Reclaiming Individualism: Perspectives on Public Policy 9781447309093

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Paul Spicker Reclaiming individualism Perspectives on public policy

Reclaiming individualism Perspectives on public policy Paul Spicker

First published in Great Britain in 2013 by The Policy Press University of Bristol Fourth Floor Beacon House Queen’s Road Bristol BS8 1QU UK t: +44 (0)117 331 4054 f: +44 (0)117 331 4093 [email protected] www.policypress.co.uk North America office The Policy Press c/o The University of Chicago Press 1427 East 60th Street Chicago IL 60637 USA t: +1 773 702 7700 f: +1 773-702-9756 [email protected] www.press.uchicago.edu © Paul Spicker 2013 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. A catalog record for this book has been requested. ISBN 978 1 44730 908 6 (hardcover) The right of Paul Spicker to be identified as author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act 1988. All rights reserved: no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without the prior permission of The Policy Press. The statements and opinions contained within this publication are solely those of the author and not of the University of Bristol or The Policy Press. The University of Bristol and The Policy Press disclaim responsibility for any injury to persons or property resulting from any material published in this publication. The Policy Press works to counter discrimination on grounds of gender, race, disability, age and sexuality. Cover design by Andrew Corbett Front cover: image kindly supplied by istock Printed and bound in Great Britain by TJ International, Padstow The Policy Press uses environmentally responsible print partners

Contents List of tables and figures About the author Introduction: Six impossible things before breakfast

v vii 1

Part One: Individualism 1.1 Individualism Moral individualism Methodological individualism Substantive individualism 1.2 Individualism and collectivism Individual and collective discourses

5 5 6 8 13 18 21

Part Two: The moral dimensions of individualism 23 2.1 Individual value and individual rights 23 Dignity, respect and rights 23 Individual rights 26 The equality of persons 29 2.2 Autonomy and self-determination 31 Choice 33 Self-development 36 2.3 Personal responsibility 37 Reward and punishment 39 Individualism and moral judgments 42 2.4 Possessive individualism 44 Property 45 Self-ownership 48 2.5 Individual welfare 51 Individualism and individual welfare 55 Part Three: Methodological individualism and rational 57 self-interest 3.1 Utility and choice 57 Utility 57 Preference and choice 60 Choice and well-being 63 3.2 Self-interest 68 Incentives and motivation 70 3.3 Rationality 73 Indifference curves 75 The maximisation of utility 84 Some methodological problems 87

iii

Reclaiming individualism 3.4 The Pareto principle The problem of inequality

89 93

Part Four: Substantive policy 4.1 Choice and the market How markets reconcile choices The limits to markets Market failure 4.2 More of the market: one solution for everything Structural adjustment The price mechanism Rationing by price 4.3 Personalised services Personalised approaches Personalisation in practice 4.4 The individualisation of social policy

99 99 102 106 110 112 114 118 123 126 128 130 132

Part Five: Individuals and collective action 5.1 Individual and social choices 5.2 Collective action Collective action and the individual The tragedy of the commons 5.3 Solidarity and voluntary collective action Social protection Redistribution and solidarity 5.4 Public services Non-market failure Public services and the individual

139 139 147 148 154 157 160 161 163 165 168

Part Six: Government and public policy 171 6.1 The individual versus the state 171 The minimal state 174 The liberal state 176 6.2 The role of government 179 Democracy 181 The welfare state 185 6.3 The moral agenda 189 Translating moral purposes into practice 191 The objections to government action 194 6.4 Social policy and the individual 195 Reclaiming individualism: individualist public policies 198 Index Index of names

iv

201 204

List of tables and figures Tables 5.1 Distribution of income in three countries 6.1 Social policy on individualist principles

142 200

Figures 3.1 Costs and benefits 3.2 Choices 3.3 Derivation of the indifference curve 3.4 An indifference map 3.5 The limits to indifference curves 3.6 Pareto optimality 4.1 Reconciling the preferences of consumers and producers 4.2 Supply and demand 5.1 Comparative advantage

71 76 77 78 83 91 103 119 152

v

About the author Paul Spicker holds the Grampian Chair of Public Policy at the Robert Gordon University, Aberdeen, and works as Director of the Centre for Public Policy and Management. His research includes studies of poverty, need, disadvantage and service delivery; he has worked as a consultant for a range of agencies in social welfare provision. His books include: • • • • • • • • • • • • • • •

Stigma and social welfare (Croom Helm, 1984) Principles of social welfare (Routledge, 1988) Social housing and the social services (Longmans, 1989) Poverty and social insecurity: concepts and principles (Routledge, 1993) Planning for the needs of people with dementia (with D S Gordon, Avebury, 1997) Social protection: a bilingual glossary (co-editor with J P Révauger, Misson-Recherche, 1998) Social policy in a changing society (with M Mullard, Routledge, 1998) Poverty: a glossary on poverty (co-editor with S A Leguizamon and D Gordon, Zed books, 2007) The welfare state: a general theory (Sage, 2000) Policy analysis for practice: applying social policy (The Policy Press, 2006) Liberty, equality, fraternity (The Policy Press, 2006) The idea of poverty (The Policy Press, 2007) Social policy: themes and approaches (The Policy Press, 2008) The origins of modern welfare (Peter Lang, 2010) How social security works (The Policy Press, 2011)

vii

Introduction

Six impossible things before breakfast Alice laughed: ‘There’s no use trying,’ she said; ‘one can’t believe impossible things.’ ‘I dare say you haven’t had much practice,’ said the Queen. ‘When I was younger, I always did it for half an hour a day. Why, sometimes I’ve believed as many as six impossible things before breakfast.’ Through the looking glass, Chapter 5 This book is about individualist ideas, and how they shape the way we think about public policy. After the Second World War, the United Kingdom introduced a ‘welfare state’, an idealised system that was supposed to offer people the best provision possible on a collective basis. When in the 1960s and 1970s, that collectivism was challenged by the ‘New Right’, a loosely formed movement of economists, politicians and political commentators, their views may have seemed eccentric.1 The ideas have been carried forward by pro-market think tanks, such as the Cato Institute in the United States (US), or the Institute for Economic Affairs and the Adam Smith Institute in the United Kingdom (UK). There are differences between the positions they adopt, but in general they argue that individualism and the protection of individual liberty imply a greater emphasis on market economics, strict limits on the role of the state, respect for property rights and personal moral responsibility for one’s own situation. The same ideas lie behind the ‘Washington Consensus’, which imposed ‘structural adjustment’ on countries in debt, including structures of property ownership, the development of more free markets and the withdrawal of the state from direct economic production.2 1

2

H Glennerster, J Midgley (eds), 1991, The radical right and the welfare state, Brighton: Harvester Wheatsheaf; N Barry, 1987, The New Right, Beckenham: Croom Helm; D S King, 1987, The New Right, Basingstoke: Macmillan. C Gore, 2000, The rise and fall of the Washington Consensus as a paradigm for developing countries, World Development 28 (5) pp 789-804; and see K Donkar, 2002, Structural adjustment and mass poverty in Ghana, in P Townsend, D Gordon (eds) World poverty, Bristol: The Policy Press. 1

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The rationale for these approaches rests in a dominant discourse, associated with economic theory and public choice. Ideas like methodological individualism, rational choice and Pareto optimality have become part of the language in which public policy is routinely discussed. Their influence has increasingly been felt in the development of market-based policies and a strong tendency to individualise institutional responses to problems. The sorts of impossible propositions we are asked to accept are that: • the exercise of choice leads to well-being;3 • rational individuals maximise their utility;4 • welfare is improved if at least one person is better off and no-one has less;5 • markets are uniquely able to satisfy people’s needs;6 • self-interest means that cooperation must break down;7 or that • any collective concept of welfare compromises individual welfare.8 These propositions are not universally accepted – I have been surprised to discover the extent to which individualists have been critical of them – but they have been pervasively influential. They matter because they have been used to justify a series of measures in public policy: individualised responses, choice-based policies, converting public services into market-based organisations and placing limits on the activity of government. In this book I review the arguments for individualist approaches, and consider how far they can and should be taken to apply to issues of public policy. Beyond that, I am hoping to reclaim some of the values that led to individualism being such a force in the first place. There is considerable scope for policies that value people as individuals, that safeguard personal liberty and that protect human dignity, but they

3 4 5 6

7

8

2

R Easterlin, 2001, Income and happiness, Economic Journal 111 pp 465-84. D Winch, 1971, Analytical welfare economics, Harmondsworth: Penguin. J Griffin, 1986, Well-being, Oxford: Oxford University Press, p 147. A Seldon, 1977, Charge!, London:Temple Smith; M Friedman, R Friedman, 1981, Free to choose, Harmondsworth: Penguin. G Hardin, 1968,The tragedy of the commons, in R E Kuenne (ed) (2000) Readings in social welfare, Oxford: Blackwell. L Kaplow, S Shavell, 2001, Any non-welfarist method of policy assessment violates the Pareto principle, Journal of Political Economy 109 (2) pp 281-7.

Introduction

do not look very much like the policies that have come to dominate the debate. I owe thanks to David Byrne, Peter McLaverty and Geraldine Wooley for comments.

3

Part One

Individualism Summary The idea of the independent, self-determining individual has been central to the defence of diversity and difference, but it has also been used to defend the established order. There are three overlapping fields of discourse. Moral individualism is a view of how people should be treated, based on independence, rights, personal liberty and moral responsibility. Methodological individualism is a way of understanding the world, either considering people as individuals, or in its stronger versions denying other, collective forms of analysis. The most important approaches are based either on average individuals or on the model of a rational, self-interested individual. Substantive individualism is a view that there are only individuals, and there is no such thing as society. These three discourses overlap, but they are separable; there is no necessary reason why someone who accepts individualist concepts in one respect should adopt the others.

