raphael 1969, p. 185) In other words, it is not only Hobbes’s self-regarding impulses that motivate us. Just as surely, there are also social (or ‘natural’) affections directed to the good of others or, more generally, to the good of the species to which we belong. Accordingly, then, we may act sometimes out of selfinterest (Shaftesbury’s ‘the good of the private’) and on other occasions out of benevolence (Shaftesbury’s social or ‘natural’ affections), and virtue consists in finding a proper balance between the two. In sum, the self of the moralist is a more complex creature than Hobbes’s one-dimensional man, and this because sense or feeling for the moralist is a more complex, deeper, faculty than it is for Hobbes. It is not that their version of the self senses and feels whereas Hobbes’s does not, because in Hobbes’s view also we are supposed to sense and feel, after a fashion. But for Hobbes it is as though the senses merely receive information, information that is then worked up and acted on elsewhere (by ‘reason’). In moral sense theory, in contrast, there is the suggestion that feeling has a more decisive role to play in human behaviour, that feelings may already carry a ‘judgemental’ charge, somehow constituting the human act as such, and thus enabling an innate sociability that goes missing in Hobbes’s strategic account of human behaviour (see, for example, Cudworth, in Raphael 1969, p. 119). Ultimately, however, Hobbes’s pre-Smithian critics present a creature that is too complex. Self-interested and benevolent behaviours are represented in an awkward, contradictory way. Moral sense theory represents other-regarding behaviour as the province of a special faculty that operates in addition to the capacities sufficient for ordinary, non-moral decisiontaking. Furthermore, the spectating upon which moral sense would seem to depend takes place outside the decision-taker, in the shape of an actually- existing third person, rather than within the first-person actor herself.

Economic behaviour and the moral sentiments   51

Smith’s sentimental subject By Adam Smith’s time all the building blocks essential to an adequate, non-Hobbesian conception of human behaviour were in place, if not yet assembled in an appropriate fashion. It fell to Smith, then, to rethink and reassemble these essential elements with a view to presenting a coherent view of the human self and its acts – a view just as internally consistent as Hobbes’s, but without the decisive drawback that Hobbes’s actor, relying on strategy alone, is congenitally incapable of sustaining a spontaneous (and, one should add, prosperous) order. The results of Smith’s labours in this field constituted The Theory of Moral Sentiments, and it is worth remembering that it was this work, rather than the now celebrated Wealth of Nations, that made his name. Pre-Smithian moralism had more or less established that the counterfactuality of Hobbes’s conclusions rests on a number of key omissions in his characterisation of the human act. These are, in no particular order, that the human act is as much enabled or capacitated by sentiment as it is by reason. In other words, and pace Hobbes, sentiment does not merely motivate our actions (i.e. determine what we want to do) but rather is a capacity or competence that makes it possible for us to do whatever it is that we want to do – given that whether or not we are going to be successful in carrying out what we want to do depends as much on the behaviour of others as it does on ourselves. The question of spectating is also an important issue for the moralists: that, again contra Hobbes, we are able to see things from a perspective (in some sense) other than our own. Finally, the connection between human beings is not (entirely) atomistic – and therefore our behaviour cannot be properly understood as mechanistic – as it is in Hobbes: rather there is (in some sense) an organic connection between ourselves. For some pre-Smithian writers this is expressed by saying that we sympathise (Butler, in Raphael 1969, p.  343, is particularly clear on this). But not all pre-Smithian writers were able to see sympathy in this way. Ironically, the writer closest to Smith at a personal level, his great friend David Hume, had come to see sympathy differently: essentially, as a matter of shared taste or preference. Smith then had to reassert the sympathy of pre-Humean vintage, and effectively disabuse the tradition of one of a number of regressive elements that had crept in via Hume’s overly methodological mindset. This is what Hume says about sympathy: [n]o quality of human nature is more remarkable, both in itself and its consequences, than that propensity we have to sympathize with others,

52   Economic behaviour and the moral sentiments and to receive by communication their inclinations and sentiments, however different from, or even contrary to our own. (Hume 1973 p. 316) He does here seem to come very close to anticipating Smith. Ultimately, however, Hume cannot get there, because for him to hold to a Smithian view of sympathy would render what he has to say about other things incoherent. The problem for Hume appears as his (empiricist) theory of the self. Famously, Hume’s self is ‘nothing but a bundle or collection of different perceptions’ (Hume 1973, p. 252), and such a bundle of first-person perceptions cannot sympathise in the way that the Smithian actor can. Smith’s sympathiser needs somehow to ‘enter into’ the feelings of others – which, as noted earlier, is possible only on the basis of what Smith calls an ‘organic connection’ between us: your feelings inside me, and vice versa; a ‘man within’, so to say. Ultimately, however, Hume’s problem has its roots in his excessively methodological turn of mind. The subtitle of the Treatise is revealing, it ‘being an attempt to introduce the experimental method of reasoning into moral subjects’. Evidently he thinks that the question of method can be resolved prior to the undertaking of any substantive inquiries. But in this case at least, Hume is gravely mistaken. On the one hand, he claims that indeed we do sympathise: it is empirical and actual; it is ‘conspicuous’, he says (Hume, 1973). On the other hand, however, his ‘experimental method of reasoning’ has left him bereft of resources with which to explain this actuality. His bundle theory of the self – a theory that for methodological reasons will admit into the definition of selfhood only those features that are themselves ‘conspicuous’ – must necessarily lack the third-person perspective on things that sympathising requires. Sympathising presupposes a third-person perspective, a ‘man within’ the self, as Smith puts it. But Hume’s ‘experimental method’ will not let him presuppose it, for, despite its obvious explanatory potential, the ‘man within’ is not ‘conspicuous’. Fortunately Smith is not bound by Hume’s self-imposed methodological strictures: entities for Smith do not need to be conspicuous to be real. Smithian sympathy, presupposing a third-person perspective within the self, cannot be conspicuous because, by definition, it can only ever be the first person that is on view. But it can be retroductively inferred from that which is conspicuous: sympathy is real enough, according to Smith’s lights, or how else would any form of (harmonised) behaviour be possible? In the terminology of the critical realist, Smith’s talk of sympathy is not concerned with the actual, not concerned with our acts as such – whether self-interested or benevolent – or with the significance that the moralist

Economic behaviour and the moral sentiments   53 reads into those acts: a significance that is also actual. Rather his concern is with the real: the condition of possibility of our actings and, related to this, how we are able, on reflection, to pass ‘moral’ judgement on the actions of others. Again, we cannot see the third-person perspective, the sense of right, that we carry around inside ourselves and that enables those actualities, but we can infer the existence of this capacity from the otherwise inexplicable ‘concords’ that it produces (see Smith 1984, p.  22). What we do in fact sense as right is context-sensitive. But the key to human action (and a fortiori human interaction) for Smith is that, always and everywhere, we do expect. To anticipate, the twentieth-century George Herbert Mead might easily have said that the human self and its characteristic form of acting and interacting presuppose (another) ‘man within’. But it is the eighteenth-­ century Adam Smith in Theory of Moral Sentiments, not G. H. Mead, who put it thus. For Smith, the human self and the characteristically human way of acting involve the taking within, and thus the pre-reflective anticipation, of the attitudes of others. Smith calls this process sympathy. Sympathy for Smith, then, is not one of a number of attitudes that the self might strike in relation to others. Rather, sympathy is how the human self and its interest are constituted, and is thus the condition of possibility of all human action. Smith begins on typical moral-philosophical terrain: first, what do we consider right and wrong in regard to ‘tenor of conduct’? In other words, ‘[w]herein does virtue consist’? And, second: how do we come to see things in that way? ‘By what power or faculty of mind . . . is this character, whatever it be . . . recommended to us?’ Or ‘how and by what means does it come to pass, that the mind prefers one tenor of conduct to another?’ (Smith 1976, p. 265). How, in other words, is moral judgement possible? In distinguishing between those forms of behaviour that are recognised as moral, on the one hand, and the faculties that are supposed to make this recognition possible, on the other, Smith claims to do no more than make a distinction that is immanent in moral discourse itself, and so one which is always and everywhere practically made. What Smith also wants to claim, however, is that ‘moral-philosophical systems’ do not always (or usually) recognise this natural difference, and that this is a major (perhaps the major) source of error. So, for example, benevolence (in the appropriate context) is often identified as both a form of moral conduct and the cause of moral conduct. Or, again, self-love (and again in the appropriate context) is viewed as both a form of moral conduct and its cause. One need hardly add that, ironically, Smith’s project itself has been read subsequently in these conflated terms (see Chapter 5 below). For the moment, however, we should note that it is all of a piece with his (explicit) recognition of the distinction between the ‘what’ and the ‘how’ of moral

54   Economic behaviour and the moral sentiments judgement that, whilst Smith recognises that we recognise (in the appropriate contexts) both benevolence and self-love as virtues, he should not say, and indeed does not say, that they make moral judgement (or conduct) possible. According to Smith’s lights, for an explanation – as against a mere explication – of moral judgement, one must look elsewhere. Smith’s palpable concern with moral judgement raises a second issue, however, for to judge is not the same thing as to feel. Presumably, to judge I need to do more (or possibly do other) than to feel: for to judge I need to reflect, to consider, to decide. And if feelings are involved, then to judge means to reflect on or to consider those feelings. Now if one assumes that the title of Theory of Moral Sentiments is deliberately chosen, and that, consequently, for Smith, feelings or ‘sentiments’ are somehow involved, the implication is that our capacity for moral judgement rests on our capa­ city for moral feeling. My feeling or sentiment, however, is not of a deliberate kind, and only turns from moral disposition into judgement when my on-going pre-reflective state is disturbed by a certain incongruity. In my normal pre-reflective mode, I ‘expect’, or I have ‘hopes’ (Smith 1976, p. 221), in regard to your conduct, and so long as these are confirmed, no moral judgement ensues. Indeed, it is only when I am ‘surprised’ by your behaviour, only when I am ‘astonished and confounded’ (Smith 1976, p. 27), ‘enraged’, filled with ‘wonder and surprise’ (Smith 1976, p. 31) by your conduct, when I fail to ‘anticipate’ your response or reaction, that a moral judgement is formed. Normally I just feel, and to feel is not to consider, let alone to judge. How then does the individual come by these moral sentiments that constitute her on-going, pre-reflective state, and that, when disturbed, provoke a moral judgement? According to Smith, we come by our moral sentiments or feelings because we are able to sympathise. As he points out, it is commonplace today to say that we sympathise only when we feel ‘pity and compassion’, when we have ‘fellow-feeling with the sorrow of others’. Smith’s own usage, however, recalls the origins of the term sympathy in the Greek sympatheia, meaning sense of organic connection, and is thus taken to ‘denote our fellow-feeling with any passion whatever’ (Smith 1984, p. 10). We sympathise, according to Smith, when we ‘bring home’ to ourselves the case of another (Smith 1984, p.  11); sympathy is the capacity for somehow ‘entering into’ another’s situation (Smith 1984, p. 10). It is well known of course that Hume also makes what he chooses to call sympathy the basis of moral judgement, that ‘sympathy is the chief source of moral distinctions’ (Hume 1973, p. 618) But Hume’s ‘sympathy’ is quite different to Smith’s. For Hume, I ‘sympathise’ when I am able to see the benefit (or otherwise), the ‘pain or pleasure’, the ‘prospect of . . . loss or advantage’ of another’s action (1973, pp. 295–6). It is in regard to

Economic behaviour and the moral sentiments   55 this ensuing benefit, then, that for Hume I am able to pass moral judgement on the conduct of another. Of course, I can recognise the benefit or utility given to another (though this does not mean that the recipient recognises these things), but it is not clear how I can sympathise with another’s benefit or utility, at least not in Smith’s sense of the term. For to sympathise in Smith’s sense I must have a ‘fellow-feeling’, literally, a feeling that is a fellow of your feeling. But I cannot have a fellow-feeling of your benefit, utility or advantage because these things are not feelings to begin with. In the sense then that the object of my Humean sympathy is not a feeling, this (Humean) sympathy cannot be a fellow-feeling, and thus it turns out that what Hume calls ‘sympathy’ is not sympathy (in Smith’s sense of organic connection) at all. It is not then, according to Smith’s lights, that I do not sympathise with your benefit, but rather that I simply cannot sympathise with your benefit: I can recognise your benefit, but I cannot sympathise with it. Should we use sympathy in these terms its meaning is degraded to little more than a form of taking note on which not much need hang. For Smith, however, what I can and do sympathise with is your gratitude, with how you feel about the benefit. Otherwise expressed, for Smith there is an organic connection between me and how you feel (about a certain form of conduct that affects you). But your feeling (or rather how I suppose that you feel) and I can only be organically connected if your feeling is somehow inside me. And ‘your feeling, inside of myself’ constitutes what Smith calls the ‘impartial spectator’, the ‘man within the breast’ (see, for example, Smith 1984, pp. 129–32). Now ‘your feeling, inside of myself’ is not the same as your feeling, which, as such, cannot be inside me. On the other hand, it is not a feeling that I have, which, like your feeling itself, is always and everywhere partial. In the sense that this form of spectating generates a kind of feeling or sentiment which is neither of the ‘I’ nor of the ‘you’, but, more like, of the ‘us’, Smith’s talk of an impartial spectator is exactly apposite. Smith’s impartial spectator is neither of the ‘I’ nor of the ‘you’. It is, however, of the self. Smith’s talk of an impartial spectator is his way of expressing the norms that we live by, and we come to live by these norms because, as he says, they are represented as the man within the breast. It is a moot point as to whether Smith thinks of these standards as absolute or relative. Either way, though, our point is that Smith does not think of these as external standards that we are forced to adhere to, or as standards of the kind to which, upon reflection, we agree to conform. These are standards that are not external at all but, according to Smith’s lights, inhere in me: they are my norms, norms taken to heart, norms somehow taken into – and thence constituting – myself. Better, this ‘man within’ is the ‘me’.

56   Economic behaviour and the moral sentiments For Smith, the ‘me’ enables the moral judgement – which of course comes after, presupposes, that ensemble of sentimental dispositions that Smith calls the ‘man within’. More significant from a social-theoretic standpoint, however, is that the ‘man within’ enables the human act. The ‘man within’ is not just in the business of sensing right and wrong in the actions of others but also, as a kind of third-person perspective within the first person, guides our own. For Smith also, and pace many of his interpreters down the years, sympathising is not something the human actor does with some of the people, some of the time. Nor is it confined to some special class of ‘moral’ behaviour. Rather, for Smith, sympathy is in the nature of the human act as such, the capacity that makes a specifically human form of acting possible. The ‘passionate’, partial side of being, and its ‘impartial’ counterpart, the man within the breast, together constitute the self. And it is this self that acts. One might say that the ‘I’ is the active principle here, somehow constrained by the normative ‘me’. But this in a very crucial respect misses the logic of Smith’s position, suggesting as it does the possibility of an active, ‘impulsive’ ‘I’ without its normative accompaniment. For Smith, the man within the breast is always present, accompanying the ‘I’ everywhere. In that sense Smith’s otherwise admirable terminology is misleading; for the ‘man within the breast’ is no man (but rather a constituent part of a man), any more than the man whose breast he inhabits would be a man without him. The human being can no more act according to the passions alone (egoistic theory) than according to the impartial spectator, or rather according to his representative, the ‘man within’ (traditional moral theory). Rather, action emerges as a result of a pre-reflective interplay between the two. Smith puts it thus: the actor lower[s] his passion to that pitch, in which the spectators are capable of going along with him. He must flatten, if I may be allowed to say so, the sharpness of his natural tone, in order to reduce it to harmony and concord with the emotions of those who are about him. . . . [And] . . . [i]n order to produce this concord, as nature teaches the spectators to assume the circumstances of the person principally concerned, so she teaches this last in some measure to assume those of the spectators. (Smith 1984, p. 22) Note well, however, that this is not a strategic ‘lowering of tone’; I do not have an act in mind which I then modify, having first reflected on your initial response, though of course this can happen too. Rather I have already, via the ‘man within’, your anticipated response in mind, an anticipation that thus constitutes the act: my ‘lowering of tone’ comes

Economic behaviour and the moral sentiments   57 ‘naturally’. ‘Nature teaches’ me to act with your view of the act in mind, just as ‘she teaches’ you to have my circumstances in mind when you respond, and all of this is instinctive: ‘[w]e are immediately put in mind of the light in which he will view our situation, and we begin to view it ourselves in the same light; for the effect of sympathy is instantaneous’ (Smith 1984, pp. 22–3; our emphases).

Thomas Chalmers and the reciprocity of consciences Like Smith, Chalmers also wants to draw attention to a peculiarly human form of self and acting: a self that has the feelings and attitudes of others always already in mind; one who cannot help but act in anticipation or expectation of a certain response, one who cannot conceive of the act without a sense of the reaction of the other. Also like Smith, Chalmers takes such a self as the basis of political economy and its science. It is only such a self as this that could sustain a world without external direction or regulation. Only such a self is able to develop the character appropriate to its situation, because it is surely only by taking within the feelings of another that the human actor has the intrinsic capacity to learn. This acting is moral to the core but not in the sense of adhering to some universal standard. Rather, the human act is always already moral for Chalmers, as it is for Smith, in virtue of the fact that the act of the human agent always embodies a sense of what is expected of her, always operates according to a conception of what is appropriate that is wider than that which Hobbes’s egoistical theory presumes. The question is how those expectations may be formed. For Chalmers, like Smith before him, the key to the formation and reproduction of a liberal political economy is the reproduction of an acting self capable of sustaining such arrangements. Evidently, Chalmers’s ostensible concern was with those virtues that would nurture and sustain a liberal-economic order. Our interest is in how Chalmers, like Smith before him, imagined those virtues to be inculcated. How, then, does one come by ‘character’? In On the Adaptation of External Nature to the Moral and Intellectual Constitution of Man Chalmers addresses just this issue by investigating the ‘affinities between man and his fellows, that harmonize the individual with the general interests’ (Chalmers 1833, I, p. 10), and to this end it is necessary to understand the ‘moral constitution of man’ rather than ‘the moral system of virtue’ (1833, I, p. 11). Concern with the latter would ask ‘what is virtue?’ but Chalmers’s interest was in ‘the mental process by which man takes cognisance of virtue’ (1833, I, p. 1; see also pp. 55–8). The cultural basis of the free market would have to be formed on this mental process, which presupposes a self with the capacity and need for self-development, culminating in the formation of character. It

58   Economic behaviour and the moral sentiments was essential, however, that this process should not be looked at in isolation: ‘the main tendencies and aptitudes of his moral constitution should be looked for in connection with his social relationships, with the action and reaction which takes place between man and the brethren of his species’ (1833, I, p. 8). These interactions Chalmers considered to be the ‘proper theme of our volume’ (1833, I, p. 162) and constitute what he calls ‘conscience’ (1833, I, p.  60). This is the ‘voice within every heart’, its ‘guide or governor’ (1833, I, pp. 62, 71). Conscience for Chalmers, then, is summoned from within but it is not determined from within. It is rather constituted by the ‘actings and reactings that take place between man and man in society’ (1833, I, p.  162), receiving its ‘impulse and . . . direction from sympathy with the consciences around it’ (1833, I, p.  169). Conscience, for Chalmers, is the social taken into oneself, the ‘reciprocal play of moral judgement . . . maintain[ing] . . . its freshness and integrity’ (1833, I, p.  169). Through conscience, each one acts ‘under the observation and guardianship of his fellows’ (1833, I, p.  169), ‘each man lives under a consciousness of the vigilant and discerning witnesses’ (1833, I, pp. 169–70). It is this vital ‘law of interchange of mind and mind’ that ensures that no one is ‘left to the decay and the self-deception of his own withering solitude’, thus multiplying the ‘pleasure of virtue as also the sufferings of vice’ (1833, I, pp. 170, 172). As conceived by Chalmers, this reciprocity of minds is the endemic form of the self (1833, I, esp. p. 210), and left to its own devices this ‘delicate mechanism’ would itself ensure a social coherence, would itself ensure that self-action would not be a mass of chaotic experiments taking place on and in a hostile world. Left to its own devices, then, this ‘mutual acting and reacting of . . . emotions’, this ‘law of interchange of mind and mind’, would itself ‘form the materials of a society that can stand’ (1833, I, p. 211). According to Chalmers, conduct conducive to a liberal order cannot be legislated for or officially demanded because any attempt to institute good behaviour would destroy the good. It is not possible to ‘translate beneficence into the statute-book of law, without expunging it from the statutebook of the heart’ (1833, II, p.  24). Law that makes virtue an object of compulsion so destroys it. This ‘law of the heart’ for Chalmers, however, by no means makes one a (Humean) slave of the passions. Whatever is within for Chalmers cannot only be passion (with or without the capacity for instrumental reasoning) because, as Hume goes on to show, the acts of such a person are not ultimately acts of volition. In distinguishing emotion (which is not in itself determinate of action) from will (which is), however, Chalmers does not mean to rehearse standard moral-philosophical themes, which set the moral act against what one is inclined to do: Chalmers does

Economic behaviour and the moral sentiments   59 not mean to substitute for an ego buffeted by external rules an ego buffeted by internally generated ones. In the case of actors capable of sustaining a liberal political economy, at least, the idea for Chalmers is that the self develops what he calls ‘character’, and it is because of this development that the self becomes disposed to act in a free yet responsible way.

Mead’s inner conversations Chalmers’s language is archaic, but the concepts are not. The fundamental concepts employed by both Smith and Chalmers accord well with the influential social psychology of George Herbert Mead (1863–1931), who, like the pragmatist-philosophical tradition with which it is closely aligned, may be seen as part of a wider current of post-Kantian thought which seeks to rethink the presuppositions of minded activity. Of particular concern here is the relation (or lack of it in the philosophy of Kant) between knowing and doing. To be sure, for Kant thought must stay within the realm of the experiential to have any purchase. But, this apart, the being, doing or conduct of the knowing subject (should) play no further role in the determination of her thought, whether ‘theoretically’ or ‘practically’ oriented. On the contrary, in the case of theoretical reason, experience is itself the synthesis of transcendental concept and intuition. Likewise, Kant’s take on practical reasoning makes a positive virtue out of the individual abstracting from those very features of her situation that cannot be universalised. The excessively abstractive tenor of Kant’s philosophy was to be challenged over and again. In Hegel’s case it is through the idea of Spirit recognising itself in the dialectic of a natural consciousness perpetually out of phase with its experience. In the later Husserl it is through the insight that individual thought is always already given distinctive shape by lifeworld considerations. In a similar vein, Heidegger insists that being-in-the-world and equipmental deficiency condition, indeed constitute, all thinking. Though differently expressed in each case, it is precisely Kant’s separation of the capacity to know from practical engagement that is at issue. This is also the issue for Mead in his framing of a pragmatically inspired social psychology. For Mead, the meeting of minds that successful social behaviour presupposes comes earlier than the calculative and/or conventional taking account of the responses of others. We are not thinking here of a previously conceived act that we now modify in the light of others’ reactions. We are not here dealing with passions that must subsequently be socialised in order for successful coordination to take place. For Mead, how the other might respond to one’s behaviour is not some afterthought – though it can be that as well – but is in any case always already built into the structure of the human act.

60   Economic behaviour and the moral sentiments Mead distinguishes three forms of being: inorganic, organic and, as a special case of the latter, human being, the last characterised by the capa­ city for (reflective) thought. Even in the case of inorganic nature, the key to an adequate understanding of events, he argues, is the idea of process, of interaction, of sociality. Even in the simple case – say, for example, in the action of light on a photographic plate or, again, in the action and reaction of chemical processes – the emergent state of affairs is the outcome of (environmental) stimulation and (individual) response or (re)action, but one that modifies both individual and environment. What Mead takes to be true of the inorganic holds a fortiori for the organic life-form and its environment. It is not merely that organism and environment are (or should be thought of as) constitutive of one another, as is the case with what Mead calls ‘inanimate being’, but rather that the organism selects its environment, constituting it in such a way that it stimulates or releases impulses immanent in the living form itself. Thus, as Mead puts it, ‘[i]n the twisting of a plant towards the light, the later effect of the light reached by the twisting controls the process’ (Mead 1945, p. liii). Or, again: a digestive tract creates food as truly as the advance of a glacial cap wipes out some animals or selects others which can grow warm coats of hair. An animal’s sensitiveness to a particular character in an object gives the object in its relation to the animal a particular nature. (Mead 1922, p. 158) So Mead wants to claim that sociality is a property of all action, inorganic as well as organic, indicating as it does no more than an internal relation between individual form and environment. In ‘The genesis of the self and social control’, however, his usage is more specific – or, rather, he wants there to distinguish different types of sociality. In the case of organic being, he writes, [a] social act may be defined as one in which the occasion or stimulus which sets free an impulse is found in the character or conduct of a living form that belongs to the proper environment of the living form whose impulse it is. (Mead 1925, p. 263) This of course takes us no further than the instance (given above) of the flower ‘twisting towards the light’ and thus selecting its environment so as provide stimulation. In particular, no consciousness or thought of this process is supposed to be involved here; rather individual and environment

Economic behaviour and the moral sentiments   61 are attuned to one another through the physiology of the former. The same may also be said of that class of act which, though social in the more usual sense of entailing a cooperation between individuals belonging to the same group, relies on physiological differentiation alone. To be sure, in this case the completion of the (complex) act comprises a succession of (more elementary) operations carried out by various members of the group, and, thus, ‘[t]he objective of the act is then found in the life-process of the group . . . [and] not in those of the separate individuals alone’ (Mead 1925, p. 264). In such cases the actions of the ant or bee in achieving the social object, the construction and running of the nest or hive, are produced by the differentiated physiological characteristics of its collaborators. The distinctiveness of the human social act is brought out once we have highlighted the previous form of physiological differentiation for we can see that without differentiation each agent must somehow have in mind the social act in question. It becomes the essence of successful coordination that each somehow has in mind the social object which his/her action will help to construct. In this case the social act would be one in which the ‘different parts of the act which belong to different individuals should appear in the act of each individual’ (Mead 1925, p. 264). By phrases such as ‘different parts of the [social] act . . . should appear in the act . . . of each individual’ or should appear ‘in [her] experience’ Mead means something like the following: in doing what I do, I (pre-reflectively) anticipate or expect that the situation which would arise from the completion of my stage of the act will call out in you the response necessary for social completion. In lower forms of life, in which the success of the social act is underwritten by an evolutionary process which ensures a certain distribution of physiological characteristics acting as stimuli across the group, so as to elicit the responses necessary for completion, there is literally no idea in any of the individual collaborators of what ‘success’ or ‘completion’ might mean. In human society, however, in which physiological differentiation plays little or no role, it is of the essence for successful coordination that each somehow has in mind the social object which his/her action will help to construct. We should clarify the significance of the qualification ‘somehow’. Mead does not mean here that successful coordination always and everywhere depends on each of the individual actors having a conception of the greater good to which their own activity contributes. There is not necessarily a grand social act, for example the construction of the hive, in which the individual’s act must be given. The point is that each act, whether initiated solely by the individual or not, must be and cannot be otherwise than social. Mead’s point then is that, whether she considers or not, the human actor does take account of the likely response by the other to her act.

62   Economic behaviour and the moral sentiments Whatever the ostensible aims or purposes of her act, then, Mead is suggesting that the human actor cannot help but put herself in the place of the other to ‘see’ how her action will be received, and that this instinctive repositioning helps to make her act what it is. So, for Mead, human activity is characteristically minded, rather than physiologically differentiated, activity and this minded activity means more than simply purposeful. Of course we do have an interest and we do set out to consider the means of achieving it. Indeed Mead’s version of the self will come to think and act, and some of that thinking and acting will be about and directed towards others. But before all of this there must first be a self, and Mead’s self is ‘an individual who organises his own response [thought out or otherwise] by the tendencies on the part of others to respond to his act’ (1925, p.  267), by a ‘sympathetic placing . . . in each other’s roles, and finding thus in [its] own experience the response of others’ (1922, p. 162). Put otherwise, Mead’s self is both an ‘I’ and a ‘me’: an active, passionate – one might say, partial – side of being that organises its responses in accordance with a passive, impartial counterpart. Indeed, such a complexity seems inescapable if the idea of self-consciousness is to be taken seriously. For to say that the ‘I’ sees itself in the act, or to say that the act is mine, is somehow to sense an entity, the ‘me’, to which the act responds or answers, an entity that is reproduced and/or refurbished in the process, but is somehow distinct from it. But how is this seeing or sensing of myself possible, if not through the ‘mirror’ of your attitudes and responses to it? To say, then, that there is always something of the ‘me’ in the self and its act is to say at the same time that there is always something of the ‘you’ contained therein also. Thus in claiming that the self is irreducibly social, Mead means to imply neither that human being is essentially benevolent nor that even the most ‘private’ of actions has consequences for others. Rather, the self is irreducibly social for Mead in virtue of the fact that the characteristically human form of acting presupposes a pre-reflective anticipation of the responses of others. ‘If we are to co-operate successfully with others, we must in some manner get their on-going acts into ourselves to make the common act come off’. This is Mead writing in ‘The genesis of the self and social control’ (1925, p.  263). But it could just as easily be Smith writing in The Theory of Moral Sentiments; or, again, Thomas Chalmers, writing in his bizarrely titled ‘The political economy of the bible’. In each case a third-party view is inherent in the individual, forming her as an agent and making the act possible. It is not something added on at some later juncture because one interest has triumphed over another, or because we feel ultimately that the loss of our power to do just as we please is worth the curbing of others’ ‘natural right’ to do the just the same.

Economic behaviour and the moral sentiments   63

Ideas of community? As we have been at pains to point out, different ideas concerning our morality and its relation to our economic behaviour also beget different ideas of the nature of community. As we have seen, the fate of the community in the wake of a new assertive form of individuality runs like a leitmotif through modern social thought. In Hobbes, society is a deliberate social-contractual construct, put there to save the individual from herself. Kant’s position, some hundred years later, is more nuanced: we come to recognise our very being as individuals as depending on the community, but still he seems at a loss to explain how we can will ourselves, within Enlightenment terms, to do the kind of things necessary for its maintenance. Self-interest is still understood as an essentially destructive, rather than constructive, force. Hegel and Marx rely on history to do the work: for the latter in particular, the community re-establishes itself through the simple expedient of abolishing the self-interest of political economy. Standing between the certainties of Hobbes and Marx, and feeding into the less confident, more dialectical positions of Kant and Hegel, Smith, Chalmers and Mead offer a different vision of the problem. Indeed, as we will want to develop in our final chapter (6), from this perspective Hobbesian and Kantian discourse, especially in the guise of modern economics, actually contributes to the problem that it tries to resolve. The imposition of political-organisational and/or moral imperatives on an always already moralised individual changes in a detrimental way how that individual feels about herself and, thence, acts towards others. Even if the Leviathan could be shown to have some instrumental value in terms of the private benefit of public order, Kant would surely have to refuse an arrangement that forbids the public expression of private views. More generally, though, Kant’s approach to the question of practical reason strongly suggests he recognises that the problem of the defector in all of us goes far beyond the issue of personal security. Even if we control for the latter through some kind of political fiat, the problem does not go away but, rather like the air in a squeezed balloon, just gets displaced to other areas of life. If we really want the problem to go away then we cannot shift responsibility for it onto some third party but rather each of us has to make it go away ourselves. Literally, for Kant we have to will it away. Famously Kant argues that, however we are inclined to act, reason requires us to ask how we would like others to treat us, and then to act accordingly towards them. Put crudely, we cannot have our cake and eat it, and, indeed, as the two bag problem shows, if we behave as if we could, then we end up with no cake at all. To end up with some cake, then, we

64   Economic behaviour and the moral sentiments must recognise the right of others to cake of their own. When we recognise this right and act on this recognition Kant says that we behave morally. He also says that in such cases our will is good. It seems to us that Kant’s moral theory may be understood in ways that the literature does not always acknowledge. First, the idea of the moral and of the good in Kant have nothing to do with the way that those terms are often used: as describing actions that are altruistic, benevolent, that somehow have the interests or welfare of others in mind. Rather, Kant seems to mean by these terms that one’s (intentional) behaviour is consistent with the actions prescribed by a third person, an impartial, disinterested party: a party that is able to set aside inclinations or partial interests because, in the situation that she finds herself in, as pure observer, she doesn’t have any. In an important sense, her view of things is general, objective, in that it is behaviour that can be seen to be appropriate from this impartial perspective. And it is in precisely this sense that Kant’s moral theory harks back to the central issue for Plato in his Republic (see Chapter 2 above). What, then, can this disinterested, disengaged party see that the engaged agent with partial, particular interests cannot? She can see that moral behaviour is not about putting the interests of others before our own but rather that, far from there being a conflict between ‘inclination’ and ‘duty’, it is only by acting morally that our partial interests can be realised. Otherwise put, we have before us a community of partial interests, of creatures with ends in mind, and the moral law is that which is required to sustain it. He gives examples: how can any community sustain itself when it is acceptable to tell lies? How can any community sustain itself when it is acceptable to go back on our obligations? It seems to us that those who would criticise Kant for being too formal, too abstract, and for sacrificing a virtue-ethics of the community at the altar of rational but empty individualistic principle, are wide of the mark. To be sure, Kant’s discussion is at a more general, more abstract, level than those that one usually associates with the virtue-ethics view; but still, this is how it should be if, like Kant, one is interested in knowing the kind of behaviour that is not just conducive to the sustaining of this or that community, but rather is necessary for the sustaining of community as such. Of course this is not the virtue-ethics to which we have become accustomed, but it is still a virtue-ethics of the (literally) most basic kind. It is also worth remarking that Kant’s virtueethics, if that is what it is, seems to outline a problem rather than a solution. Unlike Hobbes, then, Kant has a question to ask of us rather than an answer to our problems, but in two other respects there is a similarity of view. On the one hand, there are anthropological similarities: Hobbes’s

Economic behaviour and the moral sentiments   65 will-to-life is not exactly the same as Kant’s relative self-esteem but both seem to generate much the same kind of unsocial sociability. And both, whilst rooted in (some quite astute) empirical psychology, are ultimately philosophical anthropologies. On the other hand, for both, the community is not an always already existing entity but rather a project to be (hopefully) realised. It is not wrong to distinguish Hobbes from Smith from Kant on the basis of their respective views on morality: distinguishing the moral sentimentalist Smith from the moral rationalist Kant, and distinguishing them both from Hobbes, who thinks that all this talk of morality conceals something darker about the human condition. We agree with Hobbes on this: talk of morality tends to displace and disguise what is really at issue, but what is at issue is not what Hobbes thinks it is – morality as a cloak for self-interest – but rather ideas about the community. For Smith, we are not hard-wired to leave Hofstadter’s empty bags, and when we do it is because that is what we expect of one another, and, via those expectations, what we come to expect of ourselves. Otherwise put, when we leave empty bags it is not because we are outside community, and thus subject to our pre-social urges, but rather because of the kind of community that we are already in (see Wilson and Dixon 2010). Talk of political constraint (Hobbes) or moral fortitude (Kant) in the face of a human nature, supposedly red in tooth and claw is part of the problem rather than its solution. The account we have presented here, especially through the work of Smith, Chalmers and Mead, is one sufficient to spell the end of Hobbesianism. However, the future was to belong to Hobbes rather than to Smith, in the form of the revitalised egoistic theory that is the neoclassical revolution in economics and its later offshoot, the theory of games. In our next chapter (5) we will consider how the Hobbesian view of homo economicus came to prevail; and in our final one (6), the on-going social implications of that prevalence.