1.1 Individualism Individualism emerged during the Enlightenment as a challenge to the established order. Feudal societies attributed social roles according to birth, status and obligation. Individualism was a critique of the societies that existed up to then, an assertion of the rights of every person to choose their own course for themselves, and a justification for resistance against oppressive governments. Individuals are independent and self-determining. They are not subject to obligations and restrictions imposed by birth or origin. Individualism is a claim for human dignity, and the rights of people to develop according to their own lights.9 People are possessed of rights that protect them from the interference of others. The discourse of individualism is closely linked with liberal thought. The core principle of liberalism is that individuals have rights. In Locke’s writing, those rights were to life, liberty and ‘estates’ or

9

S Lukes, 1973, Individualism, Oxford: Blackwell. 5

Reclaiming individualism

property;10 in the US Constitution, they became rights to life, liberty and the pursuit of happiness. Liberals argued for civil liberties, including freedom of speech, assembly and worship. Individual rights were basic to a defence of diversity and difference. All of this is still true. Over time, however, individualism has also come to stand for something quite different. The individual has come to represent someone who is selfish and isolated, who has no responsibilities to others. Individualism is at the root of laissez-faire liberalism, standing against state intervention in the operation of the economic market. It is widely used as a defence of the rights of those who have property, against those who have none. In that form, individualism has become a primary argument for the maintenance of privilege. That is another moral argument, but it is often presented as something else. Analytical welfare economics and rational choice theory conventionally present a set of normative arguments about behaviour in the form of models. In principle, the models can be taken as possible courses of action, to which behaviour in practice can be compared; in practice, they are often translated in policy debates into assertions about human conduct. Part of the task of this book is to disentangle positions which bring together description, normative propositions and ideology. Individualism, as this suggests, is not a single way of looking at the world. There are three overlapping fields of discourse: moral, methodological and substantive.

Moral individualism Moral individualism is based in the view that everyone should be treated as if they are an individual. The most basic precept is that people should be treated as being independent of each other. This proposition is so widely held nowadays that it can be difficult to conceive that there are alternatives, but it would not have been accepted for much of the world’s history. In real life, people can hardly be thought of as ‘independent’; they are born into families, households, communities, ethnic groups and nations. It is not good enough to understand moral actions in terms of those collective groups, however, because individuals within those structures may have interests, preferences, wants or needs which are different from others in the same group. Wives are not 10

6

J Locke, 1690, Two treatises of civil government, P Laslett (ed), New York, NY: Mentor, 1965.

Part One: Individualism

represented by their husbands; servants are not represented by their masters; children are not exclusively represented by their parents. Those examples may seem curiously antiquated, but the contrary view would have been widely accepted even as late as the early 20th century, and the subordinate position of women and children is still asserted in some countries. The second moral principle is that individuals have rights – moral principles that are attached to the individual, affecting the way that other people behave towards them. Many societies have been based, not in rights, but in duties – moral responsibilities which apply to people, groups or institutions. Duties are not a sufficient guarantee of the position of each and every person, and the idea of rights has developed to make up the deficiency. Some rights imply duties in other people: ‘claim rights’ are rights held against others, which will require them to fulfil duties towards the person. There are other sorts of rights, however, which do not clearly imply duties (the distinction is made by Hohfeld).11 Powers and immunities are rights which an individual is able to do, and others are not permitted to interfere with. Freedom of speech is a power. The right of parents to raise children as they see fit is an immunity (often the actions taken by parents, including physical restraint or punishment, would not be permitted in other contexts). Privileges are special rights which an individual gains in particular circumstances – for example, a driving licence, or the authority to dispense restricted medicines. The language of rights is not confined to individualism – it plays a major part in socialist thought; but the distinctive contribution of individualism has been the attachment of rights, not to the state, nor to the law, and not to duties, but to the individual who is their subject. The idea of ‘human rights’ is the paradigmatic example: rights which are deemed to adhere to every individual by virtue of their humanity. The third key principle is that individuals are moral actors. ‘Ethical individualism’12 is a narrower concept than moral individualism in the round; it means that individuals make moral decisions, as independent, self-governing persons, and that the responsibility for those decisions rests with the individual. Decisions should be made by people in their own behalf. That position is sometimes justified on the grounds that people are the best judge of their own interests, but again the justification is a moral one rather than a descriptive statement. It is 11

12

W Hohfeld, 1920, Some fundamental legal conceptions as applied in judicial reasoning, New Haven, CT:Yale University Press, obtained at archive.org Lukes, 1973, ch 15. 7

Reclaiming individualism

important that people are treated as if they have the right to make individual decisions, even if in practice they cannot. So, children can take legal cases through a guardian or ‘next friend’, and people are able to assign power of attorney in anticipation of failing capacity to make decisions. The emphasis on individual decisions leads, fairly directly, to the issue of freedom. Saying that a person is a moral actor implies the freedom to act morally, and the possibility of not acting morally. For Dworkin, ‘ethical independence ... follows from the principle of responsibility’.13 A person has to be able to think, to act and to decide; the action has to be capable of being done; and there must not be coercion, either to do it or not to do it, because coercion prevents people from acting with responsibility.14 Autonomy and choice are generally treated as central. A person needs to be self-governing and capable of making independent decisions, and there should be choices available, so that decisions are not fettered. As I have already noted, this constellation of ideas, including freedom, autonomy and choice, is often identified with liberalism, and in the US with republican thought. Liberalism in this sense is broader than individualism alone: it has things to say about the role of government, political institutions and the economy, which go beyond the immediate remit of this chapter (though they will be touched on at several points in this book). For present purposes, it is enough to emphasise that individualism provides liberalism, not just with a mode of discourse, but also with a moral foundation – a normative view of the world based on independent persons possessed of rights, deciding for themselves and making choices. The elements of moral individualism are discussed further in Part Two.

Methodological individualism Methodological individualism extends individualism from being a moral view, and applies it as a way of understanding how the world works. As the name suggests, it is about methods. It takes the proposition that individuals can be understood as independent, autonomous decision makers and moves from that to the analysis of economics, politics and society. There are arguments about methodological individualism which go beyond methodology, but if we confine the discussion in 13

14

8

R Dworkin, 2011, Justice for hedgehogs, Cambridge, MA: Harvard University Press, p 4. P Spicker, 2006, Liberty, equality, fraternity, Bristol: The Policy Press.

Part One: Individualism

the first instance only to ways of understanding human behaviour, it seems to me that there are two main versions. In the weaker form of methodological individualism, individualism is simply an approach to analysis: people are understood as if they were individuals. The position is most clearly demonstrated in economic theory, which analyses the behaviour of producers and consumers in individualistic terms. That is how Schumpeter, who probably invented the term ‘methodological individualism’, presented it. It was not feasible, Schumpeter wrote, to claim that all social processes were attributable to individuals, but methodological individualism was only a way of proceeding, implying no theory about society or the individual.15 In the stronger form, methodological individualism is based in the view that an explanation of individual conduct says everything that is required to understand society. This is the position adopted by Elster, for whom methodological individualism is ‘the doctrine that all social phenomena – their structure and their change – are in principle explicable in ways that only involve individuals – their properties, their goals, their beliefs and their actions’.16 In both its weak and strong variants, methodological individualism is a form of analysis, rather than a set of claims about what a society is. If we consider what people are really like, they are not separate from others or devoid of social relationships – if they are, there is something wrong with them. People are born into families, communities and nations. They are socialised to accept values; they are part of a culture. They have obligations and relationships, which they may have had little say about. They are mutually dependent, not independent. Methodological individualism is sometimes constructed in a way that denies that reality, presenting people as if they were islands. Friedman, for example, supposes a society consisting of ‘a number of independent households – a collection of Robinson Crusoes, as it were’.17 Life is not like that, but that is not the point. There are reasons for examining relationships as if things were different. Part of the argument is moral: that whether or not people are actually acting or developed as individuals, they should be treated as if they are. The other part is analytical: that human behaviour and relationships can be understood 15

J Schumpeter, 1954, A history of economic analysis, London: Allen & Unwin, p 855. J Elster, 1982, Marxism, functionalism and game theory, Theory and Society 11 (4), cited in G Hodgson, 2007, Meanings of methodological individualism, Journal of Economic Methodology 14 (2) pp 211-26, p 216. e.g. M Friedman, 1962, Capitalism and freedom, Chicago, IL: University of Chicago Press, p 13.

16

17

9

Reclaiming individualism

in terms of interaction between independent individuals, and that approaching the issues individualistically offers insights that collective analysis does not. One of the earliest examples of methodological individualism in these terms is Hobbes’ idea of the social contract18 – not a literal account of history, but a metaphor, an explanatory myth to explain the relationships between individuals, society and the state. John Rawls, much later, used a similar mechanism to identify the roots of legitimacy.19 Those are both, incidentally, examples from political science rather than from economics. That is worth pointing out, because much of what has happened subsequently in the literature on ‘public choice’ depends on propositions drawn mainly from economics, rather than methodological individualism alone. The form of methodological individualism found in economics usually depends on an interpretation of social action in terms of the actions of individuals. That, in principle, is what microeconomic theory sets out to do. In its simplest form, microeconomics bases generalisations about economic behaviour – demand, supply, production and so forth – on aggregates. The ‘individuals’ who are referred to are ‘average’, approximating the aggregate behaviour of people in the economy overall. The key advantage of doing things this way is that it becomes possible to disregard, for practical purposes, the inconsistencies, fluctuations and uncertainties that would have to be included in a discussion of the circumstances of real-life individuals. The disadvantage is that averaging can have strange effects. Little points out: The tastes of an average man do not change at all rapidly. He does not experiment very much. His life is not subject to any shocks or crises. ... His position on the social scale will not alter very much. The welfare of his friends and relatives is unlikely to alter greatly. Much more important, he never dies.20 (We might also note: he is a man. If there are any average women, it seems, they are men too.) The justification for averaging in this sense lies in the assumption that differences between individuals can be taken to cancel each other out, leaving a sense that there is a norm. In practice, then, it boils down to 18

19 20

10

T Hobbes, 1651, Leviathan, C B MacPherson (ed), Harmondsworth: Penguin, 1968. J Rawls, 1971, A theory of justice, Oxford: Oxford University Press. I Little, 1957, A critique of welfare economics, Oxford: Oxford University Press, p 49.