5 Cover stories

It is surely one of the great travesties of intellectual history that one of Hobbes’s most effective critics should be represented as a seminal figure in a modern economic tradition that, whatever else it does, reinstates Hobbesian behavioural principles at the heart of social theorising. Yet this has been the fate of Adam Smith, the so-called ‘father of economics’ (Crowley and Sobel 2010). But from the beginning Smith was badly misunderstood. As early as 1777, Georg Henrich Feder detects in Smith’s Wealth of Nations (hereafter WN) a willingness ‘to trust too much to the harmony of individual interests in producing naturally by their free action general good’ (Feder, quoted in Montes 2003, p. 68). Reading between the lines, what Feder suspects is that Smith has lifted to the status of general economic-developmental principle results that may only hold within the special circumstances that define modernisation in Britain. But by the turn of the century what Feder was prepared to accept as the consequence of an innocent, if illegitimate, abstraction has become a matter of deliberate concealment on Smith’s part. For Adam Heinrich Müller, for example, Smith is little more than a ‘one-sided’ apologist for Britain’s political-economic interests (Müller, quoted in Montes 2003, p. 67). Following Fichte, Müller and his kind want to claim, contra Smith’s ‘abstract cosmopolitanism’, that for the sake of national economic development (amongst other things) the state should actually prohibit foreign trade. For these writers ‘the problem of the Adam Smith School is that it tries to monopolise manufacturing for England’ (Hildebrand, quoted in Montes 2003, p. 70). Hildebrand echoes German complaints against Smith that go back to the original publication of WN and to Feder’s review. Like Feder, Hildebrand thinks that Smith produces the illusion of a (universally valid) science of economy by ‘deducing general axioms from the specific circumstances of single nations and stages of development’ (Hildebrand, quoted in Montes 2003, p.  70). But in Hildebrand’s hands the Smith problem takes a decisive turn. He claims that it is not simply that Smith

Cover stories   67 has stretched a principle beyond the bounds of its legitimate employment; nor is it that he (Hildebrand) is in addition suspicious (in any circumstances) of Smith’s presumption of a natural harmony of self-interests (though he is that, too); rather, what he really objects to is the Smithsche Schule’s apparent ‘deification’ of private interest. In a remarkable turn of phrase he claims that Smith and his disciples want to ‘transform political economy into a mere natural history of egoism’ (Hildebrand, quoted in Montes 2003, p. 70). And for Hildebrand, clearly, people are just not like that. But still, for Hildebrand to say that people are not actually ego-monsters does not make Das Adam Smith Problem as we know it. Rather, Smith has to say it (and having already supposedly said the opposite in WN): he has to dig his own grave, in other words. Conveniently, he seems to do so, with a little help from his hagiographer, Thomas Buckle. Karl Knies had noted in 1853, not long after Hildebrand’s 1848 contribution, that actually Smith had not always taken the egoistic hard line. Smith’s ‘materialism’, as he calls it, seemed to have developed as a consequence of his time in France in the 1760s, and, therefore, sometime after the publication of The Theory of Moral Sentiments (hereafter TMS) (in 1759). By the time of the publication of WN, Brentano claims, ‘he adopts completely the views of Helvetius concerning the nature of men and selfishness as the only motivating force in human action’ (Brentano, quoted in Montes 2003, p.  71; our emphasis). The implication is that, before his French sojourn, and in TMS, therefore, Smith had held a more complex view, presumably exploring (and finding) the possibility of other ‘motivating forces’. This is more or less the substance of Skarzynski’s 1878 reading of Smith (see Montes 2003). Drawing on Buckle’s clumsy attempt, some seventeen years earlier, at unifying Smith’s views in TMS and WN, according to which Smith in WN is supposed to have deliberately ‘simplified the study of human nature, by curtailing it of all its sympathy’ (Buckle, quoted in Montes 2003, p.  73), Skarzynski is able to claim that the two-motive account of human behaviour (‘self-interest’ and ‘sympathy’, with the latter predominant) in TMS turns into a one-motive account (‘self-interest’ alone) by the time of WN. Skarzynski is right: these two accounts are not complementary but just plain different. Whether or not these accounts may be reasonably ascribed to Smith, however, is a different matter. In any case, in barely more than two generations, Smith’s intellectual formation in the reaction to egoistic social theory has been all but forgotten and WN itself is being read as an exercise in enlightened Hobbesianism. Below, we look at some recent influential contributions that either implicitly or explicitly rejoin the Adam Smith Problem debate. All add to

68   Cover stories our understanding of the relation between TMS and WN, and yet, in our view, manage to miss the point that there is no discontinuity or rupture in the way that Smith theorises the principles of human behaviour because, as far as one can tell, for the Two Smiths (of TMS and WN) there is but one principle that governs human behaviour – and that master-principle is sympathy. At a stretch, one may say that self-love and benevolence are ‘principles’ of behaviour, in the sense that they ‘explain’ (though, better, describe) the direction that our actions may take, but they do not enable our actions; at a fundamental level they do not govern anything at all. We are only able to act out of self-love or benevolence because we are sympathetic. According to our lights, then, the old Adam Smith Problem gets its modus vivendi from a category error – a point that each of our authors in his/her own way recognises. Montes, on whose magisterial survey our potted history above draws heavily, rehearses many of the pro-Smithian arguments that followed in the wake of the cumulative German criticism, as well as adding accents of his own. Fundamentally, he recognises, the old Smith Problem rests on a misunderstanding. To put it crudely, Smith does assume (indeed, he does say) in WN that people are (primarily) motivated by self-love. He also argues in TMS that we are essentially sympathetic creatures. Now, the Problem theorists assume that by sympathetic Smith means that we are naturally disposed to act in the interests of others. They conclude, therefore, that he wants it both ways and, in so wanting it, digs his own intellectual grave. The old Problem dissolves, however, once it is admitted (and it must be) that Smithian sympathy is not benevolence. But still, a problem of sorts remains: what does Smith mean by sympathy, and does that meaning cohere with self-interest? There are no easy answers on offer in Montes’s piece, only suggestions as to the lines along which a fruitful debate might take place. He recalls approvingly Stephen’s 1876 reading of Smithian sympathy as a ‘regulative power’, and how this in turn echoes Lange’s earlier 1865 contribution, a contribution that ‘correctly’ (in Montes’s view) sees the ‘sympathetic process [as] provid[ing] a corrective for guiding self-interested behavior’ (Montes 2003, p. 75; emphases ours). Montes (rightly in our view) emphasises the basic action-theoretical commitments of TMS. Smith is more concerned in TMS with how people can and do act than with the traditional moral philosophical question as to how they should behave. But, apropos his strident criticism of Raphael and Mcfie, he plainly thinks that Smithian sympathy cannot be both intrinsic to human action and concerned with approbation. It seems to us, contra Montes, that this is precisely Smith’s point in TMS: that we are enabled, as human actors, by our (shared) sense of right.

Cover stories   69 Unable to see this, Montes has to turn full circle and claim, like the original Problem theorists, that Smithian sympathy is a kind of motive after all. He asks: ‘If sympathy in [its] narrow sense (as compassion) is a motive for action, why in its broader “circumstantial” or “situational” Smithian sense is it not?’ Or again: ‘If sympathy is a disposition and capacity inherent in human nature that requires an imaginative leap and leads society to form some general rules for behavior, why is it not a motive for action?’ (Montes 2003, p.  83). Montes’s questions seem to answer themselves, but not in the way that he thinks they do. From a semantic perspective, to be motivated (for a minded creature, at least) means having a reason to act; it refers to the subjective ‘why’ of the act, not to the objective ‘how’. But sympathy, as Montes himself acknowledges, is a ‘capacity inherent in human nature’, a capacity, presumably, that we draw on irrespective of motive: precisely, about the objective ‘how’ of human acting. This is why, for Smith at least, sympathy itself cannot be motivational: it is part of the enabling or (literally) actualising of our motivations. This is also why non-Smithian sympathy – ‘sympathy in [its] narrow sense (as compassion)’ – is motivational: for example, my compassion for you does indeed dispose me to act on your behalf. But then, in this case, it is sympathy ‘in [its] narrow sense’ actualising itself through sympathy in its Smithian sense. To treat both as motivational, as Montes wants to do, is to collapse the latter into the former in the manner of Skarzynski et al. Bizarrely, Montes concludes, to refuse this collapse is to ‘narrow’ Smith’s concept of sympathy (2003, p.  85). As we have already argued, Smith’s distinctive usage of the concept of sympathy (and it should be recognised that Smith uses it in more conventional ways as well) is as a process or ‘principle’, as he calls it, whereby your expectations of my behaviour are somehow taken within by me to form the expectations that I hold of myself. There is something about the individual human act, therefore, that is ex ante in accord with the views of others, irrespective of our (various) motives. One recent writer who seems aware that Smith himself refuses this collapse is Witztum (1998). He writes: Das Adam Smith problem arose when scholars found an inconsistency between the ethically conscious human being behind Smith’s Theory of Moral Sentiments . . . and the apparently selfish character behind the Wealth of Nations. For modern readers this is not a real problem. All human beings are naturally motivated to pursue their own affairs. This does not mean that they cannot be endowed with the capacity to feel for others. (Witztum 1998, p. 489; his emphases)

70   Cover stories To be sure, WN is primarily concerned with ‘mercenary exchange’ – a transaction driven by personal interest – whereas ‘reciprocally afforded assistance’ – an assistance motivated by a concern for the welfare of the other – figures much more prominently in TMS. Now Das Adam Smith Problem assumes that behind these two situations lie two mutually exclusive character dispositions, two competing depictions of human nature, an assumption that the human being is only capable of behaving in either one or other manner. The apparent incompatibility of the two texts dissolves, however, once it is admitted that Smith plainly does not see it this way: depending on situation, and who we are dealing with, we are perfectly capable of displaying both forms of behaviour. As Witztum puts it, ‘[t]he TMS is not about a single character. It is a book about how diverse tendencies and dispositions generate a system where ethical judgements and behavior interact’ (1998, p. 490). Yet, in spite of himself, in spite of his making explicit the distinction between motive (self-interest) and capacity (sympathy), Witztum continues to regard ‘self-interest’ and ‘sympathy’ (both as ways of acting and judging) as of the same kind, albeit once removed: ‘[s]ympathy’, he says, though not in itself benevolence, must in some way be ‘based on a fundamental interest in the fortunes of others’ (1998, p. 494). It follows then that we ‘use’ sympathy more in some situations than in others. Indeed, sometimes sympathy is not used at all: ‘self-interest is a motive where one’s feelings toward others appear [to Witztum] to be irrevelant’ (Witztum, 1998, p. 495; our emphasis). As in Montes, for whom sympathy only ‘regulates’ or ‘guides’ a (presumably) always already actualised self-interested behaviour, for Witztum also sympathy is only contingently related to human acting. Sympathy, though a ‘capacity’ rather than a ‘motive’ for Witztum, is nevertheless not essential to the human act as such. We doubt that such a theory, in which the human capacity for fellowfeeling (i.e. Smithian sympathy) is supposed to figure largely in our ‘otherregarding’ activities, but little (if at all) in those that are ‘own-regarding’, amounts to a tenable action-theoretical position: in our view, fellow-­ feeling only ‘appears’ or seems to be ‘irrelevant’ for ‘own-regarding’ activities. But, in any case, such a theory is not Smith’s. Pace Witztum, Smithian sympathy is not only at work in some areas of human conduct; nor (pace Montes) does it merely ‘guide’ or ‘regulate’. For Smith, sympathy constitutes human behaviour, always and everywhere. It is fair to say that both Montes and Witztum argue for a consistency across Smith’s work whilst leaving the supposed dichotomy between the moral and amoral discourses of TMS and WN intact. This ‘solution’ to the Smith problem is also a feature of Vivienne Brown’s (1994) insightful reevaluation of Smith’s work. What the old problem theorists see as vice,

Cover stories   71 Brown sees as virtue. Rather than supposing that WN and its ‘self-interested’ arguments supersede the ‘moral-philosophical’ TMS (Smith as moderneconomist-in-the-making), or instead imposing a putative coherence on his inquiries, and thence finding Smith wanting (Das Adam Smith Problem), she is inclined to let the texts, and particularly their various styles, speak for themselves. According to Brown, Smith employs different writing styles in WN and TMS – a ‘monologic’ style in WN and a ‘dialogic’ one in TMS – a stylistic variation that mirrors the import of what Smith is trying to say about the kind of behaviour studied in the two works. Brown makes the case that Smith’s use of the dialogic style in TMS reproduces what he thinks of the nature of moral judgement itself. For whilst it might seem as though morality could be inscribed in law, in fact no set of rules could adequately guide human conduct in the face of the subtle situational variations that arise in practice: an individual, on-the-spot, judgement is called for, with ‘inner voices’, including that of the impartial spectator, each putting the case for a possible response. As she points out, the notion of an inner dialogue as the basis of the moral decision is not new, but, pace the Stoic template, Smith substitutes imagination for reason. In the subject-matter of WN, however, the dialogic process is supposed to be missing. Its ‘monologic’ style signifies the different moral status of the behaviour under scrutiny. As Brown puts it, in WN the ‘moral dialogism [of TMS] is absent and individual freedom is unbounded by moral considerations although it is constrained by the positive laws of a country’ (1994, p. 218). She continues: the rules of the game are provided by the rules of justice relating to property and contract, and these rules are clearly laid out for each of the parties to the transaction. The agents are economic agents, not moral agents and economic agents are owners of property in the form of land, labour and capital. In the system of natural liberty in WN, economic agents as property owners may use their property as they wish in the sense that they are subject not to moral imperatives but to the laws relating to property and contract. (Brown 1994, p. 59) Brown seems to conceive of the essential difference between WN and TMS in terms not dissimilar to that effected by Witztum’s distinction between ‘mercenary exchange’ and ‘reciprocally afforded assistance’ – though now transposed by Brown into the realm of deliberation. If we understand Brown aright, for Smith there is something about the relatively simplistic and transparent character of the problems that arise from

72   Cover stories ‘mercenary exchange’ that admits rule-bound, ‘monologic’ solutions. Truly ‘moral’ deliberations, on the other hand, respond to problems that are by nature more complex, problems that require one to make much finer distinctions between different people and the merits of their respective cases. There is something in what Brown has to say here. She is also right to point out (though not for the first time) that in Smith’s TMS moral deliberation is somehow depoliticised (Brown 1994, p.  210). In making these arguments, however, she implies – as does Witztum with his talk of the ‘ethically conscious human being behind TMS’ – that the sympathetic process applies only to the moral deliberator, only to human being in ‘ethically conscious’ mode. In fact, she is explicit on this point: according to Brown, there is ‘no need for an imaginary change of place or for sympathy [in the world of WN], because everyone knows that the other is in the same position as themselves’ (1994, p. 53; our emphases). How people are supposed to ‘know’ such things, without first feeling such things, Brown does not say. But, in any case, the idea here – that the sympathetic principle, defined by Smith as ‘fellow-feeling’, is somehow made redundant in circumstances of mercenary exchange – plays no part in Smith’s argument: Smith himself bases everything we do, ‘moral’ or otherwise, on sympathy. Brown notes, in typical Problem theory mode, that famously in WN we are supposed to ‘address’ ourselves to the ‘self-love’ rather than to the ‘humanity’ of others (Smith 1986, p. 119). But she fails to note, again in typical Problem theory mode, that Smith supposes our appeals to be made on the basis of our ‘expectations’, that is, on the basis of a pre-reflective anticipation of how the addressor’s ‘address’ will be read by the addressee. ‘[I]t is in vain for him to expect . . . the help of his brethren . . . from their benevolence only’ (Smith 1986, p. 118). Or again: [W]e expect our dinner . . . from their regard to their own interest’ (Smith 1986, p. 119; our emphases). Contra Brown, Smith in WN does not suppose a ‘basically amoral discourse’, a world of ‘individual freedom . . . unbounded by moral considerations . . . constrained [only] by the positive laws of a country’ (Brown 1994, p. 219). To be sure, what Smith’s actors expect of one another, as well as of themselves, is context-dependent. What a child expects of its parents, and, for that matter, what a (good) parent expects of him/herself is rather different to what a buyer expects of a seller, and what the seller expects of herself. But for all that they remain Smithian actors; and the key thing about Smithian actors is that, whatever their motivation, they do expect. Thus even when we do address ourselves to the ‘self-love’ of the other, we do so on the basis of an already existing moral community – a community, one should add, constituted by the expectations we hold of ourselves.

Cover stories   73 Talk of a ‘natural harmony’ in human affairs, of a ‘concord’ produced by the now celebrated ‘invisible hand’, runs like a leitmotif through Adam Smith’s work. A key question in Smith scholarship is then: how does Smith suppose this harmony to be constituted? According to the Problem theorists, Smith claims in WN that individuals are motivated by self-interest, and in virtue of that motivation alone are able to coordinate their activities, whereas in TMS he claims that benevolence alone is supposed to do the job. Of course, if Smith had claimed these things, he would stand guilty (of inconsistency) as charged. But these assertions play no role in Smith’s social theory; the Problem, for whatever reason(s), is a post-Smith fabrication. Smith did claim that self-interest is endemic to human behaviour. But this kind of self-interest – and this kind of interest pervades TMS just as much as WN – is more a matter of perspective than some crude (economic) impulse to self-gratification: of course, as a human actor, I have to see the act as mine and so, in some sense, as in my interest, even when I act ‘benevolently’. As for the other kind of self-interest, or ‘self-love’: yes, this kind of act – behaviour motivated by self-interest – dominates the discourse of WN, but not because Smith (sometime between TMS and WN) has changed his opinion on how people are motivated. It is rather that WN (unlike TMS) is not concerned with situations in which a ‘benevolent’ disposition is to be expected: that is why benevolence is not much discussed. There is no inconsistency; to use Nieli’s (1986) nice phrase, it is all a matter of the ‘spheres of intimacy’. But, in any case, Smith does not claim in WN (or anywhere else for that matter) that people are able to coordinate their activities because they are motivated by self-interest; for Smith, motivation of any kind does not enable or capacitate anything at all. And Smith has not changed his opinion sometime between TMS and WN as to how people are capacitated to act, on the competencies that they draw on, whatever the motivation. In TMS Smith offers ‘sympathy’ or ‘fellow-feeling’ as that core capacity or competence, and no reason in WN to suggest that he has changed his mind. Whether we act out of concern for self or for other, we are only able to act as we do because we are sympathisers. Whilst Brown reads a methodological dualism into Smith’s work – one driven by the ontological distinction Smith is supposed to uphold between a more complex, other-regarding world that requires the actor to bring to bear her moral sentiments and reflections, and the much simpler, amoral world of the commercial transaction – Otteson (2002) sees only methodological unity: throughout Smith’s work, he claims, runs the unifying theme of an unintended order that is fundamentally moral in character. To be

74   Cover stories sure, the kind of (unintended) moral order that manifests itself varies according to the situation: ‘[i]n cases dealing with acquaintances, friends, or family members . . . we approve of behaviour . . . that reflects an ascending level of benevolence and hence a descending level of self-interest’. But still, the ‘rules and protocols’ that govern commercial society – those rules and the principally own-regarding behaviour constrained by it that Brown thinks signifies an amoral world – govern only because we approve of them. Thus ‘in all the various cases, the proper codes of motivation and behaviour are determined by the impartial spectator procedure’ (Otteson 2002, p. 7; our emphasis). So far, so good. But in our view Otteson spoils his case (and in the process the inner logic of Smith’s position) by going back on himself in claiming that the ‘overall [unintended] order of morality’ is not primitive after all, and is instead the product of more ‘basic human desires’, more ‘basic, natural drives’ (2002, pp. 6, 7). For it is hard to see how ‘codes of motivation’ can be ‘determined by the impartial spectator procedure’, when at the same time (and on the same page) those ‘motivations’ are supposed to come first. We suspect that Otteson’s confusion arises because his analogy between a ‘market-place of morals’ (according to him the animating trope in TMS) and a ‘market-place of goods and services’ (that of WN) is not as revealing of Smith’s thought as he thinks it is. For whilst the behaviour on show in the ‘market-place of goods’ can be cashed out (at a superficial level at least) in classical-mechanical terms, with adjustments to atomic prices and quantities being made by atomic actors, those same actors, when regarded as moral beings, are governed by what Smith calls a ‘sense of organic connection’ (Smith 1984, p. 10). And, to repeat, Otteson is at least right in this respect: for Smith we are always and everywhere moral beings.

Economics and the atomic actor As we tried to make clear in Chapter 1 above, this is precisely what the neoclassical turn in economic inquiry denies: that at least in regard to the formal properties of our economic behaviour, morality has nothing to do with it. Our attitude towards others may give substance to our actions – so we may want to do the other good – but the way that we realise those wants is itself amoral: merely a process of working out what needs to be done to achieve those (possibly moral) ends. The expectational economy that makes the Smithian world go round – where I have always already taken within some version of what you expect of me, and you vice versa – is replaced in the neoclassical understanding of things by a classicalmechanical worldview in which we are all isolated particulars, each of us

Cover stories   75 (literally) wondering how we are going to get our own way in an environment populated by similarly minded creatures. This does not make us enemies, or even competitors: perhaps for me ‘getting my own way’ means making your welfare my priority. But it does give rise to a very different vision of how we make our way in the world – a way-making that, because of its ontological and epistemological commitments, cannot rely on Smith’s ‘sense of organic connection’ any more. Indeed, neoclassical thinking is riddled with what we will call the one-man argument, by which we mean the (unexamined) action-theoretical presumption that human cooperation is what one gets when two otherwise independent human operators come together, or, better, when two otherwise independent human actors interact. We call it the one-man argument because it presupposes an operator before cooperators, an actor before interactors – an atomic actor, so to say. It is not essential to this argument that there are in fact operators who do not in some way cooperate, or actors that in some way do not interact. Its significance is rather in furnishing a conception of the human act that is independent of interaction. According to this way of thinking, there is first the human act and, ontologically speaking, interaction comes later onto the scene. Neoclassicism did not invent the idea of the atomic actor. It is a persistent theme in social thought at least since the seventeenth century and, as we have seen, is given its clearest expression in Hobbes. But appeal to the atomic actor is the definitive neoclassical manoeuvre. In neoclassicism atomic acting is a matter of principle. Thus Walras writes: [i]f there were only one man in the world he would be master of all things. [But] since this is not the case, [and] as long as every man in the world is just as much a person as everyone else, [with] each equally responsible for the pursuit of his ends and for the fulfilment of his destiny, all these ends and aims have to be mutually co-ordinated. (1954, p. 62; his emphasis) Walras’s emphasis is revealing. Instances of cooperation in the natural world are abundant. The classic example, often cited by behavioural ecologists, concerns hymenoptera, an order of social insects comprising ants and bees. Members of these species perform specific tasks such as foraging or protecting the entrance of the nest from intruders. Indeed, an explanation as to why cooperation occurs to such an extent in these species led to a paradigm shift in evolutionary biology during the 1960s and 1970s. Other examples include the fifty-odd species of cleaner fish who feed by picking off parasites from the body, and sometimes in the mouth, of larger fish. But ants, bees and fish cannot coordinate because they cannot

76   Cover stories ordinate. What Walras wants to emphasise is that we are (potentially) coordinating beings because we are in the first instance ordinating beings, and coordination is the ‘mutual’ process of bringing our diverse ordinations into line. In Walras’s exposition an auctioneer does this for us, inserting your plan into my plan (and vice versa) via a price-list which is adjusted until all of our plans cohere. For Morgenstern, however, Walras has hit upon a special case of a more general phenomenon, because as interactors we naturally do this for ourselves, always already building the expectations and possible reactions of others into our plans. It is this insight that leads him to study ‘games of strategy’ as a way of ‘find[ing] the mathematically complete principles which define rational behaviour for the participants in a social economy’ (Morgenstern 1974, p. 31). In the same vein Aumann recommends game theory as a ‘sort of umbrella’ or ‘unified field’ theory for the rational side of social science, where ‘social’ is interpreted broadly, to include human as well as non-human players (computers, animals, plants). Unlike other approaches like economics and political science, game theory does not use different, ad hoc constructs to deal with various specific issues, such as perfect competition, monopoly, oligopoly, international trade, taxation, voting, deterrence and so on. Rather, it develops methodologies that apply in principle to all interactive situations, then sees where these methodologies lead in each specific application (Aumann, quoted in Eatwell et al. 1987, p.  460). But ‘specifics’ aside, what is ‘fundamental’ to the interactive view, according to Ross, is that we ‘distin[guish] between acting parametrically on a passive world and acting non-parametrically on a world that tries to act in anticipation of these actions’ (2001, p.  4; his emphases). It is as if the appearance of others (literally) interferes with the arche-acting of the one man; he is no longer ‘master of all things’. Fortunately, though, those faculties of ‘percipience’ and ‘cognition’ (Walras 1954) that condition the possibility of our arche-actings also enable us to manage this interference. Now I build your plan into my plan (and vice versa) and this is how we bring off the cooperative act. To reiterate, the idea of atomic acting did not originate with neoclassicism. What is new in neoclassicism, though, is that one-manism becomes a matter of principle and its proponents see it as their vocation to exorcise occult elements from social thought. Thus von Mises: there are no ‘myster­ ious mechanical forces’ at work in society; there are ‘[n]o “automatic” and “anonymous” forces’ to consider because ‘every human action means planning’. Either we coordinate, by which is meant the ‘democratic process of the market in which every individual has his share’, a sociality constituted by ‘people . . . execut[ing] . . . their own plans’. Or for this meeting of many minds is substituted the ordination of just one: ‘[i]t is the

Cover stories   77 substitution of the planner’s own plan for the plans of his fellow-men . . . he aims at the absolute pre-eminence of his own plan’ (von Mises 1947, p. 29). On this view either we respect the plans of others or we do not, but in either case our cooperation just consists in the many operating in atomic mode, ‘men consciously aiming at ends chosen and deliberately resorting to definite means for the attainment of these ends’. Of course, if we are to attain these ends then I’d better plan for your plan, and vice versa. But still there is just ‘you and I and Bill and Joe and all the rest’ (von Mises 1947), doing what comes naturally: acting atomically.

Conventional behaviour ‘If there were only one man in the world then he would be master of all things’ (Walras 1954, pp. 62–3). He would also, as a matter of definition, be without ethical orientation. In a world of one, he could be neither concerned with nor influenced by others. He would be narrowly self-interested but, given his situation, he could not be otherwise. We hardly recognise ourselves in this lonely figure. Unlike the one man, we cannot help but be ethically oriented, each of us being one amongst many. I may, for example, be the kind of person who has a concern for Bill’s welfare or, again, feel better if seen in a certain light by Joe. Even if I am not that kind of person, even if Bill’s welfare and Joe’s gaze leave me cold, then that too is an ethical orientation. On this view, the fundamental problem with the neoclassical approach is that it has surreptitiously introduced into an irreducibly ethical environment an actor who has, by construction, no sense of other. We will return to this issue later in this chapter. Suffice it to say here, though, that Morgenstern (1974, p.  10), like Walras before him, did not doubt that individual motivation might be influenced by imitation, advertising, custom, etc. But what he did doubt is that these influences ‘change the formal properties of the process of maximizing’ (1974, p. 10). These ‘formal properties’ may come under scrutiny for different reasons, however. We should emphasise, in case it has slipped by unnoticed, that by ‘formal properties of the process of maximizing’ Morgenstern means something like our notion of atomic acting. Analogously, when he talks of ‘find[ing] the mathematically complete principles which define rational behaviour’ for the participants in a social economy’ (1974, p. 31) he means to make what we call the one-man argument. In Morgenstern-speak the one-man argument turns on the claim that our ability to cooperate successfully rests on these ‘formal properties of the process of maximising’. But to close the argument would require that these ‘formal properties’ be fully and properly specified in the context of a ‘social

78   Cover stories economy’. Walras (he claims) has failed to do just this. In focusing exclusively on a special case of social economy, and then in a special way, Walras’s treatment of the ‘principles that define rational behaviour’ in an interactive context is less than ‘mathematically complete’. ‘Mathematical completeness’, presumably, requires a fully interactive approach, that is, the theory of games. But the seminal game theorists for their part failed to fully specify these ‘mathematically complete principles’, inasmuch as a ‘complete’ specification of rational behaviour would have to explain how, by following the postulates of an idealised instrumental rationality, we might get our cooperative acts to come off. In the early literature it was thought to be selfevident that if we each know the other’s motives and opportunities for acting, and our (instrumental) rationality is common knowledge, then we can reason what the other plans to do and so act accordingly. It was soon realised, however, that in many situations the logic of us each choosing a best response to the best responses of the other players can yield a number of equally compelling but very different interactive scenarios. And because each of these is by construction thoroughly reasonable, reason itself cannot tell us which of these we should fix on. In the face of an equilibrium selection problem, then, something more than reason, as understood by classical game theory, is required if our diverse ordinations are to make cooperative sense. Schelling’s (1960) insight was that the success of our cooperative efforts often depends in an essential way on our drawing on some shared conception of what we should all be doing in a given context. So, for example, in coordinating our road-using behaviour it can be supposed that it really doesn’t matter to us whether we all drive on the left or on the right, but it does matter to us that we all do the same (Sugden 1989). In Britain it is well known that we drive on the left. Thus, when I come to formulate a plan that somehow involves driving in Britain, I’d better factor into my calculations that driving on the left is a salient feature of our roadusing behaviour. Insofar as the success of my project depends in part on me completing my journey, the fact that left-driving is conventional in Britain is reason enough for me to adopt left-driving. But it is not a classical game-theoretic reason insofar as none of us has a preference for leftdriving as such and right-driving would do us all just as well. Lewis (1969) makes similar points in regard to the use and development of language. Schelling, Lewis and others have shown how conventions – sometimes resolved as moral dispositions, sometimes reinforced by political fiat – are ordinarily an integral part of the landscape within which our actions and interactions take place. Of itself, however, the observation that our successful coordination more often than not requires a conventional

Cover stories   79 supplement hardly calls into question the view of human being as atomic actor. By conventional behaviour these writers understand a form of decisionistic process that falls outside the logic prescribed by classical game theory but is still recognisably a form of strategic thinking. After all, a convention is here understood as something that we reflect upon, something that we see as external to our acting selves, something that we (reflectively) incorporate into our action plans so as to ensure personal success. (Note: this success may itself be measured in part by the approbation of others.) Even in Schelling’s convention-strewn landscape, then, the atomic actor, the embodiment of Morgenstern’s ‘formal process of maximising’, lurks unharmed in the background, even if these ‘formal properties’ are now in need of some refurbishment. But still, for the one-man fundamentalist the very suggestion that convention may really be independent of our atomic actings, that conventions are really ‘out there’, so to say, smacks of the occult, of a primitive but unexplained social entity brought into serendipitous relation with the reasonings of our atomic selves. For the one-manist, conventions cannot be left just to be, but rather must be unmasked for what they (supposedly) are: the unintended consequences of our atomic actings. And whilst Schelling’s work renders untenable the idea that classical game theory offers a truly general theory of human interaction, it leaves open the possibility that the one-man argument might be saved by further refinement of the game-theoretic approach. In an attempt to exploit this possibility, game theory in the social sciences, drawing on Maynard Smith’s work in evolutionary biology, has itself taken an evolutionary turn. Maynard Smith and collaborators (Maynard Smith 1972, 1982; Maynard Smith and Price 1973) introduced game-theoretic techniques into evolutionary biology in an attempt to better understand conventional behaviour in animals. In particular why do certain species engage in ‘ritualistic’ displays of aggression that make less than maximal use of their ability to inflict damage on their opponents? Or more generally: why, when it is obviously the case that an animal has the physical capacity to respond in a wide variety of ways to a certain situation, does it adopt the kind of response ‘chosen’ by most others in the group? In Maynard Smith’s work it is not assumed that animals really do choose. But still, animal interaction may be given a strategic interpretation by supposing that, whilst each individual is itself capable of only one kind of action (determined by genotype), its (pair-wise) interactor will be drawn from a range of possible genotypical responses. Each encounter then becomes a skirmish in the evolutionary battle of the strategies, with every individual (effectively strategy bearer) receiving a pay-off measured in terms of a change in Darwinian fitness, i.e. in terms of expected lifetime reproductive

80   Cover stories success. In Maynard Smith-speak an evolutionary stable strategy (ESS) is a strategy such that, if adopted by most of the population, no ‘mutant’ strategy (and this includes other ESSs) would be able to invade the population through natural selection. An ESS may not always exist, but when it does it shows that although different modes of behaviour are a priori possible, most of the population come to behave in much the same way. Maynard Smith’s work on animal behaviour seems, to many, to carry over into the field of human behaviour in a fairly straightforward way. Although human agents (unlike Maynard Smith’s animals) do get to choose their strategies, even they cannot choose a convention. They do, however, in the face of the equilibrium selection problem, have to choose what they think will become a convention, and through a process of cultural evolution, driven by a ‘natural selection’ that eliminates strategists with ‘less successful’ conceptions, a population of strategists emerges which, when faced by this problem, has a shared conception of what would count as an appropriate response. Arguments of this type feature strongly in Binmore (1994, 1998). He wants to argue the ‘Whiggish’ case for economic and social reform, by which he means a reformation in conformity with basic human nature. Naturally, to do this he has to say something about what he thinks human nature is. For Binmore, human being is above all else homo economicus, whose unavoidable engagement in the ‘game of life’, and thus unavoidable exposure to the concomitant ‘forces of biological, social, and economic evolution’, determines a creature that cannot be other than oriented to ‘getting things maximised’ (1994, p. 11). Yet, according to Binmore’s lights, our deliberations are not confined to the maximand. We are also engaged in a ‘morality game’, in which we reflect on the good and the just. In this way economic man develops a moral sense, a sense of justice. So far, so socioeconomics. But, pace the socioeconomists, it is not enough for Binmore that we note the existence of an ethical dimension to people’s thinking and its implication for decision theory. Rather, insofar as we do have shared conceptions of the just and the good, ‘one must ask instead how and why they survive’ (Binmore 1994, p.  11). Binmore himself finds the reason for their survival in the edge that they give to the individual in the game of life. A society of like-minded moralising individuals, individuals who reflect on the nature of justice and produce broadly similar conclusions, is a society of individuals each better able to coordinate on the same equilibrium in the game of life. Players in the game of life do not mean to bring their moralising into their choice of strategies; after all they are concerned here only with ‘getting things maximised’. It is rather that those who are somehow predisposed to moral deliberation outside of the game of life develop what we might call a sense of the social, and it is this that they draw on in a taken-for-granted way in their ‘everyday’

Cover stories   81 dealings. It is then this sense of the social – a by-product of their moral reason – rather than their moralising per se – that makes them better able to coordinate in the game of life and thus better able to prosper in that environment. Thus, according to Binmore, to model homo sapiens as a moralised version of homo economicus, as having both a well-developed self-interest and a well-developed sense of the social, is not of itself to engage in either wishful or muddled thinking, but rather to recognise that ‘Nature’ (aka ‘the game of life’) selects for just those characteristics. Having a well-developed sense of the social makes us better interactors, which in turn makes us more successful actors, which in turn means it makes us better maximisers. Binmore goes as far as his one-manism will allow to admitting that our competence as actors may rest on more than a capacity for strategic thinking. Binmore’s twenty-first-century homo economicus brings a sense of the social to the game of life and is a better player for it. Yet Binmore’s action-theoretic commitments will not allow him to admit this sense or feeling as a core human competence. Binmore’s story is after all that we do not begin with this competence but under some circumstances some of us come to develop it. Meanwhile, there is no suggestion that these earlier versions of ourselves are anything less than fully acting and interacting human beings. In fact Binmore departs from the standard neoclassical view of the self – the self as some kind of calculator with attitude – only to reassert it in a more sophisticated form. On this view, deliberation is the core competence we draw on as distinctively human actors, and is one which, when used to second-guess the actions of others, serves as the equally distinctive basis of our interactions. In contrast to this, we have argued in our last chapter (4) that our exclusively human way of coordinating is not exhausted by our ability to rationalise the putative responses of others; that this ability is neither the beginning nor the end of our effective sociality. Rather, our capacity for deliberation or reflection is parasitic on more fundamental moral competences: for sensing the propriety of actions and states of affairs and for becoming attuned to how others may see these things; and, unlike reflective judgement, these are not competences that get turned on and off at will. But this is not Binmore’s way: his way is to leave in place the modern economist’s understanding of homo economicus as (basically) rational maximiser and, where necessary, to supplement it. As we shall see, he is not alone in this regard.

Homo sociologicus The seminal sociologist, Emile Durkheim, also found the action-theoretical presumptions at the heart of neoclassical economic theory wanting but,

82   Cover stories like Binmore, instead of setting aside those presumptions and starting again, he supplemented them with sociological ones. For Durkheim, a sociology of action was to be the necessary antidote to what he saw as the ultimate sterility of the Hobbesian assumptions of political economy, assumptions that ‘detach the individual from the rest of the world . . . [that] clos[e] off every horizon’ and thus lead to a palpable motivational and affective deficit in the theorisation of individual behaviour (Durkheim 1972, p. 94). Durkheim is quite clear: an adequate social theory must begin with a ‘moral individualism’, must begin with the presumption of an individuality which is social, through and through. But Durkheim’s promise of an irreducibly social conception of human behaviour – his promise of a ‘moral individualism’ – is never satisfactorily cashed out. Instead of supplying a conception of homo economicus that is able – and would want – to behave in more complex fashion than homo neoclassicus, Durkheim’s actor is somehow forced to behave in that way. The behaviour of Durkheim’s actor is more complex because she is subject to ‘social facts’. Indeed, a ‘social fact’, according to Durkheim, ‘is to be recognised by the power of the external coercion which it exercises’ (1982, p. 56). In a now familiar strategy, then, Durkheim has the ‘social’ characteristics of the individual somehow added on to a ‘natural’ (i.e., Hobbesian) character; for what is distinctive about human, as against animal, society for Durkheim is that not all human motives are instinctive and/or internal, but rather some are ‘imposed . . . from the outside’, are ‘added on to his own nature’ (1982, p. 248). Like Mead, Durkheim wants to insist on an irreducibly social self. Unlike Mead, however, Durkheim wants to argue that the social is an imposition; it is a ‘thing’ (1982, p. 51). We have of course encountered this dualistic vision of the self before: of a human actor divided into private, ‘self-interested’ and social, otherregarding parts. This is how the German historicists and their fellow-­ travellers misunderstand Smith, and Durkheim’s sociology fed off this misunderstanding. For Durkheim, sociology was required as a reaction to what he took to be the starting point of political economy, Hobbes’s essentially unsocial self. Like Smith, Durkheim rejects such a starting point as a possible basis for any explanation of naturalistic social phenomena. Hobbesian egoism ‘detaches the individual from the rest of the world . . . closes off every horizon [and] leads directly to pessimism’ (Durkheim 1972, p.  94). But, influenced by Hildebrand and the like, Smith, qua political economist, has become part of the problem rather than the basis of a solution. The manner in which Durkheim himself sets out to deal with this problem sets the tone for sociology as well as for some significant critical interventions within economics itself. For Durkheim (what he takes to be)

Cover stories   83 the prevalent characterisation of the human actor as calculating ego is not so much wrong as incomplete; and consequently the answer to the problème social is somehow to supplement self-interest with other, more socially oriented concerns. It is clear, he says, that ‘these two springs of behaviour have been present from the very beginning’ (Durkheim 1982, p. 145; our emphasis). Where there is only ego, where in Durkheim’s view there is only ‘interest’, we are back in the discredited territory of Hobbes, ‘for where interest alone reigns, as nothing arises to check the egoisms confronting one another, each self finds itself in relation to the other on a war footing’ (Durkheim 1984, p. 152). Durkheim thinks that his richer, more complex conception of the individual is supposed to change everything. It is not just that the needs and wants that are somehow brought into conformity through social process are richer and more complex; it is rather that these supplementary characteristics posited by Durkheim are supposed to enable the social process. For Durkheim, the acquisition of character is about the how, rather than just the what, of coordination; character is the element, missing in Hobbesian theory, that enables human agents to coordinate. But Durkheim’s conception of the ‘social fact’, of the social as sui generis, does not change as much as he supposes. To see this, let us consider his method. Durkheim asserts that what is required is the study of the social in its own right. For him the social is ‘irreducible’ to ‘the psychic nature of the individual’ (Durkheim 1972, p. 62). Social facts, he says, must be examined as things, thus circumventing the issue as to how we get from the individual to the social. As a thing, the ‘social fact’ can be understood sui generis and as such it becomes possible to work out how a social organism works without considering how it arose in the first place from individual behaviour. It turns out then that Durkheim’s apparently methodological decision is a substantive one, a decision that derives from a particular kind of understanding of the relationship between individual and society. ‘A social fact’, he says, ‘is to be recognised by the power of the external coercion which it exercises’ (Durkheim 1982, p.  56), and as such is supposed to originate and operate independently of the power of individuals. Social properties emerge just as the properties of bronze emerge from the joining of parts rather than from the parts themselves (see Durkheim 1982, p.  39). Thus what is distinctive for Durkheim about human, as opposed to other animal, societies is that human coordination, rather than being instinctive, internally driven, is supposed to be ‘imposed . . . from the outside’, ‘added on to his own nature’ (Durkheim 1982, p. 248). But in positing a social psychology, a logic of the social, that is supposed to work independently of the (self-)interest-driven psychology of the individual, Durkheim, far from transcending the egoism of Hobbes, has left the foundations of such a