Part One: Individualism

much the same thing as discussion of people in aggregate. This sort of aggregation has been used, for example, to explain the mechanisms of supply and demand; both consist of the aggregate actions of multiple actors. However, the process has fundamental weaknesses. The first problem is that aggregates, averages or composites, in their very nature, do not represent the position of individuals; they tend to conceal diversity. Second, the assumption that variations are distributed around a norm is questionable – there might be several norms operating simultaneously – and whether it is not consistent with empirical evidence depends heavily on context. Describing average profiles for the customers of supermarkets is a useful shorthand, but attempts to do the same for benefit claimants have not proved to be helpful for practical purposes21 – there is too much individual variation. If we are talking about other more complex issues, like the health status of the population, then aggregation and averaging may make very little sense at all – for the same reason that the mean number of legs available to a human being is less than two, people’s state of health cannot sensibly be described in terms of variations around a central point. Third, it is not clear that differences in people’s positions can be taken to cancel each other out. There are some circumstances when this is possible. If we are talking about goods for consumption, it might make sense to suggest that the aggregate reflects total demand – though if I cannot get a supply of drinking water, the reassurance that someone in a different city is able to use a hosepipe in the garden is not much help. The problems with the concept of the ‘average person’ have led to the development of an alternative model, based instead on a different kind of theoretical individual, whose behaviour is rational, consistent and self-interested. This approach, which will be discussed further in Part Three, is widely used in analytical welfare economics, public choice and game theory. The two methodologies, based on rational actors or average men, are often taken as directly equivalent, and economics textbooks are liable to hop between the two as if they are saying much the same thing in different ways; but in fact the positions are discrete, inconsistent and probably mutually contradictory. For example, if a rational individual is faced with an incentive, that individual will respond; if an aggregate group of individuals is faced with an incentive, only some will. If decisions are made by a rational individual, that individual is generally assumed to make decisions that are consistent with his preferences; if decisions are taken on the basis of aggregates, 21

A Bryson, D Kasparova, 2003, Profiling benefit claimants in Britain: A feasibility study, DWP Research Report 196, London: Department for Work and Pensions. 11

Reclaiming individualism

the aggregate preference might not be consistent with the preferences of the constituent parts. (Neither of those points may be self-evident. Incentives are discussed in 3.2, and the discrepancy between individual and aggregate preferences is discussed in 5.1.) If the reference to a notional individual, or homo economicus, is justifiable, it is not because it offers a description of the world, but because it offers a methodology – that is, a rationale and an approach to analysis. There are times, however, when the predictions of individualistic theories seem remote from the behaviour of real people: some of the discussions later in this book, about markets, incentives and collaboration, are illustrative. Rational behaviour at the individual level does not necessarily lead to rational aggregate outcomes. Average behaviour does not conform to predictions of rational behaviour: Thaler argues that ‘Behaviour can be (and is often shown in the laboratory to be) purposeful, regular, and yet systematically different from the axioms of economic theory.’22 It is not true on the whole that people can be said to make independent decisions: the decisions of economic actors are directly influenced by a history of production, consumption and existing patterns of behaviour. And it does not follow, because an individual is self-interested, that the same individual will always want more. The character of economic theory used to be represented in terms of ‘positive economics’, as a rational, objective examination of economic behaviour.23 Rational choice theory has similarly been criticised for claiming to be ‘positive’, when it is anything but.24 It is not clear that any theory which offers prescriptions in place of descriptions can be said to be value-neutral. It is probably true, too, to say that methodological individualism is sometimes invested with a moral fervour that sits uncomfortably with its pretensions to be scientific and dispassionate. David Green, from the pro-market think tank Civitas, writes: One of the main problems we face is that some defenders of a market economy think they have to defend formulaic economism and they often do so with the zeal of someone

22

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R Thaler, 1991, Quasi rational economics, New York, NY: Russell Sage Foundation, p 191. e.g. M Friedman, 1953, Essays in positive economics, Chicago, IL: University of Chicago Press. M Petracca, 1991, The rational actor approach to politics, in K Monroe (ed) The economic approach to politics, New York, NY: HarperCollins.

Part One: Individualism

who wants to uphold individual liberty and guard against political absolutism. In truth they are very different ideas.25 The dominant theories rest in a prescriptive view of individual action – they outline what people should do, in idealised circumstances. Some hefty chunks of economic theory, including analytical welfare economics and general equilibrium analysis, are normative rather than descriptive in form. That does not have to be true of methodological individualism, which requires only that interactions are studied from the perspective of the individual. Behavioural economics, a fusion of economics and psychology, describes what people do rather than assuming it. However, it begins from the proposition that it is possible to start with individual behaviour and aggregate it into social phenomena; in that sense it is also methodologically individualist.

Substantive individualism The third form of individualism is sometimes identified with methodological individualism, but there is a critical difference. In an influential essay on methodological individualism, Lukes identifies five main forms: 1. ‘truistic social atomism’, the view that societies are made of human beings; 2. a belief that the only meaningful statements about society are statements about individuals; 3. a view that in society, only individuals are real; 4. an argument that sociological generalisations are impossible; 5. the principle that society must be run for the good of individuals.26 The most obvious thing to say about this list is that it does not seem to be much concerned with methodological individualism in either of the senses in which I have discussed the term so far. Only the second proposition says anything directly about how to analyse society; the fourth could be taken as its converse, but it does it indirectly. The gist of statements (1) and (3) is that society is made up of individuals. Statement (5), a form of moral individualism, says that it ought to be treated that way. These statements mainly represent, then, not methodology, but 25 26

D Green, 2010, Prosperity with principles, London: Civitas, p 38. S Lukes, 1973, Methodological individualism reconsidered, in A Ryan (ed) The philosophy of social explanation, Oxford: Oxford University Press. 13

Reclaiming individualism

individualist understandings of social action – ontological accounts of what society is like, rather than statements about methodology. For Watkins, the ultimate constituents of the social world are individual people who act more or less appropriately in the light of their dispositions and understanding of their situation. Every complex social situation or event is the result of individuals, their dispositions, situations, beliefs, and physical resources and environment.27 This is about the nature of society, rather than the methods used to analyse it. Schumpeter called this position ‘sociological individualism’, to distinguish it from a methodological approach: By sociological individualism we mean the view, widely held in the seventeenth and eighteenth centuries, that the self-governing individual constitutes the ultimate unit of the social sciences and that all social phenomena resolve themselves into decisions and actions of individuals that need not or cannot be further analyzed in terms of superindividual factors.28 I do not think the term ‘sociological’ helps here, so I am going to call it substantive individualism – the argument that individualism is a description of social reality: that what we call ‘society’ is an artefact, and all it really is is a collection of individual human beings. Mrs Thatcher famously argued that ‘there is no such thing as society’.29 That statement chimes in with a long tradition of individualist thought. Jeremy Bentham argued that ‘The community is a fictitious body, composed of the individual persons who are considered as constituting as it were its members. The interest of the community is, then, what? – the sum of the interests of the several members who compose it.’30 Karl Popper argued that 27

28 29

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J Watkins, 1957, Historical explanation in the social sciences, British Journal for the Philosophy of Science, 8 (30) pp 104-17, p 106. J Schumpeter, 1954, A history of economic analysis, London: Allen & Unwin, p 855. M Thatcher, Interview for Women’s Own, at www.margaretthatcher.org/ document/106689 J Bentham, 1789, An introduction to the principles of morals and legislation, in M Warnock (ed) Utilitarianism, Glasgow: Collins, 1962, p 35.

Part One: Individualism

the ‘behaviour’ and the ‘actions’ of collectives, such as states of social groups, must be reduced to the behaviour and actions of human individuals. ... we should never be satisfied with an explanation in terms of so-called ‘collectives’.31 Lukes objects to the suggestion that sociological analysis is impossible or vacuous. Coming from an eminent sociologist, that objection is predictable enough. There are evidently social phenomena, like suicide, crime or social stratification, that need to be understood in social terms as well as from the perspective of individuals. However, Lukes goes too far in accepting the apparent ‘truism’ that a society is made up of individual human beings.32 It is made up of lots of other things besides. A collective decision by the individual human beings who happen to be in a parliament building is not the same as a decision of the Parliament. British Petroleum is not just a collection of human beings; the Royal Opera House, the Church of England or the Scottish Parliament are more than the people who make them up. These are corporate bodies, and they have personalities, both in law and as a matter of social fact.33 Corporations have structures, rules and procedures, which define their social relationships. A society comprises, not just human beings, but also a wide range of collective entities – families, businesses, employers, charities, clubs, government bodies, voluntary societies, schools and universities. The idea that society is made up only of individuals, or that only individuals have any social existence, is at odds with most of our everyday experience. Substantive individualists emphasise the importance of treating people as they are. Gray makes this case for ‘conservative individualism’: We are not, in truth, Mill’s sovereign selves, parading our individuality before an indifferent world: we are born in families, encumbered without our consent by obligations we cannot by voluntary choice renounce. ... Conservative individualists recognise that, before anything else, even

31

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K Popper, 1945, The open society and its enemies, vol 2, London: Routledge & Kegan Paul, pp 87, 91. Lukes, 1973; and see R Bhargava, 1992, Individualism in social science, Oxford: Clarendon Press, pp 5-6. See e.g. R Scruton, 1989, Corporate persons, Proceedings of the Aristotelian Society 63 (supp) pp 239-66. 15

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before freedom, human beings need a home, a nest of institutions and a way of life they feel to be their own.34 This is as much a moral position as it is a description of society. Denying the validity of individual experience can be an excuse for overriding the needs and concerns of individuals. But that can be read as an objection to the generalisations of rationalist methodology as well as to collectivist interpretations. For Hayek, ‘true individualism’ stood in contrast with ‘false, rationalistic individualism’ based on abstract understandings of humanity.35 He condemned the silliest of the common misunderstandings: the belief that individualism postulates (or bases its arguments on the assumption of) the existence of isolated or self-contained individuals, instead of starting from men whose whole nature and character is determined by their existence in society.36 This is not a ‘misunderstanding’; some individualists do exactly that. Friedman does it, for example, when he talks about a ‘collection of Robinson Crusoes’. For a substantive individualist, the representation of people as ‘average individuals’ is difficult to justify – any averaging must disguise the behaviour of individuals, rather than representing the range and diversity of individual choice. Equally, the idea of a typical, ‘rational’ individual is problematic – substantive individualism begins from the proposition that real people are individuals and act differently from each other, whereas rational choice assumes that people in aggregate fall into predictable general patterns of behaviour. If  Hayek’s approach was applied consistently, substantive individualism ought to look very different from methodological individualism. It may be possible to hold to substantive individualism while using aggregate or collective methods for convenience. Many concepts in economics, such as ‘market price’ or ‘money supply’, are not describing the action of individuals directly. The analysis of markets often deals in aggregates and complex processes; they may be compatible with individualism, and they may be reducible to individual actions analytically, but they do not have to refer to methodological individualism conceptually. (Hayek 34 35

36

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J Gray, Beyond the New Right, London: Routledge, pp 52-3. F Hayek, 1948, Individualism and economic order, Chicago, IL: University of Chicago Press, ch 1. Hayek, 1948, p 6.