84   Cover stories theory intact. Effectively, Durkheim’s explanation of society has substituted for one ‘social fact’ (the Hobbesian social contract) another one of his own making. Durkheim offers a critique of the prevalent mode of economic theorising from an external, explicitly sociological, perspective. But his approach may also be read back into influential auto-critiques of economics that dissent from the excessively formalistic modelling exemplified by neoclassical general equilibrium theory. Consider, for example, the self-styled ‘socioeconomics’ of Etzioni et al. The problem, Etzioni maintains, is that we need to recover those motives that might at least explain apparent divergences from the supposed behaviour of the egoistic self of neoclassical theory. He comes directly to the point when he complains that ‘neoclassical economists view man as a two-legged calculator, efficient and cold blooded’ (Etzioni and Lawrence 1991, p.  3). The self, he claims, should be regarded as a more complicated entity, a more or less ‘muddleheaded’ creature, ‘part morally conflicted and selfish, part morally dedicated and caring, and prone to moving in herds’ (Etzioni and Lawrence 1991, p. 3). Individuals, so defined, are ‘torn between their urges and their values’ and sometimes ‘their urges win, sometimes their conscience’ (Etzioni and Lawrence 1991, p. 5). In a similar, albeit more sophisticated vein, Amartya Sen sets out to show that economics would be more productive if it were to pay ‘greater and more explicit attention to the ethical considerations that shape human behaviour and judgement’ (Sen 1988, p. 9). According to Sen, in characterising the human self as essentially egoistic and its rationality as slave to the Humean passions neoclassicism effectively treats ‘ethical’ behaviour as irrational. It is this prevailing contrast between a rational ‘selfish’ behaviour and an irrational altruism that Sen is not prepared to accept. It ignores the intermediate relations lying between concern for oneself and concern for others. There are intermediary groups lying between the individual and the larger society, each drawing on the loyalty of its members in such a way that the accounting of personal sacrifice and personal fulfilment becomes a more complicated affair than that allowed for by a narrow self-interest. For Sen, the real issue is ‘whether there is a plurality of motivations, or, whether self-interest alone drives human beings’ (1988, p. 19). Sen himself comes down in favour of an ‘ethics-related view of motivation’ (1988, p.  15) but again the modern economics discourse is reaffirmed since the manner of escape is through motivation. Motivation is not the issue. Adding to the textbook-neoclassical repertoire of motives leaves its assumptions in regard to our capacity to act and interact untouched. Sen’s work is certainly testament to, and recognition of, the fact that something must change. For Sen’s project, of course, with its focus on

Cover stories   85 capabilities and functionings, it is important that homo economicus is credited with a richer diet of concerns than that of the textbook-agent, and giving ethical orientation its due has enabled Sen to make significant contributions to the theories of welfare and development. But this extends rather than departs from the neoclassical view. And also: how is this ‘plurality of motivations’ held together? Or how, for that matter, is the victor determined in Etzioni’s battle between primal ‘urges’ and socially instilled ‘values’? As Lawrence admits, though ‘strong in terms of grounded empirical data . . . [s]ocioeconomics is weak in terms of unified theory’ (Etzioni and Lawrence 1991, p. 9). This ‘weakness’, one should add, shows itself in the barely coherent concept of a self that acts selflessly, of a self that acts but not out of self-interest. Yet the idea of ethically oriented actors need not make the postulate of a unitary self-interested behaviour aporetic. Akerlof and Kranton get to the heart of the matter in proposing that ‘people have identity-based pay-offs derived from their own . . . [and] others’ actions’ so that ‘behaviour that appears detrimental . . . maladaptive or even self-destructive by those with other identities . . . may be to bolster a sense of self or to salve a diminished self-image’ (2000, p. 717; our emphases). As Akerlof and Kranton argue, it is not that, from the perspective of prediction and policy objective, human motivation is too complicated an affair to be handled within the confines of a concept of self-interest, but rather that the concept of selfinterest itself needs to be more carefully formulated. These remarks would seem to apply a fortiori to other recent work that ventures outside the textbook-neoclassical perimeter fence. Consider, for example, Heinrich et al. (2001, p. 73): ‘Recent investigations have uncovered large, consistent deviations from the predictions of the textbook representation of homo economicus’ and the problem seems to be the economist’s ‘canonical assumption that individuals are entirely self-interested’. Fehr and Gachter (2000, p.  159) concur; the problem is that, according to the (experimental) evidence, ‘people are frequently much nicer and much more cooperative than predicted by the self-interest model’. For Fehr and Gachter, the evidence suggests the presence of strong reciprocators and, this being so, ‘progress will not come from additional tweaking of a pure self-interest model but rather from recognizing that a sizeable proportion of economic actors act on considerations of recipro­ city’ (Fehr and Gachter 2000, p. 178). Indeed experimental economics, on which they report, has appeared to push the boundaries considerably yet what this approach has discovered, in line with Kahneman and Tversky’s work, are departures from rationality. That this line of work now hits on an interesting boundary is recognised in the Journal of Economic Behaviour and Organization (2010) in which Vernon Smith leads a summary

86   Cover stories appraisal of the work of experimental economics. He himself appears to have crossed the boundary in a paper concluding the issue with the pertinent question, ‘What would Adam Smith think?’ (Smith 2010). However, despite this advance the old mindset is resistant, still setting agendas. That the question remains for many the rationality of the one man is demonstrated in what is certainly an interesting work by Nuno Martins (2011) on the application of Antonio Damasio’s neuroscientific work to economic thought. Here the argument is that emotional and rational states should not be studied in isolation, but as part of an interplay: decisions will be biased depending on the emotional charge associated with each option, where we do not have rational choices on the one hand, and emotional choices on the other hand, but rather different degrees of rationality and of (various types of) emotionality in every circumstance. In fact, emotions are essential to the exercise of reasoning, since if emotions did not make some options more salient, our brain could not compute all available options. (Martins 2011, pp. 264–5) This is fine as a development of rationality but we note that, ‘The network of somatic markers, located in the ventromedial prefrontal cortex, is, of course, connected to a larger hierarchical structure of bioregulatory processes, which support cognition and motivation, from which social and moral behaviour emerges’ (Martins 2011, pp. 264–5). We have gone more deeply into the one man and although Martins suggests this leads to Adam Smith’s Theory of Moral Sentiments we think it falls short of what Adam Smith would think. Even so, it is still the prospect of a change in economic theory that appears to be on the cards. But what kind of major modification of economic theory does this require? Bowles (1998) looks for an alternative to the standard – and clearly evidentially inadequate – approach by presenting a social vision of preferences. The key idea is endogeneity. According to Bowles, if we accept the endogeneity of preferences – and, interestingly, he cites Hobbes as a seminal figure in a tradition that does not (see Bowles 1998, p. 75) – then we can account for the ‘perverse’ phenomena that have been observed in various experimental games, such as framing, reciprocity and so on. We can begin to determine how economic institutions, and this of course can and should include markets, may be crucial to the formation of preferences. He is also aware that the orthodox view is part of a general fragmentation of disciplinary boundaries and so by implication a proliferation of ‘incompatible and inadequate models of human behaviour’ (Bowles 1998, p. 104). To overcome this fragmentation, he suggests, ‘preferences

Cover stories   87 must be internalized, taking on the status of general motives or constraints on behaviour. Values which [then] become durable attributes of individuals . . . may explain behaviours in moral situations, and hence are included in this broad concept of preferences’ (Bowles 1998, p. 79). No one would surely want to demur from Bowles’s insistence that the market itself is an institution and that its specific characteristics do inform preferences. It could also be the case that ‘recognition of the cultural effects of markets (and other economic institutions) may foster a more unified approach to the behavioural sciences’ (Bowles 1998, p. 104). But, be that as it may, a reconceptualisation of preferences and their formation is not of itself up to the job of providing a coherent alternative to the standard approach. Indeed, the idea that a reconceptualisation of preferences could of itself lead into more productive non-Hobbesian territory suggests that the standard, ‘canonical’ approach is not well understood. Hobbesianism, either in its original or modern-economic guise, does not depend for its results on a particular kind of preference or preference formation. In particular, the pathologies that would characterise Hobbes’s view of the world do not arise because agents are insufficiently disposed to behave in a pro-social or other-regarding way. Put crudely, it is not what an agent wants to do – say, further her own interest rather than somebody else’s – that makes her Hobbesian; it is rather the competences that she is supposed to draw on in turning the ideal into reality. Put even more crudely, it is the means, rather than the ends of the act, that characterise Hobbes’s – and the modern-economic – approach to self and society. Consider this: say I only have your interests rather than my own interests in mind; I am thus a paragon of other-regarding virtue. But because you cannot know this, you cannot just sit back and let me do good to you because, for all you know, I am about to do you harm. But then this is precisely Hobbes’s point: even if I wish you well, I cannot do you well without some form of (private or public) enforcement. My pro-social or other-regarding intentions are neither here nor there. It looks to me as if my preferences, and they can be as other-regarding as you’d wish them to be, are about to be thwarted. In sum, the recognition that people have a sense of self, or that their self-interest is socially constituted, does no violence to the basic actiontheoretic contours of neoclassical theory. Morgenstern, as we have pointed out already, did not doubt that individual motivation might be influenced by imitation, advertising, custom, etc. (Morgenstern 1974, p. 10). But what he did doubt is that these influences ‘change the formal properties of the process of maximizing’ (Morgenstern 1974, p.  10). For the neoclassical Morgenstern, the point is that the ‘formal properties of the process of maximizing’ (our emphasis), a process in itself devoid of moral substance, is the transcendental condition of possibility of all of our doings, ‘ethical’ or

88   Cover stories not. It is as if ethical or moral orientation is intruded into this ‘formal process’ so as to give it determinate content. Akerlof and Kranton’s work – essentially neoclassical in structure, if not in tone – in which various aspects of ethical life appear as arguments in a utility function, makes his point nicely for him.

Remains of a moral-economic view: Marshall and Keynes Durkheim and Sen in particular want to say that there is more to our interactive accomplishments than a strategic rationality, but they cannot find the words. The words that they do find suggest an agent barely able to hold itself together, let alone act with others in a decisive and competent way. It has always been an attractive feature of Hobbes’s egoistic theory – and why, presumably, his presuppositions in regard to the human act have resurfaced more recently as the bedrock of neoclassical economics – that it does at least postulate an agent at ease with herself. On the other hand, Durkheim is right to point out that such an agent is congenitally incapable of interacting effectively, unless supplemented with additional character traits. Sen is right that this figure is too stripped down for us to understand her behaviour or her human development. But, as we suggest above, it is in the process of supplementation that the agent is in danger of losing her integrity. Her character traits – those ‘morals’, ‘norms’, ‘values’ of which the sociologist and socioeconomist speak – are supposed to be acquired, imposed, from the outside, added on to her ‘own nature’ (Durkheim), and as such can hardly be said to be her own. As we argued in our previous Chapter 4 above, the approach taken in the political economy of Smith and Chalmers, and also in the social psychology of G. H. Mead, has the decisive advantage over both Hobbesian theory and the sociological/socioeconomic reaction to it of postulating an agent who is, like the Hobbesian agent but contra its reaction, not only comfortable with herself and her actions, but also, unlike the Hobbesian agent, naturally capable of successful social behaviour. But ultimately Smith was successfully (mis)represented – successfully, that is to say, from the standpoint of his representers rather than from the standpoint of Smith himself – as offering a bifurcated view of human nature: on the one hand, a red-in-tooth-and-claw, barely disguised, Hobbesian egotist; but, on the other, a creature with altogether softer, moral proclivities. Now these two creatures can hardly share the same skin, but the analysis of their respective attributes can be taken up and developed as separate disciplines, and this is largely what has happened. But, notwithstanding the triumph of neoclassicism, remnants of that earlier integrated approach to economic behaviour and morality – an

Cover stories   89 approach in which homo economicus is enabled rather than just driven by her morality – survived. Remnants of that earlier, morally capacitated view of the economic agent are to be found in the post-neoclassical thought of William Beveridge and J. M. Keynes. For both, a viable form of economic equilibrium depends in an essential way on the formation of an agent whose competence cannot be simply characterised as, cannot be reduced to, an instrumental or strategic rationality. Furthermore, whatever else it is that makes a competent economic actor and interactor, it is not a supplement to self-interest, or something that is supposed to hold self-interest in check. Whenever this ‘character’ is present in the economic agent, it really does dwell within. Pace Etzioni, this agent is not ‘torn between [her] urges and [her] values’; this agent is comfortable with herself. It is Keynes who is remembered as the economist of unemployment par excellence, though it was in fact Beveridge (before Keynes) who had helped make unemployment a key concept for economic thought. As we survey his categorisations we appear to be on familiar textbook-economics ground. We seem to be examining, even if in archaic language, the usual classifications that form the basis of the now mandatory chapter on unemployment. Yet closer inspection reveals something odd, for Beveridge talks of the moral causes of unemployment. Prefiguring the theoretical import that Keynes gives to the distinction between short run and long run, Beveridge writes that ‘the forces which constantly tend to adjust demand and supply work only in the long run. There are forces as constantly tending to disturb or prevent adjustment’; and crucially these counterforces often had ‘a run long enough to determine the fate of individuals’ (1930, p. 14). For Beveridge, short-run ‘imperfections’ have long-run consequences because, in compromising the ability of the individual to meet her needs and so fulfil her responsibilities within the system, they can and do undermine the independence of the labourer. As Keynes was to make clearer in the General Theory, short-run analytics should not be thought of as representing the accidental fluctuations of economic magnitudes around their already determined long-run values. Rather, the short-run situation, in forming how people are disposed to act, effectively determines the long run. For Keynes and Beveridge both, the aim was to secure the basis for an adequately functioning capitalist economy; and both understood this to mean the establishment of those conditions that would enable individual choices to be made in a free yet responsible way. Ironically, remnants of that earlier, ethically capacitated view of equilibrium are also to be found within neoclassicism: in the work of Alfred Marshall, the economist who taught Keynes and whom Beveridge most admired. From the start Marshall’s concern was with practical ethics. His interest in economic thought was in relation to the formation of character

90   Cover stories (Groenewegen 1995, p.  141). In the Principles (1890) he writes that ‘man’s character has been moulded by his every-day work’ (Marshall 1956, p. 1). The significance of this becomes apparent as he complains that many lived in poverty and ‘the conditions which surround extreme poverty, especially in densely crowded places, tend to deaden the higher faculties’ (1956, p.  2). Even outside the residuum many could not make ‘the best of their mental faculties’ due to overwork and lack of education or leisure. And so, ‘the study of the causes of poverty is the study of the causes of the degradation of a large part of mankind’ (1956, p.  2). The modern view had to take on board the fact that a man’s character was ‘a product of the circumstances under which he has lived’ (1956, p.  631). This reference to circumstance as character-forming was itself to form the basis for an understanding of economic process that would be developed by both Beveridge and Keynes. Marshall himself developed an analysis of different time periods that he saw as supplementing the lopsided long-run view of Ricardo, a view that he considered to have taken too much for granted in the matter of character. Investigation of circumstance required investigation of actual pro­ cesses over time rather than assuming an uneventful adjustment process towards long-run equilibrium values. Time became central for Marshall because the individual is formed by his circumstance, that is to say, by those unfortunate ‘short-run’ situations, in particular poverty, on any path to equilibrium. However, the distinction between short run and long run is not in itself sufficient, according to Marshall’s lights. It does not in itself capture the real movement of time, even though providing an adequate approximation for certain analytical purposes: ‘Fragmentary statical hypotheses are used as temporary auxiliaries to dynamical – or rather biological – conceptions’ (Marshall 1956, p. xiii). Economics should be concerned with human beings who ‘change and progress’, so that the central issue must be ‘living force and movement’ (1956, p. xiii). Despite conceding that treating problems of economics in terms of ‘statical equilibrium . . . alone can give us definiteness and precision of thought’, he warned that it was only an introduction to ‘a more philosophical treatment of society as an organism’ (1956, p. 382). He could not conceive of a ‘more calamitous notion than that abstract, or general, or “theoretical” economics was economics proper’ (Marshall 1925, p. 437 note 27). The (neoclassical) equilibrium method applied to economic progress offered little, as ‘pushed to its more remote and intricate logical consequences, it slips away from the conditions of real life’ (Marshall 1956, p.  382). Naturally, this is not the Marshall that modern economic orthodoxy wants to recall. At the heart of Marshall’s economics is a moral creature. He was after all a member of the Charity Organisation Society through which Chalmers’s views had found

Cover stories   91 their practical application. His question is not whether morals can be added but rather what moral perspective is formed and how it is so formed. This is not simply then an examination of a theory of choice. Circumstance becomes a matter of urgent concern; the work of Beveridge and Keynes makes sense in this perspective.