Part One: Individualism

criticised Friedman’s use of macroeconomic concepts for the same reason: ‘there is no such thing,’ he wrote, ‘as the quantity of money.’37) Ultimately, however, substantive individualism should mistrust general statements about human action; it reserves a space for individuals to be irrational, distinctive and different. Nevertheless, and despite the gap between them, substantive individualism has become closely identified with the strong version of methodological individualism. If the world is made up of individuals, the argument runs, then that is how it should be analysed, and that is how policy should be formed.38 If there is some confusion between methodological and substantive understandings of individualism, one of the contributing factors has been the refusal of some substantive individualists to accept that other ways of looking at the world make any sense at all. When Hayek writes that ‘there is no other way toward an understanding of social phenomena but through our understanding of individual actions directed toward other people and guided by their expected behaviour’,39 he crosses the line into the sort of methodological abstraction that he claims to be condemning. Bhargava refers to the fusion of methodological and substantive views as ‘ontological individualism’, and the doctrine that no other form of analysis is possible as ‘atomism’.40 Arguments may then be methodological and substantive at the same time, in the sense that they offer an individualist analysis that could also be applied to the analysis of social issues. Substantive individualism is only partly about an understanding of society. It is also about a process or way of recognising the decisions of individuals, and a set of principles related to that. Hayek writes: What, then, are the essential characteristics of true individualism? The first thing that should be said is that it is primarily a theory of society, an attempt to understand the forces which determine the social life of man, and only in the second instance a set of political maxims derived from this view of society.41 37

38

39 40 41

F Hayek, cited in D Green, 1987, The New Right, Brighton: Wheatsheaf Books, p 148. See e.g. J Watkins, 1957, The principle of methodological individualism, British Journal for the Philosophy of Science 3 (10) pp 186-9. Hayek, 1948, p 6. Bhargava, 1992, p 40. Hayek, 1948, p 6. 17

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The political maxims may be secondary, but they carry considerable weight in public policy. The belief that individualism relates to people as they really are leads to a series of prescriptions for the way that decisions are made – a set of social processes and policies which allow individuals to express themselves in their own way. They include arguments about choice, markets, collective action and the role of government. Debates on these issues occupy a large part of the subject matter of this book.

1.2 Individualism and collectivism Collectivism is based in the view that people interact, not as individuals, but as part of social groups, such as families, communities, schools, associations, businesses, tribes and nations. Like individualism, collectivism can be represented in three models: moral, methodological and substantive. Moral collectivism considers that groups, can be moral actors, and are worthy of moral status. There have been collectivists who have elevated the position of the group above the position of the individual, but the idea that it might be legitimate to sacrifice the position of an individual for the good of the group has been heavily tainted by its association with Nazism and fascism. Most present-day collectivists would argue only that the interests of groups should be considered as well as the interests of individuals, and that moral principles have to be formed in terms of the social context. The position of minority ethnic groups and the position of social blocs like gender or older people are not effectively protected if they are considered only as individuals. This is the typical position of socialists, who interpret key values of liberty, equality and solidarity in collective social terms rather than strictly in terms of relations between individuals.42 Methodological collectivism is the characteristic mode of operation of sociology, in the same way as methodological individualism is characteristic of microeconomics. One of the central issues in sociology is how to balance the role of agency – the deliberate action of human beings – with what we know about patterns of social behaviour. Durkheim argued that there was a dimension to suicide, ostensibly a most individual act, which could only be understood in social terms.43 Sawyer refers to this as the problem of ‘emergence’, where the actions and interactions of agents produce global patterns of behaviour that are difficult to explain in terms of the component elements.44 One of 42 43 44

18

e.g. Party of European Socialists, Our Values, www.pes.org/en/renew/our-values E Durkheim, 1952, Suicide, London: Routledge & Kegan Paul. R Sawyer, 2005, Social emergence, Cambridge: Cambridge University Press, pp 2-5.

Part One: Individualism

the reasons we are aware of systemic disadvantage in areas like health is because the information has been grouped and processed collectively, using the collective construct of ‘social class’. This can be taken to mean that people are understood as if they are part of collective groups; but if methodological individualism can be understood, in its stronger form, as a view that relationships and social structures are best understood in terms of relationships between individuals, methodological collectivism can equally be taken to claim that relationships between individuals are best understood in terms of social relationships and structures. That is certainly the position of many approaches to social analysis, including feminism and critical theory. In recent years, too, there has been a revival of functionalist approaches to social action. Functionalism is based on the view that patterns of social organisation are developed because they are useful or beneficial to a society. The belief that cooperative behaviour is a product of human evolution,45 and the view that behaviours are maintained because they are beneficial to relatives or kinship networks,46 are examples; they justify collective action in terms of the supposed benefit to the group.47 There are deep flaws in those arguments – values and norms are not all benign, some collective actions work to the detriment of the group, not to their benefit, and cultural adaptations that have been beneficial at one stage are not necessarily beneficial at others. The strongest form of methodological collectivism is holism. Sociological holism, Sawyer explains,‘holds that macrosocial phenomena have primacy over individuals in explaining behaviour and cannot be redefined in terms of individual behaviour’.48 Examples of holistic explanations might include the Marxist analysis of class conflict,49 the concept of institutional racism50 or the idea of structural dependency in development theory;51 each depends on the relationship between social units rather than the individuals who play a part in those units.

45

46 47

48 49 50

51

N Henrich, J Henrich, 2007, Why humans cooperate, Oxford: Oxford University Press. R Dawkins, 1976, The selfish gene, Oxford: Oxford University Press. M Nowak, 2006, Five rules for the evolution of cooperation, Science 314 (5805) pp 1560-3. Sawyer, 2005, p 48. K Marx, F Engels, 1848, The communist manifesto, Harmondsworth: Penguin, 1967. S Carmichael, C Hamilton, 1967, Black power: The politics of liberation in America, New York, NY:Vintage Books, pp 2-6. R Packenham, 1992, The dependency movement: Scholarship and politics in development studies, Cambridge, MA: Harvard University Press. 19

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Substantive collectivism argues that it is social groups that are real, rather than individuals.To an individualist, that statement may seem bizarre. In its strongest form, the proposition can veer into a remote and inhuman quasi-mysticism: examples are Hegel’s view of the conflict of nations as the march of God through the world52 or the Nazi elevation of the Volk and the race over real people. Individualist arguments developed in mediaeval times in reaction to a corporate view of society, where status was ascribed and individuals had no rights or significance in the great order of things. In contemporary society, one of the principal defences of individualism is that the alternative is a repressive authoritarianism, and individualists often stigmatise collectivist arguments in those terms. That is not, however, the only way that collectivism might be expressed, and it has become rare in the modern era. Substantive collectivism is largely formed as an alternative view of human experience, best represented in communitarianism. The central proposition might be that we are social animals; our lives have no meaning or shape outside a social context. Our social relationships define us as people: to a sociologist, Dahrendorf once wrote, a person is the sum of his roles.53 Families, firms and institutions are as real to us as other human beings. Next, social reality is constructed – this is the basic proposition of symbolic interactionism.54 Our understanding of ourselves and other people is always framed in terms of our social relationships. If ‘emergence’ is the process of understanding how individual actions coalesce into collective action,55 its converse is ‘social causation’, where individual behaviour depends on and is conditioned by the social framework. It is not necessary to go so far as ‘causation’ to accept that the character and pattern of collective relationships shape the values and actions of individuals. Living in society is the condition of humanity. People are socialised; they learn language, thought and behaviour. Communitarians argue that our moral values, too, derive from our social position: we are not individuals in isolation, but come into the world as children, brothers or sisters, part of a network of relationships and responsibilities.56 That means, in turn, that we cannot 52

53 54

55 56

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G Hegel, Philosophy of Right, http://socserv.mcmaster.ca/econ/ugcm/3ll3/hegel/ right.pdf p 197 R Dahrendorf, 1973, Homo sociologicus, London: Routledge & Kegan Paul. L Coser, B Rosenberg, 1976, Sociological theory (4th ed), Collier-Macmillan; P Rock, 1979, The making of symbolic interactionism, Basingstoke: Macmillan. R Sawyer, 2001, Emergence in sociology, American Journal of Sociology 3 551-85. A McIntyre, 1981, After virtue, London: Duckworth; D Rasmussen, 1990, Universalism versus communitarianism, Cambridge, MA: MIT Press.

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sensibly talk about issues like freedom, rights or property without placing them in a social context. The terms in which communitarianism is formed are not so different from the claims that Hayek makes for ‘true individualism’;57 both understand individuals in terms of the societies in which they live. That does raise the question as to whether individualist and collectivist concepts are mutually exclusive. The terms seem to represent, rather, alternative approaches to the interpretation of social phenomena, placed somewhere on a spectrum between contrasting extremes. Individualism and collectivism are not genuinely contradictory; they are different perspectives on human experience. There is, or should be, no great difficulty in accepting that people sometimes act as individuals, sometimes in families or businesses, sometimes in social groups; and that such diversity is part of human experience. Individualism without a sense of community is often vacuous; communitarianism without moral individualism can be numbingly repressive.58 Each gains strength from the other. There is often more difficulty in reconciling moral, methodological and substantive accounts of society than there is in accepting insights from individualism and collectivism simultaneously.

Individual and collective discourses A discourse is not a set of shared opinions, but a mode, vocabulary and set of concepts within which ideas are framed. The discourses of moral, methodological and substantive individualism overlap, but they are separable. There is a marked difference between viewing the world through the lens of methodological individualism, by rational choice or in terms of economic man, and considering the position of each individual. Some substantive individualists adopt a strong moral position, an assertion of the independence and value of the person; but others treat individualism as a process, a set of rules for making decisions rather than a commitment to individuals, and if that means that individuals suffer, that has to be borne. Moral, methodological and substantive principles often lead, then, to different conclusions, and different prescriptions. There is no compelling reason why someone who accepts individualist ideas in the terms of one of these three perspectives should adopt either of the others. A moral argument for the individual does not rely on individualist methodology; methodology does not in general commit anyone to substantive or moral outcomes; 57 58

Hayek, 1948, ch 1. W Kymlicka, 1989, Liberalism, community and culture, Oxford: Clarendon Press. 21

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and arguments from the way things are do not produce good moral arguments. Equally, distinctions between different forms of collectivism reflect on individualism only within the spheres to which they relate. Establishing that people live collectively in households and families – a substantive argument – is not a counter either to moral individualism or to a methodological perspective. Moral arguments for collectivism or solidarity are not particularly helpful in interpreting whether an individualist methodology approach is appropriate (though, as I have argued, where that methodology is intrinsically normative, a normative response may be called for). Methodological collectivism, of the sort favoured by Durkheim59 or Parsons,60 can offer valuable insights into society, but it does not address the moral arguments to respect each individual as a separate entity. Despite the differences, the three perspectives are not always distinguished in practice. Some writers happily segué between individualism in its different varieties, seeing no distinction between the message given by moral, methodological and substantive approaches. Kenneth Arrow, no mean individualist himself, takes Samuelson and Hayek to task for eliding moral and substantive arguments.61 Conversely, many of the writers who find unbridled individualism indigestible are informed as much by moral as by methodological concerns.62 I would not describe myself personally as an individualist or a collectivist. In epistemological terms, I see no contradiction between the statements that individual decisions produce social effects and that society shapes people; both can be true. (That makes me, in Sawyer’s terms, a ‘dualist’.63) In moral terms, I consider that individual freedom and collective responsibility both have value, and each is diminished without the other. My primary purpose in writing this book is to take a normative position. It is not possible to do that, however, without recognising and dealing with the methodological and substantive arguments.

59 60 61

62

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E Durkheim, 1952, Suicide, London: Routledge & Kegan Paul. T Parsons, 1951, The social system, London: Routledge & Kegan Paul, 1970. K Arrow, 1994, Methodological individualism and social knowledge, American Economic Review 84 (2) pp 1-9. e.g. R Wolff, 1990, Methodological individualism and Marx, Canadian Journal of Philosophy 20 (4) pp 469-86, pp 472-3; Petracca, 1991. R Sawyer, 2005, Social emergence, Cambridge: Cambridge University Press, ch 5.

Part Two

The moral dimensions of individualism Summary Moral individualism stresses the value of the individual, and the idea of the individual as an autonomous, self-determining, free agent, but there are many interpretations of what this means. Some interpretations have emphasised the importance of personal choice and the responsibility of individuals as moral actors; some writers consider property rights to be paramount. The welfare of individuals is sometimes identified with choice, and sometimes with rights, but it is more complex than either; the interests of individuals are closely affected by their relationships with other people.

2.1 Individual value and individual rights Dignity, respect and rights Moral individualism depends on the premise, not just that each person is an individual, but also that each individual is of value. One of the key roles of individualism has been to assert that every person matters. Doctrines that dismiss, disregard or diminish the individual – caste, racism or fascism – are mistaken, oppressive and morally wrong. The idea of value is expressed in different ways – that individuals have human dignity, that they are deserving of respect and that they have rights. Of these three, the idea of dignity seems to be the term that is least often discussed. Nordenfeldt distinguishes four types of dignity: • dignity as merit – that is, dignity relating to position or status; • dignity as moral stature – a person’s moral standing or worth, including the respect of others and self-respect; • dignity of identity – ‘the dignity we attached to ourselves as integrated and autonomous persons’;

23

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• Menschenwürde or human worth – the sense of equal human value.64 Part of this relates to ‘aristocratic’ dignity, which is not what individualists are concerned with; a stress on comportment harks back to the feudal idea that each person had a status, and that they had to be related in a way appropriate to that status. Rather, they emphasise universal dignity – the Kantian idea that each person has ‘unconditional and incomparable worth’.65 Some writers have been critical of the idea of dignity – it has been dismissed as redundant, in so far as it can be reduced to other issues like autonomy or respect, or vacuous.66 Its purpose becomes clearer when it is violated, as it often is for older people and people with disabilities. In one case in the UK Supreme Court, a former ballerina who had suffered a stroke was denied night-time care by the local authority, and told she must use incontinence pads instead of being helped out of bed, although she is not incontinent. The case was supported by the Equality and Human Rights Commission, rightly in my view; the effect of withdrawing support was an affront to dignity.67 To be dignified, Killmister argues, is to be able to live according to one’s personal standards. She suggests that dignity ‘is both a (near) universal capacity that grounds the value of human life ... and it serves to articulate which actions are required for that capacity to be met, in particular the absence of humiliation’.68 A second formulation lies in the idea of respect for persons. Downie and Telfer suggest that the principle rests on finding, in each person, certain attributes – ‘a capacity for self-determination, and a capacity for forming and pursuing ideal values’.69 I do not think that that way of expressing things is wholly satisfactory, because if respect is dependent on capacity, some people – such as those with severe dementia or very severe intellectual and developmental disabilities – do not have it, and it would follow that they should not be given any respect. It is possible to find, even for the people with most limited capacities, something 64 65

66

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L Nordenfeldt, 2004,The varieties of dignity, Health Care Analysis 12 (2) pp 69-81. I Kant, 1785, Groundwork of the metaphysics of morals, L. Denis (ed), Peterborough, ON: Broadview Press, 2005, section 79. R Macklin, 2003, Dignity is a useless concept, British Medical Journal 327 (7429) pp 1419-20. The Daily Telegraph, 2011, Ballerina loses right to overnight carer to help her use bathroom, 6 July. S Killmister, 2010, Dignity: not such a useless concept, Journal of Medical Ethics 36 pp 160-4, p 164. R Downie, E Telfer, 1980, Caring and curing, London: Methuen, p 38.

Part Two: The moral dimensions of individualism

to value, but conceptually the approach has two serious disadvantages. One is ‘perfectionism’ – the moral principle that some states of being are better than others.70 We need that principle if we are ever to do things better, but it does imply that people ought to try to change, and they may not have the option. The other problem is that respect is relative – if it depends on an evaluation, then some evaluations will be more favourable than others, and some will be negative.71 Respect, in these forms, cannot be a universal value. It probably makes more sense to see respect for persons as a moral injunction – it refers to the way that we should treat other people, and does not reflect on the merits that they themselves display. Probably the most common approach, however, lies in the assertion of individual rights. Rights are rules governing social relationships; more than that, they are rules that are based in the individual, person or group that holds them. Rights are primarily about the way that other people should behave towards to the person who holds the rights. Rights have been described by some writers as corresponding with duties, but people can have duties to someone else without that other person having rights – for example, the duties of a charitable trustee to the object of charity. Besides, some important rights, including the classic civil rights of speech, assembly and worship, are negative in form: they do actually not require anyone else to do anything, and nothing is required of anyone else until they are doing something which stands to violate them, when they have to desist. The belief that ‘individuals have rights’ is central to liberal theory. It means that the moral conduct of other people towards each individual is based in the position of that individual. (It is possible in theory to construct a model of individualism that does not rely on that proposition – the relations between individuals could all be seen as duties to God rather than to the people affected. However, this would be unusual.) Saying that people have rights is not a description of the way that people are; it is a normative statement, concerned with how people should be treated. Among the best-known claims to rights are international declarations – the United Nations (UN) Declaration of Human Rights and the European Convention on Human Rights – which offer individuals a range of protections, including rights to security and the protection of political institutions. The UN Declaration includes ‘the economic, social and cultural rights indispensable for [the individual’s] dignity and the free development of 70 71

V Haksar, 1979, Equality, liberty and perfectionism, Oxford: Oxford University Press. D Watson, 1980, Caring for strangers, London: Routledge & Kegan Paul. 25

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his personality’72 and ‘a standard of living adequate for the health and well-being of himself and his family, including food, clothing, housing and medical care and necessary social services’.73 Some fundamental rights can be seen as liberties. They include: • • • •

protection from crime; protection from unsafe or unhealthy environments; the avoidance of discrimination; legal security, in the protection of citizens from arrest or legal harassment, and the avoidance of injustice.

But it is difficult to see how a standard of living, food, housing or medical care could be secured without ‘claim rights’ – rights that require positive action by others.

Individual rights Individualism has been associated with a very wide range of rights, and rather than just listing them, it is helpful to establish some broad categories. First is the distinction between general rights and particular rights. General rights apply to everyone, or at least everyone in a similar situation – the right to a family life, the right to freedom of worship, the right to a fair trial. The human rights found in international declarations, like rights to privacy and personal security, are general rights; so are many civil rights, like the right to free speech or the ability to obtain government freedom of worship; and a society can have further general rights, like universal benefits, health care or even rights to hold a bank account. Particular rights, by contrast, apply only to specific, identifiable individuals. They are held by virtue of a particular relationship or circumstance. If I have a contract with you, I hold certain rights under the contract; that is a particular right, which applies to me and only to me. Particular rights can be negotiated; usually they can be traded and alienated; people can choose whether or not to exercise them; and they are usually conditional. The rights that husband and wife gain in marriage are particular rights. Pensions arrangements are often based in particular rights, depending on the contributions and terms on which people have worked or contributed. Second, there is a difference between rights which are alienable and those which are inalienable. One of the theoretical claims made 72 73

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UN Declaration of Human Rights, Article 22. UN Declaration of Human Rights, Article 25 (1).