Concluding remarks Economic theory admits of various ways in which the behaviour of the human actor may be said to have a moral or ethical dimension. Of course we deliberately enlist the help of others in prosecuting our own interests. Also, we may be persuaded by their arguments as to where our interests lie. But more than this: we may enjoy the company of others. We may be concerned for their welfare. Or again we may look for their respect. In sum, others may appear in our motivational sets. All of this says why we might want to associate, but not how we are able to do it. For neoclassicism, our interactive accomplishments reduce straightforwardly to our ability to instrumentally or strategically rationalise. What makes the human act distinctive is its origination in a plan; and all that I need do in the case of cooperation rather than operation, in the case of interaction rather than action, is to build your plan into my plan, and vice versa. As we have been at pains to point out, however, such a reduction is anything but straightforward. If purposive rationality is understood simply in these terms, then the hard-won principle that has always animated liberal political economy – that society may be constituted as a spontaneous (and prosperous) order – becomes untenable. The case of Thomas Hobbes’s Leviathan should give pause for thought. As is well known, Hobbesian actors are enabled by a purposive rationality, simply understood, but their attempts at establishing society, in the absence of a dictator­ial politics, always ends in tears. Modern commentators agree that there is nothing much wrong with Hobbes’s logic at a basic level, even if his more detailed arguments have failed to stand the test of time (see, for example, Ross 2001, p. 4; and also Tuck, in Hobbes 1991, p. xvii). Consequently, if liberal political economy is to make any sense, then purposive rationality has to be understood in some other way. It is such an understanding – one that enables rather than disables liberal political economy – that we developed in Chapter 4 above. Economic behaviour, on this view, must be understood as formally moral, whatever its content. Accordingly, the human actor always acts in a way that presupposes another for whom such behaviour makes sense. So, for example, my offer of sale presupposes the idea of a buyer; my making of a gift, the idea of a non-reciprocating recipient; my attempt at forceful

92   Cover stories appropriation presupposes others who acknowledge the idea of brute force as justification for parting with their possessions. In each case a (different) sense of normative rightness is presupposed, but in each case, economic and social coherence depends on the presupposition being shared. The standard homo economicus, on the other hand, presupposes nothing but a world of abstract purpose; not an immoral world but one in which individuals are differently and arbitrarily moralised. But Hobbes has shown only too well that behaviour based on such a presupposition, if left to its own devices, is utterly destructive. To be sure, our view of a formally moral homo economicus is capable of sustaining illiberal as well as liberal behaviour, depending on which expectations she has taken to heart. But at least she is (plausibly) capable of sustaining something. Standard homo economicus, in contrast, incapable of making and retaining a common sense of things with his fellows, and thus reduced to making his own sense of everything around him, is ultimately not capable of sustaining anything at all. The standard view needs to be reconsidered and then abandoned. At the level of theory, it makes sense to distinguish motive from (economic) capacity in human behaviour but no sense at all (at least since Schelling’s work in the 1960s) to configure this capacity as amoral. Moreover, insofar as morals or ethics enable (rather than just motivate) economic activity they do so because (1) they are shared and (2) they constitute economic behaviour rather than supplementing or running alongside it. By constitute we mean to go against the view of evolutionary game theorists, who continue to postulate a more primitive, amoral economic capacity as well as a morally informed one. We also mean to distance ourselves from the Durkheimian strategy of supplementing traditional homo economicus with homo sociologicus, a creature that responds to norm as if it were a kind of external force or imposition. On our view, the economic agent neither has to grow additional capacities in order to coordinate with her fellows, as Binmore’s has to do, nor has to depart or deviate from purposeful behaviour, as does homo sociologicus. On our view, economic capacity has to be more richly endowed than standard homo economicus in order to do what it is supposed to do, but it is recognisably still a single, purposeful capa­ city. Talk of a morality that drives, modifies or moderates our economic behaviour, but does not constitute it, is usually no more than a cover story for a basic view of the economic agent that is just as unsociable as the one that it purports to criticise. The rethinking of homo economicus also has a practical significance. The predictive successes of modern economic theory suggest that even if nobody really behaves (or really could behave) like standard homo economicus, there remains a certain heuristic or instrumental value to modelling behaviour as if it were true. But the predictive failures of theory also

Cover stories   93 suggest that this value has limits. Economic behaviour depends not only on the ability of each agent to respond imaginatively to incentives whilst being mindful of constraint but also on the common sense we make and retain of the general form of the activities we are each engaged in. But, just as incentive and constraint get their meaning from this common sense, so also is this common sense disturbed by changes to how we are incentivised and/or constrained. Major policy initiatives such as privatisation, deregulation, reregulation and the like cannot be adequately captured simply as a restructuring of pay-offs and constraints because, in each case, a moral community is being broken up and re-formed. Extending (or restricting) commercial behaviour in some sector of the economy does not replace the moral with the amoral (or vice versa) but rather changes the type of moral sentiment at work. But, major policy initiatives aside, there is still the more general cultural damage done when we take within and behave according to the expectations that Hobbes and his modern-­ economic progeny say we should hold in respect of one another’s behaviour. In our final chapter (6) we will want to explore the nature of that damage.

6 Hobbesworld

The overly self-interested and often careless behaviour much in evidence in recent times, as banks (and other businesses in their wake) have gone (technically) bust, is not the expression of some natural propensity of the economic agent, but is rather an institutionally conditioned reformation of how that agency thinks of itself. As Smith and Chalmers knew, as Marshall knew, as Keynes knew, as G. H. Mead knew, the human being is a deeply moral creature: all aspects of her behaviour, including the economic, respond to expectations others hold in respect of her behaviour, represented via what Smith called the ‘man within’, as expectations that she holds of herself. But modern economics does not know this, because, despite nodding in the direction of Smith, it somehow gets its understanding of the principles of human behaviour from Thomas Hobbes. And as far as Hobbes is concerned, it is all about ‘rewards and punishment’: these act as the very ‘nerve-centre’ of community life (see Hobbes 1968, p. 81). As we have seen, this sombre vision of ourselves and our communities is even reproduced by many who profess to be its critics, whether within or outside the discipline. It is even reproduced by sophisticated thinkers such as Binmore (see Chapter 5 above), who want to argue the evolutionary advantages of a homo economicus with moral capacity. Yet, despite his turn to naturalism, Binmore’s starting point for this evolutionary process remains that standard rational maximising agent. The orthodox homo economicus is apparently the default unit of evolution. This view accommodates in economic thinking what de Waal critically identified as veneer theory, the concept of an underlying ‘reality of nature red in tooth and claw’ (de Waal 2006). From this reality, but only via various socialisations, moral lessons and the like, we are supposed to achieve some kind of apparently viable social order. Binmore may not recognise himself in such a description but his problematic is still how to get from the standard agent to a more capable, moral, game player and he does not pause to consider the evolutionary status of his starting point. As we have been at pains to

Hobbesworld   95 point out, the need for clarity arises because, in reproducing versions of veneer theory, economic theorising does not necessarily reject moral concern in the agent. On the contrary, its more perceptive operators would want to emphasise it. Consider, for example, the contribution of Michael Jensen and William Meckling (1994). Responding to critics, they argue that instances of apparently altruistic behaviour hardly pose a problem for ‘sound’ economic theorising since it is just another aspect of our preferences; it is, as they say, in human nature to ‘care’. The key here, though, is that sound theorising would recognise, even in the case of altruistically inclined preferences, the existence of constraints on choice: choosing altruistically, like any other kind of choice, involves an opportunity cost or trade-off. Our point? Jensen and Meckling are self-consciously operating from the heartland of neoclassicism, and yet if told that homo economicus is in some sense a social creature they would, we think, readily agree. Jensen and Meckling’s model of economic man, the Resourceful, Evaluative, Maximising Model (REMM), sets out a much richer vision of homo economicus in their view than what they call the Economic Model does. It is not just that the agent ‘cares’, but rather that this implies also that the motivation is not just income, money, and also that the constraint is not just the money budget but includes time and other relevant factors defining an opportunity set. Indeed the constraint should not itself be taken as fixed, for this is an agent capable of reconceptualising and pushing boundaries; this is an agent in some kind of ‘creative’ relation to her opportunity set. In their view, REMM disposes of many arguments that critics have thrown at modern economics in recent times, whether heterodox-economic, sociological or psychological in tenor. In our view? They have a point. Jensen and Meckling’s claim is to have identified a broader set of characteristics than that possessed by the Economic Model but it has the same ambition: to identify a ‘set of characteristics that captures the essence of human nature, but no more’ (1994, p. 2). From such a vantage point they can then look across geographical, cultural or historical variations. The natural element, abstracted from different forms, allows, they say, a wider explanatory scope. But, like other stories about economic behaviour, the veracity of their story depends on what is taken to be ‘natural’ and what is not: what is cultural, social overlay. And in this important respect, their story, notwithstanding its broader motivational characteristics, is no different to the Economic Model. Like the Economic Model, like Binmore, their default unit is the Hobbesian rational maximiser. One way or another, a tendency towards social behaviour, a concern for the other, gets overlaid onto this ‘natural’ basis.

96   Hobbesworld There is nothing special about Jensen and Meckling’s defence of the orthodoxy in the face of its moralising critics. As we have seen, Morgenstern, some thirty years earlier, made a similar case; and somebody like Robbins could have made the case thirty years before that. What marks Jensen and Meckling’s essay out for particular comment is its context. For Jensen at least, it provides ex post justification for his long-standing commitment to a certain kind of organisational theory – an understanding that sees adequate organisational structure as one that has as its principle the reining in and channelling into productive activity of the otherwise destructive self-interest of the economic agent. Just as the Hobbesian rational maximiser – Mr Congenital Defector – has become the default unit for much of modern social theorising, so Hobbes’s complementary idea of ‘rewards and punishments’ as the very ‘nerve-centre’ of any community has become the default unit of organisational theory. What has stood behind the formation and/or transformation of so many modern organisations has been the culture of modern economics founded on the Jensenian view of homo economicus. This is the context for the separation of ownership and control (see Lazonick and O’Sullivan 2000) – and the associated development and application of the principle of shareholder value – in private sector organisations that, in keeping with our gangster vision of the self, closes off the opportunities for management to filch the rightful resources of the corporation. Analogously, public service falls prey to the same analysis but it is now the taxpayer/consumer who must watch out for overgrazing by the producer/provider interest. And within the firm – whether public or private sector – the same logic justifies a managerial class that somehow keeps the worker up to her task. Without this supervision, the economist reminds us, she would (naturally) fall short of what she should be doing. And if each of these arrangements seems strangely familiar, then so they should; in each case, through a suitably tethered management, the practitioner is introduced and made subject to the third-person view of things. Aside from this synchronic familiarity, there is also a diachronic one. The same kind of thinking about homo economicus in different times begets a similar kind of arrangement: from Plato’s Guardian, to Hobbes’s Leviathan, to economics-inspired modern management. But our point throughout has been this: that we learn from Smith and his contemporaries, from Chalmers, from Mead, that the third person view was and is always already present, in the mind of the agent herself. What Jensen and his colleagues fail to recognise is that the organisational imperatives of their modern-economic theorising, when put into practice, are not really introducing and imposing an objective, third-person view of things on an otherwise wild, antediluvian partiality, but rather reforming the already existing third-person view that we all carry around in our heads.

Hobbesworld   97 We can see how Jensen’s idea of the ‘nature of man’ framed his economics-inspired organisational theory from the start: [a]n organisation is the nexus of contracts, written and unwritten, among owners of factors of production and customers. These contracts or internal ‘rules of the game’ specify the rights of each agent in the organisation, performance criteria on which agents are evaluated, and the payoff functions they face. (Fama and Jensen 1983, p. 302) Or again: Agency problems arise because contracts are not costlessly written and enforced. Agency costs include the costs of structuring, monitoring, and bonding a set of contracts among agents with conflicting interests. Agency costs also include the value of output lost because the costs of full enforcement of contracts exceed the benefits. (Fama and Jensen 1983, p. 304) Finally, ‘[w]ithout separation of decision management from decision control, residual claimants have little protection against opportunistic actions of decision agents’ (Fama and Jensen 1983, p. 306; our emphases throughout). We should add that the aforementioned ‘residual claimants’ are the shareholders, getting what is left over after the primary claims are settled. It is then this way of seeing things that leads directly to the argument that managers should be tied, via stock options and the like, to the strategy of maximising shareholder value. We are surprised and heartened by the widespread criticism of these practices and the underlying vision; but not so surprised or disheartened by how little of this criticism comes from economists. Perhaps it is in the nature of the orthodoxy that this criticism has often come from outside the discipline itself. What has become clearer to critics is that in some way economics has shaped the environment in which it operates. More importantly, there is an argument that in so shaping the environment, economics has set the ground for a number of corporate scandals, IMF bailouts and, even more recently, the Credit Crunch. The criticism of economics has not been so precise, but it is nevertheless close to the mark. In the introduction to a British Journal of Management special issue, critical of the role of business schools in recent events, the point is accepted that it was a fundamental intellectual failure that led to the Credit Crunch. This failure, inter alia,

98   Hobbesworld took the form of principal–agency theorists advocating cash bonuses and stock options to motivate managers to fulfil their obligations to concentrate on improving shareholder value. In the context of the neoliberal economic consensus that swept both developed and developing economies in the late 1990s and early 2000s, this business model was a recipe for disaster, as has proven to be the case. (Currie et al. 2010, p. S1) The general point, as argued by Ferraro et al. (2005, p. 8) in relation to the formation of business conduct, is that social sciences can influence reality by ‘influencing how we think about ourselves and how we act’. Unsurprisingly, there has been a particular focus on the teaching of ethics and how managers are trained, but this concern has also gone deeper – identifying the root cause as the dominance of economics and its pervasive influence on how problems have been viewed. As these critics see it – rightly in our view – economics (mis)understands itself as articulating the (natural) foundation for any culture; but what is actually the case is that it is in the process of forming a very particular culture of its own. Its practitioners, in other words – unlike Xenophon and his contemporaries – miss the salient point that their discourse is a performative one. As MacKenzie (2006) sees it, but economists themselves do not: economics is an engine, not a camera. It is plain enough that at some point after the Second World War there was a significant change in corporate culture, away from a more traditional understanding of the corporation and towards one that has been largely formed by what has been called Chicago economics. In an article that reflects on the spate of recent corporate scandals, Sumantra Ghosal puts ‘Bad Management’ down to the syllabi taught in business schools. His point is simple but devastating enough: ‘[b]usiness schools do not need to do a great deal more to prevent future Enrons, they need only to stop doing a lot they currently do. They do not need to create new courses; they need to simply stop teaching some old ones’ (2005, p. 75). He is clear that business schools need to reflect on and reappraise themselves: ‘we – as business school faculties – need to own up to our own role in creating Enrons. Our theories and ideas have done much to strengthen the management practices that we are all now so loudly condemning’ (Ghosal 2005, p. 75). Of course, an immediate effect of Enron and the like was indeed a demand for, and the subsequent rolling out of, business school courses in ethics. In fact, the absence of ethical theory in organisational studies had already been noted (Wicks and Freeman 1998), prompting the demand that they be ‘fundamentally reshaped’. Our authors also recognise here the performative element of economic assumptions, especially in regard to the

Hobbesworld   99 Prisoner’s Dilemma (Wicks and Freeman 1998, p. 134). The lack of ethics courses also comes under the spotlight in an editorial for the Academy of Management Review that examined the task of ‘taking ethics seriously’ (Holland 2003). But Ghosal’s complaint is of a more general kind: ‘[m] any of the worst excesses of recent management practices have their roots in a set of ideas that have emerged from business school academics over the last 30 years’ (2005, p.  75). Business schools, however, were only a conduit, only picking up on stuff that had a much wider currency: ‘these theories have been in the air, legitimizing some actions and behaviours of managers, de-legitimating others and generally shaping the intellectual and normative order within which all day-to-day decisions were made’ (2005, p. 75). By ‘these theories’, he means economics, and in particular its very negative view of human conduct. Ghosal had recognised that economics works with a vision of the economic agent as congenitally opportunistic and untrustworthy. And, in passing on that vision, ‘business schools have actively freed their students from any sense of moral responsibility’ (2005, p. 76). For Ghosal, then, the malaise runs deeper than that which might be cured by a corrective dose of ethics classes. In any case, as he well realises, these students are already getting their ethics from elsewhere: from their economics professors. Never mind the lack of courses explicitly designed to teach ethics; ‘[o]f far greater concern is the general delegitimation of companies as institutions and of management as a profession’ (2005, p. 76). This delegitimation arises from the widely held assumptions within mainstream economics that reduce the corporation to Jensen’s ‘nexus of contracts’, and the ‘nature of man’ (Jensen again) to an opportunity-monkey just waiting for the next defection. All of this pulls in the same direction: the behaviour of homo economicus has to be monitored and controlled through a system of ‘rewards and punishments’, just as Dr Hobbes prescribed. Of course, corporations used to be conceptualised as organisations with common and concrete purposes, with the manager – responsible, that is answerable to the actualisation of those purposes – as its trustee. But not any more. Perhaps we can understand better Ghosal’s point if we leave aside modern economics for just a moment and resurrect what it in turn leaves aside: that apparently obscure interest of old political economy in the twofold nature of the commodity. For the old school political economists, the commodity is a nexus of use-value and exchange-value: it has a specific character – the result of the application of specific skills, interests and expertise – through which it satisfies specific needs, but it must also be bought and sold. The problems that Ghosal tries to address seem to have their root in a more recent (mis)understanding that renders the commodity as exchange-value alone; as if, as use-value, it is always already exchange

100   Hobbesworld value. Of course it is not, but there is little recognition in modern agency theory that anything specific is being made, and, as we have been at pains to point out, no recognition at all of the moral competences that we draw on in making the common act of production come off. One aspect of that morally depleted vision of economic activity is the reduction of the firm to a bundle of particular (and usually competing) interests, as though the organisation has no intrinsic existence of its own. Ghosal would no doubt warm to the counter-discourse of Hopper and Hopper (2009) and their emphasis on what they call ‘domain knowledge’. In Hopper and Hopper, use-value considerations do not fall away. Successful managers in successful organisations are more like old-style workshop managers, necessarily with interests and skills that match those of the people whom they manage. (They may or may not be good at financial engineering and ‘human resource’-style management as well.) But, as the Hoppers opine, that kind of view and way of doing things, based on the particular domain, has been all but crowded out by the spread of a very different culture: the moderneconomic conception of management and corporation that sees no intrinsic worth in any of it. It is a conception that favours the exchange-value side of things to the total exclusion of use-value. As Lazonick and O’Sullivan (2000) argue, there was a shift from ‘retain and reinvest’ to ‘downsize and distribute’, the motto of shareholder value. This was coupled with a decline in innovation, with increasing funds going on share buybacks as opposed to investment in the core business. Not only did this mean a relative decline in relation to Japanese companies, it also meant a profound change in American capitalism with increasing inequality, declining education and skill training, and rising levels of economic insecurity (Lazonick 2009). This was accompanied by the decline of a savings culture, indeed of the old work culture of the American Dream, and so also rising debt, and of course ultimately that poisonous combination of inequality and financialisation that was the sub-prime mortgage boom. Everything was on the exchange-value side. Even Hayek’s insight that the market coordinated local and particular knowledge was lost: so much for domain knowledge. After all, as everyone knows, the real purpose of the firm is the disgorging of residual funds to the shareholders. And ‘everyone knows’ because the lessons of the economist have entered the ether; the economic point of view has become second nature to us all. Witness then those students keen to get into something called ‘business’ so that they can make ‘money’. Ghosal’s insight into a performative economics – mainstream economics as a process of forming an agency that it purports only to describe – takes him well beyond counter-discourses within economics itself. Unfortunately, however, when he – and others from outside the discipline

Hobbesworld   101 – try to build on that insight they fall prey to the same kind of problems that have beset critics from within. When he says that the standard characterisation of the economicus has tended to exclude ‘any aspect of otherthan-self-interested preferences’ (Ghosal 2005, p. 82), we know, from our reflection on the socioeconomists, and on Sen et al. in Chapter 5 above, exactly where that one is going. And, sure enough, Ghosal wants to highlight ‘other motives’. Drawing on Arner Ben-Ner and Louis Putterman (1998) and, in particular, on the deviations from standard predictions that the ultimatum game has thrown up, he advocates a more sophistated approach to preference modelling: one that would accommodate ‘selfregarding, other regarding and process regarding’ preferences. This is all well and good. But of course it takes him right back into the territory where economic orthodoxy would like to fight its battles: where the idea that economic behaviour as (in some sense) rational maximising is let through by default, and instead we argue about what kind of concerns inform this process. Ghosal’s deep insight into the performative aspect of modern economics – that, with its ‘agency theory, transaction costs economics, game theory, social network analysis, theories of social dilemmas’ it should be understood as a ‘process of self-fulfilling prophecy’ (2005, p.  84) – calls out for a serious inquiry into the very nature of economic agency at work in modern economic theory, an inquiry that looks at capacities or competences rather than just motives. Unfortunately, as we say, a serious inquiry into what economic agency is really like, as against what modern economics tells us it is like, is not what we get. But still, at least Ghosal and others in the management literature do some calling out. They do not see how, but at least they do know that the problems we face are in large measure because we have indeed taken economics to heart. Economics does not dig into a natural realm but helps form a cultural one. The ‘assumptions and language of economics are widely accepted’ (Ferraro et al. 2005, p. 10) and have become dominant in the development of contemporary management practice. The starting point, always, is ‘self-interest’. This was key to the formation of agency theory (Ferraro et al. 2005, p. 11) and also to the formation of managerial economics. Both, in turn, have helped form the ‘associated problems we have witnessed’ (Ghosal 2005, p.  84). Take the managerial economist, Oliver Williamson. His starting point is the usual (Hobbesian) one of economic agent as rational maximiser, and what follows therefrom is all too predictable: the manager’s task is to use hierarchical authority to prevent the opportunistic from benefitting at the cost of others. To ensure effective co-ordination, managers must know what everyone ought to be

102   Hobbesworld doing, and use their ability to monitor and control and to reward and punish to ensure that everyone does what he or she is told to do. This is the exercise of ‘fiat’. (Ghosal 2005, p. 85) Williamson thinks he is prescribing good management. But from where we are standing – and Ghosal too – this is all very bad indeed. Responsibility for the work has shifted from the practitioner-in-place to a person or persons out-of-place: the what-to-do is now sorted out at some distance from the who-to-do. The effect is wholly damaging, involving a shift from proper management to the appointment of someone who is nominally in charge, and thence to systems of control that form conduct: ‘[s]urveillance that is perceived as controlling threatens people’s personal sense of autonomy and decreases their intrinsic motivation. It damages their self-­ perception’ (Ghosal 2005, p.  85). Work then tends towards ‘perfunctory compliance’, a result that justifies the appointment of others who are also nominally in charge, and what they are charged with, of course, is yet more surveillance. As for the practitioner herself, a large part of her working day is now taken up with gaming the system, something she has anyway learnt is natural from the discourse that sets out to control her.