Part Two: The moral dimensions of individualism

about rights is that rights are rules which people can choose to exercise or not – this is called the ‘will’ theory of rights.74 That applies, for example, to physical contact, which is not permissible without the consent of the person who is touched; to labour, which can be hired or sold; and to many particular rights, which can be transferred to third parties. These are alienable rights. There are those who think that all rights must be alienable: Nelson thinks that ‘any right ... may always be voluntarily given up by the individual who possesses it’.75 But people who give up their rights do not have them any more. To say that rights are inalienable is to say that a person cannot choose not to have them. The right to life is still, for most practical purposes, inalienable; people are no longer charged with committing a criminal offence if they attempt suicide, but they are not able to do what people can do in relation to lawful acts, such as buying or selling services, advising or advertising. People are not free to sell their children, or sell themselves into slavery. There are good reasons why these rights are inalienable; the effect of choosing to die or choosing slavery is to deny all future freedoms, and it is not generally possible to justify the loss of rights in terms of freedom. (The main exception in relation to suicide is suicide when facing terminal illness, because that is not a loss of future freedom.) Third, there is a distinction between moral and legal rights. There are moral rights, like the right of older people to be treated with respect, which have little or no legal protection, but the existence of some legal protection or sanction can be basic to the operation of rights in practice. Among the most basic rights of citizenship are rights of redress – the ability to obtain access to justice and to have violations of rights sanctioned or stopped. The influence of individualism on Western democracies has been profound, and it is unusual to find legal systems that are inconsistent with any individual rights. That may be true in some states – for example, in the restriction of minorities, the suppression of religions, the enforcement of ascribed status, the subordinate position of women or the denial of status needed to hold property – but they cannot be described as liberal democracies. Moral individualism is an ethical position, and the question of whether or not rights exist in law is secondary to the question of whether or not people are being treated as individuals.

74 75

L Wenar, 2005, The nature of rights, Philosophy and Public Affairs 33 (3) pp 223-53. J Nelson, 1989, Are there inalienable rights?, Philosophy 64 (250) pp 519-24. 27

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That seems to imply that the rights people have are distinguishable from anything expressed in law. Bentham dismissed the idea that people had inherent rights as ‘nonsense on stilts’.76 The difficulty of taking that position is that without some sense that individuals have moral rights that others are bound to respect, it is impossible to attach any moral weight to individuals at all. It is not enough, for example, to say that rights reside in the agreements that individuals make; that is a reason for those individuals to respect them, but not for anyone else to do so. If individuals have a moral status, and that moral status inheres in them as individuals, then they have rights – rights are moral rules that inhere in the person that they relate to. Freedom itself, if it has any moral value, is a form of right in those terms.77 The idea of rights is more or less essential to moral individualism; it is difficult to imagine a moral sense of the individual without it. That leaves open the question, however, of what the rights cover. Neo-liberals such as Nozick78 and Hayek79 are generally prepared to say that individuals have rights, but the rights they recognise are very limited. They include some general rights, including freedom from coercion and economic rights, and some particular ones, especially rights in property; but they more rarely extend to some of the more complex individual rights, such as rights against exploitation. The issue is not that these writers are not individualists, but that they are individualists only to the limited extent that they specify. There is little reason to be either so restrictive or so prescriptive. The neo-liberal model seems to play down the civil and political rights which have been fundamental to individualism in practice – rights such as the rights of assembly, freedom of speech, freedom of religion and voting. With the main exception of rights to ownership, it does not seem to extend to basic economic rights, including rights in exchange, rights in employment and rights in the regulation of contracts. And it is likely to duck altogether social rights, such as the position of people in relation to education, mutual insurance and support in old age. These rights do not have to be prescribed uniformly for everyone. They differ in different societies, because they reflect different negotiations and settlements, often based in voluntary action.80 Individualism does 76 77 78 79 80

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J Bentham, 1792, Anarchical fallacies, obtained at oll.libertyfund.org/title/1921/114226 H Hart, 1955, Are there any natural rights?, Philosophical Review 64 pp 175-91. R Nozick, 1974, Anarchy, state and utopia, Oxford: Blackwell, p 1. F Hayek, 1960, The constitution of liberty, London: Routledge & Kegan Paul. P Baldwin, 1990, The politics of social solidarity, Cambridge: Cambridge University Press.

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imply that people have rights, but it does not imply that those rights should be manifest in the same way regardless of the social context.

The equality of persons Ideas of equality have been an important part of the constellation of individualist ideas throughout their history. The starting point is a sense of the equality of persons. The basic argument for equality begins with an argument for consistency: that people in similar circumstances should be treated similarly. Disadvantage on the basis of irrelevant criteria – such as birth, race or gender – is consequently illegitimate. Individualism is founded, Lukes argues,81 in a sense of human dignity, of the value and worth of each and every person. The US Constitution opens: We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. The point of saying that was not just to assert a moral and religious position, though that is part of the purpose; it is to deny the legitimacy of the opposite view, which is that people were born with a status and role appropriate to their station in life. Tocqueville refers to this as ‘l’égalité de conditions’, ‘condition’ meaning something like one’s station in life: No-one being different from his peers, no-one can exercise tyrannical power; men will be perfectly free, because they are wholly equal; and they will be wholly equal because they are perfectly free. It is towards this ideal that democratic peoples aim.82 Next, there is an equality of rights. This does not mean that everyone is entitled to the same things; it means that people are not advantaged or disadvantaged in the character of their entitlements. A claim of right asserts that others have obligations towards the person holding the right, or that the person is able to do something without let or 81 82

S. Lukes, 1973, Individualism, Oxford: Blackwell. A de Tocqueville, 1835, De la démocratie en Amérique, Paris: Robert Laffont, 1986, p 493. 29

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hindrance. If anyone can make a claim of right, a claim can be made by others in the same position. The most basic right, Hart argues, is freedom,83 but other rights – such as rights to life, security, property or due process – are widely accepted, and the principle of equality – that no-one should be disadvantaged in the process – is part of that acceptance. Then there is equality of citizenship. Citizenship is understood in many ways: it can be taken to refer to membership of a political community, which identifies the status of a person within the context of a particular legal, social and political system. The status of citizenship is important for the realisation of a person’s position, and access to the means of enforcement in a society; it has been described as ‘the right to have rights’.84 These three positions are the ones which have been central to individualism in the past. There are further conceptions and expressions of equality, but their connection to individualism is less direct and more contentious. They include the equality that comes from access to the conditions of civilisation, advocated for example by Tawney;85 and equality of welfare, manifest for example in calls for the eradication of poverty – one of Milton Friedman’s key defences of market ‘capitalism’ is that it produces a more equal distribution than many alternatives.86 Inequality in resources has a profound impact on welfare. The most basic problem is that some people have very restricted entitlements, implying a limited ability to participate in their society.87 In the most extreme cases, people are not only disadvantaged but effectively cut off, or excluded, from the basic structures that are needed to function in society:88 a person who is homeless and sleeping rough will have difficulties in gaining access to employment or income, but without housing they may also not be able to store food, to get access to health care or to basic communications. The New Right – or at least, the substantive liberal individualists in the New Right – are not anti-egalitarian. They generally accept egalitarian premises like the dignity of the individual, and most would consider discrimination on the grounds of race or other ascribed 83 84

85 86

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H Hart, 1955, Are there any natural rights?, Philosophical Review 64 pp 175-91. H Arendt, 1951, The origins of totalitarianism, New York, NY: Harcourt, Brace, Jovanovich, p 296. R H Tawney, 1930, Equality, London: Allen & Unwin. M Friedman, 1962, Capitalism and freedom, Chicago, IL: University of Chicago Press, ch 10. A Sen, 1999, Development as freedom, Oxford: Clarendon Press. S Paugam, 1993, La disqualification sociale, Paris: Presses Universitaires de France.

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characteristics to be indefensible – a position which would have enlisted them among radicals in previous centuries. They are rather, Rae argues, narrowly egalitarian – choosing some forms of resistance to disadvantage while denying the legitimacy of others.89 There is little obvious reason to accept such restrictions. Nothing in individualism, whether it is treated as a moral doctrine or as a method, implies that there is no room for rights, dignity or basic standards.

2.2 Autonomy and self-determination Individual autonomy lies at the heart of many individualist analyses. In Kant’s work, it is seen as fundamental to dignity and respect.90 Both methodological and substantive individualism begin from the premise that individuals are autonomous actors, who make independent decisions; moral individualism, from the premise that they should be treated on that basis. Being self-determining means that people have the capacity to make decisions, and that they do so. Being independent means that their decisions are their decisions alone; they are not attributable to domination or control by anyone else. Autonomy is a combination of self-determination and independence – autonomous people are self-directing, and make their own decisions. Put in these terms, the claim that people are autonomous actors may seem far too demanding. People do not make completely independent decisions: their actions are conditioned by their socialisation, their circumstances and the circumstances of those around them. They determine things for themselves at some times, but at others their capacity may be limited, they may be ill-informed, they may be deciding under constraints or the behaviour of others might have shaped what decision they make. None of those observations, however, is a fundamental objection to the moral concept of the self-determining individual. Even if people do not make their own decisions, there is a strong moral argument for treating them as if they do. Some of the most important moral issues occur precisely because the people who are affected are particularly vulnerable or disadvantaged, and the reason why they need the protection of moral individualism is that they cannot exercise autonomy in their own right. The idea that individuals make independent decisions is not a description, but a normative statement: it explains how people ought to be treated.