Performing economics Let us be clear: the problem of the social dilemma that so fixates economic theory is real enough. What it fails to realise, however, is that, in the context of contemporary organisations and reorganisations it is a problem that is being performed. We can examine this in a touch more detail through the related works of Phillip Blond and John Seddon. They argue and give evidence for the view that the organisational dystopia that economics-based governance is supposed to save us from is in fact a product of that very view of management. They share a common underlying concern arising from how the individual is understood and how indeed this understanding performs just the problem it purports to diagnose. Blond’s argument arises from an analysis of the political economy of the last twenty-five years. In his view, the problem goes much deeper than inadequate theories of governance or inappropriate institutional arrangements. For Blond, the practice of management is just one instance of the deeper problem of a misunderstanding of the nature of markets and the need for the state. We will examine this wider environment through a critical examination of Blond’s work and then consider, as Blond himself does, the more specific issue of management in the work of John Seddon. In both we shall see a common underlying concern about how the individual

Hobbesworld   103 is understood and how indeed this understanding performs just the problem that it purports to diagnose. We start with Blond, and, although it is evident that he himself has learnt from Seddon’s work, he places it within a broader understanding of social crisis that is of interest in itself. Blond is largely responsible for the now ubiquitous idea of the ‘big society’, though we wonder whether he would be so pleased with the way in which politicians have seized on the term and subverted the idea for their own, usually penny-pinching, purposes. According to Blond, civil society has been squeezed out by a pincer movement of market fundamentalism and state authoritarianism that was developed through post-1979 governments of both Conservative and Labour hues. It is not the politics that concerns us here since it is part of Blond’s point that the problem runs much deeper than how it is expressed politically. Whilst one prong of the pincer may be turned ‘right’ and the other ‘left’, for Blond (2009, p. 7) they are in fact part of the same movement: a combination of the authoritarianism of the state and unrestricted freedom of the market that, whilst appearing to oppose, are in fact dependent on one another. To be more precise, these two sides of the pincer constituting the post-1979 economic model have an inner relation, for where we have, on one side, ‘extreme individualism’, on the other we therefore require ‘the state to police the outcome’ (Blond 2009, p. 58). This is easily recognisable as a brief restatement of the problem that animates Hobbes’s Leviathan – and of course of the philosophical anthropology that underpins it – though here reproduced in a specific social context. What the 1970s and 1980s saw was a turn to what we now identify as market fundamentalism (MF). And what Blond wants to discuss is the debris, the essential elements, that such a turn leaves in its wake: ‘[a]n anarchic market, that has abandoned trust and eschewed any ethos of the public good, requires a huge state bureaucracy to monitor it and enforce contracts and compliance. The cost of this audit state is enormous’ (2009, p. 58). This is precisely the station at which the modern market ideologue meets Hobbes: this is the idea of the atomic individual (see Chapter 5 above) actualised: the idea actualised of an individual stripped of all social engagement. Of course this stripping away has different meanings in the two contexts. For Hobbes it was a thought experiment – gedunken social theory, so to say – allowing distance from the fissile social tensions of his day; whilst in the situation Blond wants to confront that stripping away actually performs the social problem. The key here is ethos. MF, as expressed in the economic literature, takes the organisation as simply a nexus of contracts. It is not so much that the organisation simply loses specific purpose, though that can happen too, but rather that the individual is seen as having to be incentivised and constrained in order to fall in with

104   Hobbesworld whatever that purpose might be. It is not simply then that the individual comes up short of what Frey (1997) calls ‘intrinsic motivation’ in this situation and needs to be supplemented with motivation of an extrinsic kind, but rather, according to the MF understanding of things, intrinsic motivation has no meaning, no operational significance, so that in this way we acquire a specific understanding of ourselves, and of our selfishness. It becomes what is expected of us and, in turn, what we come to expect of ourselves. This then performs the organisational dilemma of setting the external controls in order to match the work to the purpose, but at the same time poses the external control as the condition of that purpose. The depth of the problem here, as Blond sees it, is given by the fact that MF is not just the idea of a type of economic organisation – ‘liberalism’, say – but rather, when implemented, forms the kind of agency and behaviour that in its instance as a theory or doctrine – ‘economics’ – it takes as natural. Blond, like those who, all those years ago, first instituted a study of homo economicus, sees economic arrangements as formative (see Chapter 2 above), and therefore the texts that set those arrangements up as performative. Of course the MF ideologue can see neither of those things. The MF ideologue cannot see economics as a thoroughly immersive culture: immersive in the sense that it contains its own opposite pole, the state, and immersive also in that agency is being formed within it. The basis of the MF story is a notion of individual freedom in which society is ‘the first and most basic trap or prison for the individual’ (Blond 2009, p. 147). This vision of the individual converts into ‘the one unquestionable state authority’ that is necessary to manage our ‘negative liberties’ (Blond 2009, p. 146). Association, the basis of a civil society, is squeezed out between these related poles. This is not just a psychological crowding out of the voluntary basis of association but also a real replacement of voluntary functions by those provided by the state. Welfare provided for by the state disarms self-organisation, and indeed Blond thinks that this is a fear-induced policy designed to quieten the troublesome poor. On the other hand, the radical individualism that is then produced within the middle classes, a radicalism he sees as coming to a head in the hedonistic decade of the 1960s, turns to the state as the ‘ethical proxy’ (Blond 2009, p. 27). Virtue is the loser in this self-reinforcing circuit. Once the individual is hollowed out – ‘vacated’ and made ‘empty’, as Blond puts it – by the orthodox conception of rational maximiser, it then meets, coming in the other direction, a whole raft of standards and targets that are justifiable only once we understand homo economicus on that hollowed-out basis. In the world of work, the trades and professions are taken to have no framework of their own but are rather given structure by the top-down imposition of benchmarks and the like. Talk here of professional ethos is doomed

Hobbesworld   105 from the start, as everyone now knows that this is just a cover story for the narrow self-serving rhetoric of producer interest. Who could be so stupid as to claim vocation in these more economically literate times? Better rather to learn, in accord with what we are – or rather what we are told we are – how to game the corporation and the state. What Blond offers here then is an alternative to the orthodox views of right and left, of market versus state, by seeing them joined in their opposition to a process of self-management, and joined also in their view of homo economicus as atomic actor: a view, as we have seen, that sustained Hobbes’s social theory and has now been given a second wind by orthodox economics. Left and right can offer no way out of that view because they are part of that view, and the only viable exit point for Blond rests on a politics of virtue that presupposes an always already socially encumbered individual, not one who comes upon the social as vexatious fact. Ultimately, however, Blond’s diagnosis and proposed treatment of the economics-induced state of malaise that we find ourselves in are not securely embedded within a proper theoretical grasp of the issues. He is certainly clear that ‘individuals are at root relational beings’ (2009, p. 154) but seems to have little grasp of how we are relational or in what sense our relational being is a necessary one. How then are we to find the ground for his politics of virtue, and hence the ground for his critique of orthodoxy? This is not to say that he does not know what is needed; he looks to a ‘an account of the common good that is cultivated organically from within rather than imposed arbitrarily from without’ (Blond 2009, p.  153). But alternative is not the same as critique. Hobbes would have been only too pleased to find a politics of virtue, only too pleased indeed to find an account of the common good ‘from within’. Hobbes did not think there was a shortage of alternatives, indeed we might characterise his dilemma as exactly that – alternatives: for in Hobbes’s view the problem is precisely that we are arbitrarily moralised. What you or I may take to be virtue or the common good may take many forms, and we have no means of establishing a common view of the common good, until of course, having become pig-sick of ‘warre’, we put ourselves in the hands of the Leviathan. Blond’s solution to this higher-level problem is not so far from Hobbes’s, except that Blond has a generous confidence in the ‘relational’ individual. It is, after all, an ‘associative society’ (Blond 2009, p. 153) that he wants, and he does recognise that Mrs Thatcher’s configuration of society on purely individualist lines formed a ‘society where all social knowing and learning is ultimately aborted’ (2009, p.  125). He knows that what is needed is to nurture ‘individual honour and reciprocal trust’ (2009, p.  159), but without quite knowing how that is to be accomplished.

106   Hobbesworld Otherwise expressed, we think Blond’s intentions are good but also that he has little idea as to how they might be reliably cashed out. Who can object to Blond’s call for a broader, more socially informed education, except that all the signs are that we will continue to move in the opposite direction? And, of course, all education is moral, but the problem is that its essential morality – in mapping out ways of acceptable being that then get performed – goes largely unacknowledged. It is not always clear that Blond understands the distinction between this and the more conventional morality as a kind of preference. As we (and others) have argued, modern economics carries a moral charge; but this is all the more powerful (and destructive) for being unrecognised, implicit and uncontested. Making its morality explicit must help. But, even so, without an understanding of exactly how that morality works – of how people take within and respond to the responses of others to their actions – the educational project can take us in any number of strange, unexpected and not entirely welcome directions. We have a working knowledge of one – an attempt at ‘widening participation’ in higher education – that, because it had little idea of what participation should mean in an academic context, and little idea of what the ‘customers’ should be participating in, had utterly disastrous consequences for exactly the reasons that Blond would recognise: in this particular case, a failure to recognise that academic work, if it is to succeed, has its own particular ethos, and in its stead imposing a managerial scheme of things – a culture of educational managers – that makes the Soviet Union look like an exercise in laissez-faire. Blond recognises that changing the role of the state must pose new moral problems from which of course new conduct and so new forms of learning will emerge. In this respect Blond’s idea of virtue – as value and practice combined – is pertinent. To believe, however, as Blond does, that virtue is not ‘subjective since it believes there is a common good’ (2009, p.  160) sets up an unnecessary tension between individual and common good. We should also add, in his favour, that he recognises that the more socially, or relationally, competent the individual so the more likely it is that the tension may be overcome. Even so, and notwithstanding the caveat, this is still a restatement of the Hobbes problem. Of course, in this matter he can have no truck with the Bloomsbury group since they undermine the objective existence of values and so, he thinks, drain ‘the good from current social codes and manners’ (Blond 2009, p.  163). Here of course he gets to what he takes to be the heart of the matter – the erosion of British culture – and it does seem that for him ‘culture’ plays the Leviathanic role, acting as some kind of centre by which the whole is held together. ‘Culture’ has long been on the skids in Britain, he thinks. To be sure, the post-war period did some serious damage all of its own – the

Hobbesworld   107 radical individualism of the 1960s being particularly crucial – but it had been preceded by the elaboration of critical ideas that had oppressed traditional practices, so that by the 1950s British culture had ‘willed itself to forget that the logic of its rituals depended on the reciprocal responsibility of the aristocracy and the mutual associations of the agrarian and industrial working class’ (Blond 2009, p. 165). Without that holding culture in place there was an erosion of ethos that led to disastrous consequences for the financial system as well as causing the ‘the ethos and professionalism of our public services to haemorrhage’ (Blond 2009, p.  167). It is here that the tension in Blond’s work – between the horizontal force of the ethos that makes management rent-seeking behaviour untenable and the vertical force of those capable of keeping intact the required culture – becomes most apparent. It is here also that the reason for that tension – his failure to develop a secure understanding of the sense in which human sociality is an essentially moral matter – comes most clearly into view. It is no surprise to us that ultimately Blond has to look to Thomas Carlyle, and his idea of a moral hierarchy, for a (mis)understanding of the culture of virtue that has gone missing. Be that as it may, Blond’s work does highlight the corrosive and corrupting effects on ‘ethos’ of how organisations are set up and run. John Seddon wants to do much the same, but with a focus on developments within public sector management in particular. Like Blond, he locates the problems he must confront in the wider culture; in his account the end of Keynesianism and the rise of monetarist ideas provided fertile ground for the development of public choice theory and other forms of MF. Yet, ultimately, he will want to claim, MF, far from solving or dealing with problems, is the cause of problems that it purports to diagnose. In any case, [l]iberalism in the Friedmanite sense is essentially grounded in a set of pessimistic assumptions about both individuals and institutions – a ‘gloomy vision’ that views the primary purpose of social theory as being to solve the negative problem of how to restrict the social costs arising from human imperfections. (Seddon 2008, p. 13) He refers here to an immersive culture, founded on economics, in which conduct and the oversight of that conduct are also formed. The essential proposition, coming from economics, is the individual as rational maximiser. This agent, formed only for its own egoistic project, however conceived, must be constrained or incentivised – somehow externally channelled – into what is required from a wider perspective. As we have already seen above, in the case of business, arrangements are set in

108   Hobbesworld place to disgorge the maximum revenue for shareholders, which means that rewards and punishments must be set in place to prevent controlling managers acting, on their own interest, against the residual claims of owners. In the public sector the ‘manager/owner’ split is rehearsed as an analogous tension between ‘producer interest’ and that of the public/taxpayer. Seddon is clear about how public choice theory hollows out the ethos of public service, leading as it does to a ‘reform regime . . . based on negative assumptions about people in general and public servants in particular’ (2008, p. 46). Alongside this modern-economic view of homo economicus there is the development of what he describes as ‘command-and-control management’, as the ‘negative assumptions’ about economic agency get built into specific management structures. For this top-down hierarchy, ‘the key issue is controlling people’ (Seddon 2008, p. 13), and it has to be, since the underlying assumption is of homo economicus as congenital defector. Managers ‘make decisions using budgets, targets, standards’ and they ‘seek to control the workers with a variety of management practices–procedures, rules, specifications, inspection and the like’ (Seddon 2008, p. 47). This is the third-party view, first isolated from, then regenerated and imposed upon, those who do the work by those who do not. Of course, once internal ethos has been ditched in favour of external control, work has to be redesigned: away from the practitioner’s perspective and towards one that is compatible with the manager’s more limited understanding of the task. Specialisation now becomes a matter of first identifying what a function manager will be able to reliably specify and audit. Once in place, this allows ‘managers [to] make decisions’ and workers to ‘do the work’ (Seddon 2008, p.  47). The manager’s job becomes a ‘resource-management problem’; the consequence of this diminished view of work is a failure to ‘deliver the organisation’s purpose’ (Seddon 2008, p. 51). Purpose is replaced by cost cutting and activity management. Both have an immediate and obvious appeal to management. After all, they are in charge and are responsible for the organisation’s financial viability. But financial viability, when taken as an end in itself, becomes ever more abstracted from its use-value conditions of possibility. Seddon’s report on efforts by various managers to improve call centre services illustrates the degenerate logic of this position perfectly. Activity management pushes the organisation away from its original purpose: customer satisfaction. The focus is on lowering costs, increasing activity speed (‘performance’); and this results in setting targets for answering and resolving calls and usually in low-cost outsourced, often offshore, contracts. The consequence is behaviour that meets those targets but this is not the same as meeting the organisation’s wider purpose. As Seddon reports, whereas the senior managers of a local authority ‘boasted that

Hobbesworld   109 80 per cent of calls were resolved at the point of transaction’, the actual outcome from the point of view of customers was that less than 5 per cent were resolved (2008, p.  55). Indeed, much of the ‘demand’ that these managers are dealing with is itself the result of the methods of control that they employ; it is a demand failure arising from the inadequacies of their own system. As Seddon points out, real improvement, as against management-measured improvement, comes only when there is a return to purpose, requiring a (re-)identification of purpose but also a shift away from hierarchical management and control. For Seddon, external systems of control have an inherent tendency to diverge from purpose because they produce compliance in agents all the way down the line. Ultimately, the people charged with doing the work are in the best position to see what needs to be done, but they are not the ones in control. On the contrary, their responsibility is to meet the demands of the manager, not the end-user. But those who really know what needs to be done, and how best to do it, cannot be left in control because they have no idea of – and no commitment to – any purpose wider than their own egotistical interests. In other words, the problem starts from the assumption that a wider, third-party view can only be gleaned from a separate caste of operatives set up to define and implement that view. In that essential respect, the rest of us, like Plato’s craftsman, are naturally incompetent. And so it goes on: [m]anaging people’s activity is an incredible waste of management resource; worse, this style of management demoralises workers. Having found that their goodness or badness is judged by whether they meet their activity statistics, they usually learn how to cheat their numbers to avoid attention. (Seddon 2008, p. 61) Thus it is that external regulation creates what it seeks to control: in our terms, it reforms and remoralises the practitioner, but not in a good way: the practitioner learns what is expected of her and this in turn shapes both herself and her work. Seddon again: ‘[i]mposing arbitrary measures in the shape of targets and standards creates a de facto purpose – meeting the targets – and constrains method, because the work gets designed around the reporting requirements’ (2008, p. 82). As Seddon can see, questions to do with purpose and competence can only be determined within the flow of work itself. But, instead, failure to meet these already degenerate management targets seems to justify ever more detailed systems of specification and audit; and all the while, responsibility is moved further and further from the work.

110   Hobbesworld

Concluding remarks Ghosal, Blond and Seddon tell of the damage done by a modern-economics conception of homo economicus that departs in no significant respect from the widely discredited view of ourselves that stalks the pages of Hobbes’s Leviathan. They also recognise, unlike the economics profession itself, that the damage it does is because it is a performative discourse: one way or another we take to heart what it says about ourselves and we begin to act out its fantasies. One way or another? Actually, this way: modern economic theory has provided a blueprint via which organisations today are constructed, and via us going through our motions within these settings, has given our economic agency the shape that it has. What they do not say, though, is how all this is possible. It may look as though the performativity of modern economics has turned us into Hobbesian agents, has emptied us of our morality, has made us into the kind of creature that only cares about pay-offs and constraints. But how things appear is almost exactly how they are not. We can only seem and act like amoral beings because in fact we are deeply moral beings: moral to the core. On Hobbes’s view, on Plato’s view, in the view of the modern economist, the individual can see and act only according to her own partial view of things, and for the sake of order and the wider good, a wider view needs to be imposed on our behaviour from the outside. Hence Plato’s Guardian; Hobbes’s sovereign; Jensen’s checked (or rather chequed) and balanced manager. There is no evidence for this view. On the contrary, all the evidence runs the other way: the experimental evidence; the fact that regulation (and its costs) in a truly Leviathanistic society would have to expand without bounds; the fact that less Leviathanistic societies seem to outperform more Leviathanistic ones. All the evidence points to a more accurate picture of homo economicus as being a creature who naturally takes the wider view, who naturally acts on a wider and shared conception of the good. But this skill, which she cannot help but use, is a mixed blessing, for that wider, cooperatively generated conception of the good may be mistaken. This is surely the case when the modern homo economicus begins to chase its tail, when we start to believe and act on the age-old misconception about our formal amorality now being peddled by modern economics. Ideas do matter, and so does their history, because it is only by seeing how and where we have gone wrong that we can begin to set things right. Setting things right means doing what was done in the early eighteenth century: we need to consider again what a coherent non-Hobbesian view of homo economicus looks like. It has to be recognised, first and foremost, that the problem with the Hobbesian view of the human actor lies not in

Hobbesworld   111 the why but rather in the how of the human act. The postulation of a more complex motivational set does no serious violence to the story that Hobbes wants to tell. As the more sophisticated neoclassicist recognises, a (sometimes) reciprocating, empathising and mind-reading Hobbesian agent, acting on social preferences, is not a contradiction in terms (see Chapter 5 above). The essential issue with regard to the Hobbesian model is not whether or not I take your welfare to heart but rather how I am supposed to act on those feelings. If the foundations of economic behaviour are to be successfully reconceptualised, then we have to let go of the deeply entrenched idea that instrumental/strategic reasoning is a basic human competence, and see it instead as parasitic on our more fundamental ability to draw on a shared perspective on things. As we argue in Chapter 4 above, human beings are able to coordinate successfully because, pace the Hobbes-neoclassical atomic actor, your expectations of my behaviour are always already built into my act. We are naturally and pre-reflectively attuned to the behaviour of others, without having to think about how the other will respond – which is just as well because, as Hobbes shows so well, a coordination based on calculation is the road to mutual ruin. It is in this sense that our sociality is morally based: in the sense that our actions conform in a prereflective way to wider standards of behaviour. But such conformity entails no conflict with the principle of self-interest. After all, we do not think of these expectations as belonging to other people, because, as it turns out, these are naturally represented within us as the expectations that we have of ourselves.

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Index

abduction 7 abstract cosmopolitanism 66 Academy of Management Review 99 activity management 108–9 the actual 6 Adam Smith Problem debate 66–74 administration 31, 41, 42 affections, social or natural 50 agency 8, 11, 12, 24, 101, 104 agency costs 97 Akerlof, G. 85, 88 altruism 64, 84, 95 American Revolution 34 amoralism 43, 92 animal behaviour 4–5, 79–80 antinomianism 25, 26 apes 4–5 aristocracy 39, 107 Aristotle 1 association 104 atomic actor 75, 76–7, 79, 103, 105 Aumann, Robert 76 authoritarianism, state 103 authority 25, 27; individual 28–9 being 6, 59, 60; inanimate 60; inorganic 60; organic 60–1; relational 105 being-in-the-world 59 Ben-Ner, Avner 101 beneficence 58 benevolence 29, 30, 50, 53, 54, 64, 68, 70, 73, 74 Beveridge, William 89, 90, 91 big society idea 103 Binmore, K. 80–1, 92, 94

Blond, Phillip 102–7, 110 bonuses 98 Bowles, S. 86–7 Brentano, Franz 67 British Journal of Management 97 Brown, Vivienne 70–2, 73, 74 Buchanan, S. 17, 18, 19, 20, 21 Buckle, Thomas 67 bureaucracy 103 Burke, Edmund 33, 34, 37 business conduct 97–9 business schools 97, 98 Butler, Joseph 29, 30, 49, 51 call centre services 108 capacity 51, 101; economic 2, 3, 92; moral 43, 94; for sympathy 69, 70 capitalists 40 care: as function of state 41; for the other 41, 43, 95 Carlyle, Thomas 31, 43, 107 Cartwright, Major 34 Chadwick, E. 32 Chalmers, Thomas 39–40, 41–3, 44, 57–9, 62, 63, 88, 90–1; on character 57, 59; on conscience 58; on mutual care 41; and Poor Law reform 32, 41; On the Adaptation of External Nature to the Moral and Intellectual Constitution of Man 57–8 character 57, 59, 83, 89–90 Charity Organisation Society 90 Charles II, king of England 9 Chicago economics 98 choice 95

Index   119 circumstances 90 civil society 103, 104 classical economics 39 cognition 76 commerce 30–1, 36, 48, 73 commodity: as exchange-value 99–100; as use-value 99 common good 16, 105, 106 commonwealth 43 communicative competence 6 community 63–5 comparative advantage, theory of 38 compassion 69 competence(s) 51, 87, 101; economic 4–5; moral 7, 8, 16–17, 43, 44, 100; moral-communicational 6 compliance 103 conscience 58, 84 consciousness 59; self- 62 consequences 41–2, 43 conservatism 33 Constitution 34, 35 contract(s) 47, 48, 71, 97, 99, 103; social 47, 63, 84 control, systems of 102, 108, 109 conventional behaviour 77–88 cooperation 46, 48–9, 61, 62, 75, 77, 78, 91 coordination 4, 61, 75–6, 78–9, 81, 83, 111; managerial 101–2 corporate culture 98, 99, 100 corporate scandals 97, 98 corruption 21, 27, 31, 33, 35, 38, 39, 42 cosmopolitanism, abstract 66 Credit Crunch 97 critical realism 6 Cromwell, Oliver 9 culture 106–7; corporate 98, 99, 100 Cumbernauld, Richard 29 Currie, G. 97–8 Damasio, Antonio 86 de Waal, F. 4, 5, 7, 94 deliberation 1, 6, 71, 72, 81 democracy 40 dialogue, inner 71 discretionary behaviour 6 disinterestedness 24 disorder 41 division of labour 17–18, 20, 21, 30, 48

Dixon, William 30, 32 doing 59 domain knowledge 100 Durkheim, Emile 81–4, 88, 92 economic capacity 2, 3, 92 economic competence 4–5 education 106 egoistic self 27, 30, 41, 82, 84, 88 emotions/emotionality 58, 86; see also feeling(s) emotional contagion 4 emotional intelligence 6 empathy 4–5 empirical evidence 7–8 empirical reality 6 ends and means 4, 11, 77, 87 English Civil War period 25–7, 28 Enron 98 equilibrium 84, 89, 90 estate management 12–15 ethics courses 98–9 ethos: organisational 103–4, 107; professional 104–5; public service 108 Etzioni, A. 84, 85, 89 evolutionary biology 75, 79–80, 94 evolutionary stable strategy (ESS) 80 exchange 26, 48; mercenary 70, 71, 72 exchange-value 99–100 expectations 69, 72, 74, 75, 94, 111 experimental economics 2, 85–6 extrinsic motivation 104 fairness 5 Fama, E. 97 farming 13–14, 15 Feder, Georg Henrich 66 feeling(s) 50, 54, 55; see also emotions/ emotionality; sentiments Fehr, E. 85 Ferraro, F. 98, 101 feudalism 22–3 financialisation 100 foreign trade 66 formal morality 2–4, 16–17 formativity 24 franchise 33, 42 free market 31, 33, 42, 43, 57, 103; for labour 39

120   Index freedom, individual 104; see also liberty freedom of speech 40 French Revolution 31, 33, 34, 37, 40, 41, 42 Frey, B. 23, 104 Gachter, S. 85 game theory 65, 76, 78, 79, 92; see also Prisoner’s Dilemma Ghosal, Sumantra 98, 99–100, 100–2, 110 good 16, 21, 50, 64; common 16, 105, 106; private 9, 22, 43, 50; public 9 goodwill 14 government 27, 31, 34–7 Greek thought 8–9, 11–22, 23–4 Habermas, Jürgen 6 Hanson, N. 8 harmony, natural 73 Harrington, James 27 Hayek, Friedrich von 100 Hegel, G. W. F. 15, 22, 23, 24, 59, 63 Heidegger, Martin 59 Heinrich, J. 85 hierarchy, moral 107 Hildebrand 66–7, 82 Hobbes, Thomas 10, 20, 43, 44–7, 48–9, 51, 63, 66, 83, 86, 88, 92, 105, 111; purposive rationality 91; rational maximiser 9, 95; reason 48; rewards and punishments 94; and the self 27–9, 30, 49, 50, 82; sovereignty 21, 28–9, 46–7, 48; state of nature 45–6, 48; will-to-life 64–5; Leviathan 9, 46, 48, 91, 103, 110 Hofstadter, D. 47, 65 honour 18, 105 Hopper, K. and Hopper, W. 100 household management 12–14 human nature 46, 47, 67, 80, 95 Hume, David 3, 49, 51–2, 54–5, 58 Husserl, Edmund 59 Hutcheson, Francis 49 hymenoptera 75 imagination 71 impartial spectator 55, 56, 71, 74

improvement 38 impulse 56 inanimate being 60 incentivisation 20, 103–4, 107 independence 26 individual authority 28–9 individualism 103, 105; radical 104, 107 individuality 31, 63, 82 individual(s) 22, 26; freedom of 104; as source of order 28, 29 inequality 100 inference 7 injustice 17, 18, 19 inner dialogue 71 inorganic being 60 insect behaviour 75 insight 59 instrumental behaviour 6, 23–4 instrumental rationality 3, 78, 89 instrumental reasoning 58, 111 interaction 26, 41, 60, 64, 76, 78, 91 interest(s) 17–18, 35, 40, 42; conflicting 97; dominant 27; mutual and reciprocal 36, 40; private 67; see also self-interest intrinsic motivation 23, 102, 104 intuition 59 irrational behaviour 6 Jensen, Michael 95–6, 97, 110 Journal of Economic Behaviour and Organization 85 judgement 50; moral 53–4, 55, 56, 58, 71 just deserts 5 justice 8, 9, 17, 19, 20, 21, 22, 80 Kahneman, Daniel 85 Kant, I. 3, 59, 63–5 Keynes, John Maynard 89, 90, 91 Keynesianism 107 Knies, Karl 67 knowing 7–8, 59 Kranton, R. 85, 88 labour: demand for 40; division of 17–18, 20, 21, 30, 48; free market for 39 landowners 26, 40, 71

Index   121 Lange, Friedrich 68 law(s) 46, 58, 71; natural 29, 33, 36, 38, 39 Lawrence, P. R. 84, 85 Lawson, T. 7, 8 Lazonick, T. 100 leadership 14–15 liberal-economic order 49, 57, 58, 91 liberty 26; see also freedom lifeworld 59 London Corresponding Society (LCS) 34 long run 89, 90 Lopes, H. 2 love, self- 30, 53, 54, 68, 72, 73 Machiavelli, Niccolo 19 Mackenzie, D. 98 McNally, David 32, 33, 37, 39, 41 Malthus, Thomas 37, 38, 40; Theory of Population 33, 38–9 management practices 96–9, 101–3, 107–9 Mandeville, Bernard 30, 43 market fundamentalism (MF) 103–5, 107 markets 86, 87, 105; see also free market Marshall, Alfred 89–91; Principles of Economics 90 Martins, Nuno 86 Marx, Karl 1, 6, 63 maximising 29, 77, 79, 80, 87, 95; see also rational maximiser Maynard Smith, J. 79–80 Mead, George Herbert 53, 59–62, 63, 82, 88 means and ends 4, 11, 77, 87 mechanical arts 13, 16 Meckling, William 95–6 mercenary exchange 70, 71, 72 modernity 9 monetarism 107 Montes, Leonidas 68, 69, 70 moral capacity 25, 43, 94 moral competences 7, 8, 16–17, 43, 44, 100 moral hierarchy 107 moral individualism 82 moral judgement 53–4, 55, 56, 58, 71

moral sense 10, 49, 50, 80 moral sentiments 3, 44, 51–7, 68, 68–9, 70, 71, 72, 73 Morgenstern, O. 6, 76, 77–8, 79, 87, 96 motivation 2, 6, 50, 51, 67, 68, 69, 74, 85, 87, 95; and capacity distinguished 70, 73, 84, 92; extrinsic 104; intrinsic 23, 102, 104 mutual care 41, 43, 95 mutual interests 36, 40 Myers, Milton 29, 30 natural affections 50 natural harmony 73 natural laws 29, 33, 36, 38, 39 natural rights 36, 38–9 natural selection 80 necessity 41, 42 neoclassicism 26, 65, 74, 76, 77, 81, 84, 87, 89, 91, 95 Nieli, R. 73 objectivity 20, 21 observance, economy of 16–22 one-man argument 75, 76, 77, 79, 86 opportunism 97, 99 order 8–9, 13; the individual as source of 28, 29; see also social order organic being 60–1 organisational ethos 103–4, 107 organisational theory 96–7, 103–4 O’Sullivan, M. 100 Otteson, J. R. 73–4 overplus 27, 29–30 Paine, Thomas 39, 40, 43; The Rights of Man 34–8 passion(s) 56, 58 peace 46 percipience 76 performativity 24, 98–9, 100–1, 102–9, 110 Plato 8–9, 110; Republic 10, 17–22, 43, 64 Pocock, J. G. A. 25–7, 28, 30–1 political economy 25, 27, 30, 31, 32–3, 34, 37, 38–42, 57, 63, 67, 91 Poor Law 32, 33; abolition of 40, 41 positivism 7–8 possessions 12

122   Index poverty 31, 39, 90 power 35 practical reasoning 59, 63 pragmatism 59 preferences 3, 4, 86–7, 95, 101 prices, control over 40 principal-agent problem 13 principle 34–5, 36, 37 Prisoner’s Dilemma 47, 99 private good 9, 22, 43, 50 privilege 39 producer interest 9 professional ethos 104–5 property 26, 71 propriety 8 public choice theory 9, 107, 108 public good 9 public sector management 107–9 public service ethos 108 Puritan political thought 25–6 purposeful behaviour 1, 2, 6 purposive rationality 91 Putnam, Hilary 11 Putterman, Louis 101 radical individualism 104, 107 radicalism 25, 33, 34, 37–8, 39, 43 Raphael, D. D. 49, 50, 68 rational maximiser 8, 9, 94, 95, 101, 107 rationality 86; instrumental 3, 78, 89; purposive 91; strategic 6, 7, 89 real 6 reality, levels of 6 reason 48 reasoning: instrumental 58, 111; practical 59, 63; theoretical 59 reciprocal interests 36, 40 reciprocal trust 105 relational being 105 religious toleration 40 Resourceful, Evaluative, Maximising Model (REMM) 95 retroduction 7, 8 rewards and punishments 94, 96, 99 Ricardo, David 32, 33, 38, 39–40, 41, 42–3, 90 right and wrong, sense of 53, 68 rights 22, 26; natural 36, 38–9 Robbins, L. 11, 22, 23, 96

Roman world 22, 26 Rose, G. 22 Ruskin, John 31 Schelling, T. 78, 79 Seddon, John 102–3, 107–9, 110 self 27–9, 31, 36, 42–3, 56, 62; bundle theory of 52; egoistic 27, 30, 41, 82, 84, 88; Hobbes’ view of 27–9, 30, 49, 50; independent 40; pre-social 30; social 26–7, 29–30, 36, 62, 82; as sovereign 28–9 self-consciousness 62 self-esteem 65 self-interest 3, 6, 7, 24, 27, 29, 41, 50, 53, 63, 65, 70, 83, 84, 85, 87, 89, 101, 111; Durkheim 83; Plato 17, 18, 19, 20; Smith 67, 71, 73, 74 self-love 30, 53, 54, 68, 72, 73 selfishness 67, 84, 104 Sen, Amartya 84–5, 88 Senior, N. 31–2, 33 sentiments, moral 3, 44, 51–7, 68, 68–9, 70, 71, 72, 73 Shaftesbury, Anthony Ashley Cooper, 3rd Earl of 29, 49, 50, 73 shareholder value 96, 97, 98, 100 short run 89, 90 Skarzynski, W. 67, 69 slaves/slavery 4013 Smith, A. L. Macfie 68 Smith, Adam 10, 40, 44, 52–7, 62, 63, 65, 66–74, 82, 88; abstract cosmopolitanism 66; benevolence 73, 74; impartial spectator 55, 56, 71, 74; moral overplus 27, 29–30; selfinterest 67, 71, 73, 74; self-love 68; sympathy 52–3, 54, 55, 56, 57, 68, 69, 72, 73; The Theory of Moral Sentiments 51, 53–4, 55, 56, 67, 68, 69, 70, 71, 72, 73, 74, 86; The Wealth of Nations 66, 67, 68, 69, 70, 71, 72, 73, 74 Smith, Vernon 85–6 sociability, innate 50 social, sense of the 80–1 social contract 47, 63, 84 social facts 82, 83 social order 8–9, 22, 26, 27, 28–9, 35, 41, 44

Index   123 social self 26–7, 29–30, 36, 62, 82 sociality 60 society 45 socioeconomics 80, 84, 85, 88, 101 sociology 81–4, 88 sophists 17, 18, 19, 48 sovereign/sovereignty 21, 22, 28–9, 46–7, 48 spectating 49, 5; see also impartial spectator Speenhamland system 32–3 Spirit 59 standards, setting of 104, 109 state 49, 105; authoritarianism 103; as care/welfare provider 41, 104; as ethical proxy 104; role of 26; supervisory 46, 49 state of nature 45–6, 47, 48 Stephen, Leslie 68 stewardship 13, 14 strategic rationality 6, 7, 89 strategic thinking 79–80, 81 Strauss, L. 13, 14 sub-prime mortgage market 100 subsistence, right to 38–9 substantive morality 2–4, 16, 43 sympathy 4–5, 51–3, 54–5, 56, 57, 67, 68, 69, 70, 71, 73 target setting 104, 108–9 taxation 35, 36, 38, 39 Taylor, C. 2–3 Thatcher, Margaret 105 theoretical reason 59 third-party view 20, 62, 96, 108, 109 Thompson, E. P. 31, 32, 34, 37 toleration, religious 40

trade 36, 38; foreign 66 tradition 34, 36, 39 transcendental concept 59 transcendental realism 6 Trower, Hutches 40 trust 39–40; reciprocal 105 Tversky, Amos 85 underplus 28, 30 unemployment 89 use-value 99, 100 values 87 veneer theory 94, 95 violence 45–6 virtue 26, 27, 50, 57, 104, 105 virtue-ethics 3, 64 voluntarism 37 von Mises, L. 1, 6, 76–7 von Neumann, John 28 wages 31, 32 Walras, Leon 75, 76, 77, 78 war 38 wealth 12, 13 welfare, state 104 Wilkes, John 34 will 58, 64 will-to-life 64–5 Williamson, Oliver 101, 102 Wilson, David 30, 32 Witzum, A. 69, 70, 71, 72 working class 31, 32, 33, 37, 39, 40, 107 Xenophon 8; Economicus 11–17, 23–4

Index   125