89 90

S Paugam, 1993, La disqualification sociale, Paris: Presses Universitaires de France. I Kant, 1785. 31

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The idea of autonomy is bound up with the idea of freedom. Before the development of modern society, freedom used to refer to a status: the free man (and it would be a man) was someone who had the right to make decisions for himself, while a slave would be subject to the power of another person. Freedom consisted in whether or not a person had the status to decide, and a lack of freedom would be marked by relations of dependence.91 A free person was, then, one who was not subject to arbitrary power. In the modern era, after Hobbes, freedom came to be seen not as a status, but as a way of thinking about action. Freedom in contemporary writing has a range of meanings, including both the absence of restraint – in Hobhouse’s terms,‘negative’ freedom – and the power to act, which is ‘positive’ freedom.92 (The distinction between negative and positive freedom is commonly attributed to Berlin’s much later essay,93 but Berlin is actually making a different distinction.) The separation of negative and positive freedom is difficult to maintain, and in a famous essay, MacCallum argues that all freedom must be a triadic concept.94 Freedom has to have a negative element – the absence of impediments; a positive element, in terms of the capacity to act; and a psychological element, which is the ability to decide. All freedom, then, is the freedom of a person, from restraint, to do something. Autonomy focuses on the second and third elements of this formula. The focus in a discussion of freedom can be put on the absence of restraint, or non-interference; autonomy calls for something else. Autonomous individuals need to have both the capacity to make decisions, or psychological freedom, and the right to decide. This is close to the idea that Berlin identified with his distinctive understanding of ‘positive freedom’:95 the sense that freedom implies self-mastery, being in control of one’s own circumstances and decisions. Selfdetermination, in this account, implies that people have the right to make their own decisions; that they are the best judge of their own welfare; and that where people make decisions, those decisions must

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P Pettit, 1997, Republicanism, Oxford: Clarendon Press; Q Skinner, 1998, Liberty before liberalism, Cambridge: Cambridge University Press; Skinner, 2008, Freedom as the absence of arbitrary power, in C Laborde, J Maynor (eds) Republicanism and political theory, Oxford: Blackwell. L T Hobhouse, 1918, The metaphysical theory of the state, at http://socserv.mcmaster. ca/~econ/ugcm/3113/hobhouse/liberalism.pdf I Berlin, 1969, Four essays on liberty, Oxford: Oxford University Press. G MacCallum, 1967, Negative and positive freedom, Philosophical Review 76 pp 312-34. Berlin, 1969.

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be respected. When every person has the opportunity to decide, the accumulated effect is to increase the satisfaction (or utility) of everyone. The idea of freedom appeals to the same kind of moral compass as the idea of autonomy, but the implications can be strikingly different. Freedom has limits. Typically, individual freedom is considered to end at the point where it damages the freedom of another person. J S Mill suggests that ‘the only purpose for which power can rightfully be exercised over any member of a civilised community, against his will, is to prevent harm to others’.96 Left at that, the principle would not go far enough. If the only reason people can be stopped from acting is the harm they cause, then those who interfere with others in order to do good are doing nothing wrong – and that is a position that Mill expressly tries to avoid. The individual cannot rightfully be compelled to do or forbear because it will be better for him to do so, because it will make him happier, because, in the opinion of others, to do so would be wise, or even right.97 The issue, Feinberg suggests, is whether an activity affects the interests of another person, not whether the action causes harm.98 The discussion of autonomy takes us in a subtly different direction. People do not become autonomous simply because others are not interfering with them. In cases where people lack capacity or independence – for example, people with mental health problems or people with intellectual disabilities – moral individualism implies not that their views should be disregarded, but that steps should be taken to enhance capacity. An emphasis on autonomy translates, in policy terms, into the development of policies that give people control over their own lives, and on enabling, facilitating and empowering people.

Choice The idea of choice has been one of the central elements in the individualist critique of the welfare state, and several different aspects of choice will be considered in the course of this book. The place to begin, however, is the point at which the arguments for developing choice 96

97 98

J S Mill, 1859, On liberty, in M Warnock (ed) Utilitarianism, Glasgow: Collins, 1962, p 135. Mill, 1859, p 135. J Feinberg, 1973, Social philosophy, Englewood Cliffs, NJ: Prentice-Hall, p 26. 33

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are strongest – the identification of choice with freedom, autonomy and self-determination. ‘The only freedom worth the name,’ Mill wrote, ‘is that of pursuing our own good in our own way.’99 ‘Choice’ is often used as a shorthand for that idea. If autonomy is based on the right and capacity to make decisions for oneself, ‘choice’ stands for the process through which those decisions are made. Choosing suggests a selection between alternatives; people choose different courses of action.100 This can be translated into the general proposition, that freedom is dependent on choice. The process of choice, or decision making, is necessary for the action to take place. Raz writes:‘Autonomy is exercised through choice, and choice requires a variety of options to choose from.’101 Greater choice implies greater autonomy; less choice implies less autonomy. To choose, in this sense, is to make a decision. Calling this ‘choice’, however, is not a good way of describing what people are doing. ‘Choosing’, Dan-Cohen argues, suggests a selection between alternatives; when people ‘choose’ a partner or a career, they are not so much making choices from a set of alternatives as ‘electing’, forming intentions, making decisions about how to proceed, becoming the authors of their own lives. Dan-Cohen identifies this kind of intentional action with ‘will’;102 another way of describing it might be ‘conation’, the mental process by which intention, volition or desire can be translated into action. (The importance of the capacity becomes clearest when people do not have it; impaired conation is one of the elements of severe dementia.) An emphasis on conation implies a concern with the positive interpretation of freedom, the power to act. Inconsistently, perhaps, the same liberal writers who emphasise the virtues of choice, writers like Hayek or Friedman, tend to also to shy away from a positive understanding of freedom. Freedom in their view is strictly negative; it is only based in the absence of interference or coercion, not in being self-determining or having choices.103 This leads some liberals to deny that people’s capacity to act matters for freedom – which would

99 100

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J S Mill, 1859, p 138. e.g. P Pettit, 2008, Republican freedom, in C Laborde, J Manor (eds) Republicanism and political theory, Oxford: Blackwell, pp 104-6. J Raz, 1986, The morality of freedom, Oxford: Oxford University Press, p 398. M Dan-Cohen, 2002, Harmful thoughts, Princeton, NJ: Princeton University Press, ch 4. F Hayek, 1960, The constitution of liberty, London: Routledge & Kegan Paul.

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undermine any claim that freedom is about having choices. Berlin writes: It is argued, very plausibly, that if a man is too poor to afford something on which there is no legal ban – a loaf of bread, a journey round the world, resource to the law courts – he is as little free to have it as he would be if it were forbidden him by law. ... If my poverty were a kind of disease, which prevented me from buying bread ... as lameness prevents me from running, this inability would not naturally be described as a lack of freedom ...104 A man who is trapped on a mountain, Hayek writes, is still free, because no-one is coercing him.105 By extension, if the public authorities come along, in the form of mountain rescue, and lift him off the mountain without asking, that is an infringement of his liberty. That is a very strange argument. The effect of limited capacity must mean that people have less choice, or no choice at all; someone who is unable to act is indeed not free to act. Even if one takes a strictly negative view of freedom, choice matters. The fewer options a person has, the more that person is vulnerable to coercion. Homeless people are not free, Waldron argues, because they are denied choices; they are forbidden from sitting, walking, washing or relieving themselves in circumstances where other people can act.106 Denying people one option when they have several still leaves scope for free action; denying one option when they have only two leaves no choice at all. If freedom depends in any way on the options that are open to people, leaving capacity out of the discussion makes no sense. Sen comments that there is no obvious reason to attribute any high value to people’s freedom to act if we do not equally attribute a high value to their capacity to do it.107 If choice is a primary value, it is because it expresses the same thing that freedom does – the capacity to take action for oneself. People who are free are able to decide things for themselves – for example, whether they do things or do not do them.

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Berlin, 1969, pp 122-3. e.g. Hayek, 1960, pp 12-3. J Waldron, 1997, Homelessness and the issue of freedom, in R Goodin, P Pettit (eds) Contemporary political philosophy, Oxford: Blackwell. A Sen, 1984, Rights and capabilities, in Resources, values and development, Oxford: Blackwell. 35

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Having and making choices in this sense is fundamental to the exercise of freedom, rights and individuality.

Self-development Beyond autonomy, Lukes identifies self-development as a basic value in individualist thought.108 It has two principal aspects. It implies, first, that people should be the authors of their own lives. When Ulrich Beck writes about ‘individualisation’ in sociology, his main focus is on the ways in which people construct their identities as individuals through ‘the disembedding and … re-embedding of industrial society ways of life by new ones, in which the individual must produce, stage and cobble together their biographies themselves’.109 That is also the sense in which the term is found in writing about social work.110 People make themselves, through their choices, decisions about their life-style and interpretations of their actions. Part of the argument for the ‘right to fail’111 is that people learn and grow through their mistakes; if people are never allowed to make bad decisions, they will never learn to make good ones. Second, self-development means that people should be able to develop their talents.112 This is the model of ‘liberal education’, in which each person needs to be given the opportunity to become what they are capable of becoming. For people to be autonomous, self-determining actors, they need to have the capacity to exercise their judgment. That presumes a certain degree of mental and social competence. Where people’s capacity and competence is limited, there is not a good case for denying them future autonomy; on the contrary, it is just in those circumstances where autonomy needs most to be protected and developed. If people have a limited capacity to decide, their decisions must be facilitated; the principle of empowerment can be taken in several ways, but at an individual level it is about the development of autonomy and enabling people to have a say. 108 109

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S Lukes, 1973, Individualism, Oxford: Blackwell U Beck, 1994, The reinvention of politics, in U Beck, A Giddens, S Lash (eds) Reflexive modernization, Cambridge: Polity Press, p 13. H Ferguson, 2001, Social work, individualisation and life politics, British Journal of Social Work 31 (1) pp 41-55; C Ray, 2005, Individualisation and the third age, Newcastle: University of Newcastle.. D Soyer, 1975, The right to fail, in F McDermott (ed) Self determination in social work, London: Routledge & Kegan Paul. Lukes, 1973, ch 10.

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The emphasis on capacity leads however to an apparent paradox: if people need to become able to decide for themselves, others may need to intervene to make it possible. The position of children is the most obvious. Children need to be educated, and in most developed societies, that has led to universal, compulsory schooling. The same principle guides provision in other fields. If a person is suffering from a mental disorder, there are circumstances where that person can be subject to compulsory medical treatment. It is not generally enough to argue that the person’s ability to make decisions is impaired – there is a different kind of provision for incapacity, mainly concerned with the management of property; compulsory mental treatment is restricted to the circumstances where a person is a danger to self or others, and in the UK, the condition should be one that is capable of being treated. Leaving aside the protection of others, which is a different kind of argument, the justification for confining and treating someone with a mental disorder on the grounds that they are a danger to themselves is that such treatment is needed to protect the person’s autonomy. Empowerment and the promotion of autonomy do not imply noninterference; they may demand quite the reverse. These issues can be difficult to negotiate, and that points to the potential for differences of interpretation and opinion about the force of moral individualism. For some writers, moral individualism implies acceptance of the status quo and detachment from any consideration of the consequences of people’s independent decisions. For others, moral individualism implies respect for persons, empowerment and protection of the vulnerable. Because they rely on a common ethical foundation, there is no inconsistency in applying both views at the same time – even if they can point in different directions.

2.3 Personal responsibility If individuals are moral actors, they have moral responsibility; if they have moral responsibility, they must accept the moral consequences of their actions; and if they have control over their own lives, they must accept the consequences of that control. The most controversial part of that argument is the final step, which is based in the principle of autonomy. It seems to extend the concept of ‘responsibility’ beyond moral actions, or moral consequences. Where people make bad decisions, they need to take the consequences of those decisions. Where they fail to take action, they can be criticised for their inaction. Individualist morality is not only about asserting people’s rights; it is just as likely to blame those who fail to act appropriately. There are 37

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two moral problems with that position. The first is that failing to act appropriately is not the same thing as acting immorally. The right to fail leads to people suffering potentially severe consequences for minor lapses, for misjudgments or just for accepting risks that go bad. Failing in business, becoming unemployed or going through a divorce are not moral offences – but they can be treated as if they were. There is a tendency to blame people for the harms they experience. The second is that the consequences are often disproportionate to the action. Having a child is not a serious moral offence, but it can lead to extended periods of deprivation. Failing to insure against all medical risks may be unwise, but it carries a grim penalty for those who take the chance and lose. Becoming homeless can be fatal. Explanations for social problems, like poverty, educational disadvantage or mental illness, are often classified in the literature as ‘pathological’ or ‘structural’.113 Pathological explanations are those which locate the explanation in the circumstances where the problem happens, or more usually in the people the problem happens to. So, if someone is unemployed, it is because that person lacks skills, or because the person has not tried hard enough to find work. If a child fails to flourish at school, it is assumed to be because that child has some genetic defect, the parents have failed to give the child a good environment to learn or the child is insufficiently motivated. The ‘cycle of deprivation’ is a pathological explanation of poverty, attributing poverty to the behaviour, character and weaknesses of the family where the cycle is supposed to occur.114 Structural explanations, by contrast, attribute the causes of problems to the structure of the society or the economy where they occur. If someone is unemployed, it may well be that the economy is not providing enough jobs for everyone. If people are disadvantaged educationally, it may be because poorer areas are allocated poor facilities or the schools encourage low expectations; it is possible to show fairly consistently that educational opportunity is conditioned by the structure of class and access to opportunity. Individualistic explanations tend to be pathological, partly because they are often focused on particular individuals, and partly because of the association of individualism with moral judgment. At the same time, the identification with pathology is not perfect; there are some pathological explanations which are based in the characteristics of groups (such as families or ‘races’), and some structural explanations 113

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R Holman, 1978, Poverty: Explanations for deprivation, Oxford: Martin Robertson; P Spicker, 2007, The idea of poverty, Bristol: The Policy Press. M Brown, N Madge, 1982, Despite the welfare state, London: Heinemann.

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which are explicable in individualistic terms (such as the behaviour of monopoly suppliers). Pathological and structural explanations are not mutually exclusive. In any race, some runners will go faster than others; some will win, some will lose; but we also need to ask why people are running a race. People who are without work tend to be less skilled, more likely to live in areas of high unemployment while refusing to move, more likely to be disabled and more likely to be long-term benefit claimants. Single homeless people tend to be men; a proportion suffers from mental disorders; many (though fewer than the stereotype suggests) are unemployed; some have social problems, including drug dependency, alcohol abuse and discharge from local authority care. These accounts seem to call for pathological explanations – but that is because they do not include enough information to do anything else. People are unemployed when there are not enough jobs. When there is full employment, people with disabilities, low skills and limited mobility are still more vulnerable to unemployment, but they are more likely to get jobs than not. If there are fewer houses than there are households, then, sure as night follows day, some people will be homeless – the only question is who. So the root cause of unemployment is the lack of jobs; the root cause of homelessness is lack of housing, or lack of entitlement to housing. The pathological factors may explain, at least in part, which people become unemployed or homeless, but the fact that there is unemployment or homelessness does not have to be the result of pathological characteristics at all.

Reward and punishment The liberalism of the 18th and 19th centuries was based in a reductionist view of human motivation. ‘Nature has placed mankind,’ Jeremy Bentham wrote, ‘under the governance of two sovereign masters, pain and pleasure.’115 That means, in a nutshell, that if you want people to do things, you make it pleasant; if you want them not to do things, you make it unpleasant. This has limited relevance to everyday experience; the reasons why people do things or do not do them are complex, and it is just not true that people invariably seek pleasure and avoid pain. Bentham’s view was profoundly influential in its day: it was the core principle behind the idea of the criminal penitentiary, and it has been seen as the founding principle of the reformed Poor Law, and 115

J Bentham, 1789, An introduction to the principles of morals and legislation, Oxford: Blackwell, 1960, ch 1, para 1. 39

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the decision to make the condition of paupers ‘less eligible’ than the position of the independent labourer. However, the Benthamite view has come down into several common economic saws: that people will always prefer to increase their material welfare; that people will respond to inducements by pursuing them; and that they will respond to negative effects by avoiding them. In Losing ground, Charles Murray attempts to explain the behaviour of welfare recipients. He writes:

1. People respond to incentives and disincentives. Sticks and carrots work. 2. People are not inherently hard working or moral. In the absence of countervailing influences, people will avoid work and be amoral. 3. People must be held responsible for their actions ...116

Murray’s assertion that ‘sticks and carrots work’ is strictly Benthamite; it seems to assume that people respond automatically to predetermined stimuli, like Skinner’s pigeons.117 But even if we accept that people do respond to stimuli, which is debatable, we still do not know how they will respond in the particular circumstances where the incentives and disincentives are applied. We do not know that there are no other countervailing influences – which is rather unlikely: we do not know the alternatives, the costs or the constraints. But even if other things are equal, we cannot tell from the knowledge that people stand to gain or lose from a change in conditions what their response will be. Sticks and carrots might work, but they might not. Murray’s punitive approach is consistent with a long-standing view, that poor people need to be whipped out of their torpor. (I know some people will think that unfair: Murray claims to be presenting a dispassionate, rational analysis. But if he is not talking about whipping, why is he talking about sticks?) Condemnation of the moral character of poor people in general, and benefit recipients in particular, has been a recurrent feature of policy for at least five hundred years, and it is difficult to say with confidence that the condemnation is based on moral judgment, or whether it is something deeper and less rational. For example, the belief that some families were born degenerate – a major element in policy from the late 19th century through to the

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C Murray, 1984, Losing ground, New York, NY: Basic Books. B F Skinner, 1971, Beyond freedom and dignity, Harmondsworth: Penguin.

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Nazi era118 – implied simultaneously that people had no choice about their situation, that they were somehow at fault and that they were to be condemned morally. This constellation of views has been so persistent, for so very long, that although contemporary commentators protest that this time the situation is different, and that this time they have good reason to think what they think, it is difficult not to see the same crude stereotypes that dominated discourse 150 years earlier. Arguments for the ‘remoralisation’ of policy are based in the view that the moral conduct of the people concerned is a legitimate and appropriate criterion to take into account when determining the response to different circumstances. The argument is currently associated with Lawrence Mead, whose book Beyond entitlement put the case for moral principles in the US;119 but the principles were strongly expressed in the time of the Victorian Poor Law, in the distinction between the ‘deserving’ and the ‘undeserving’ poor, and the same arguments can be found periodically at many points in between. ‘Where morality is at issue,’ Handler argues, ‘welfare is conditioned, regardless of any notional entitlement.’120 There has been no time since the 19th century when moral criteria did not play at least some part in the allocation of services: issues like voluntary unemployment, criminal penalties and differential treatment of favoured groups like pensioners have been consistent themes. The justifications for conditionality vary: it is presented at times as a reasonable expectation, a reciprocal obligation for benefits received, a deterrent or a ‘message’. The unifying principle is that people are held, as moral actors, to be responsible for their situation. Rights have to be balanced with responsibilities; one of the consistent features of the movement towards remoralisation has been a belief that claims to rights are misplaced. These arguments can be identified with individualism, but it is individualism of a very specific kind. It is not the sort of individualism which says that individuals are valuable, that individuals have rights, or that people who are vulnerable must be protected. It is not even saying that people should be punished for immoral conduct. It is a form of ethical individualism that expects individuals to make choices, and to take the consequences of their actions. The primary justification for taking the consequences is that it is right for them to do so, but ethical individualists have also argued that it has practical benefits, giving 118

119 120

See D Pick, 1989, Faces of degeneration, Cambridge: Cambridge University Press; E Carlson, 2001, The unfit, New York, NY: Cold Spring Harbor Laboratory Press. L Mead, 1986, Beyond entitlement, New York, NY: Free Press. J Handler, 1972, Reforming the poor, New York, NY: Basic Books, p 24. 41

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people an incentive for socially desired behaviour and a disincentive for other positions. Von Mises’ simplistic view of contemporary society saw ‘capitalism’, by which he seemed to mean any form of production outside the state, as a form of society where everyone was rewarded according to their ‘accomplishments’.121 Spencer argued that poverty was functional for society, an excellent way of distributing penalties and rewards: ‘The poverty of the incapable, the distresses that came upon the imprudent, the starvation of the idle, and those shoulderings aside of the weak by the strong, which leaves so many “in shallows and in miseries”, are the decrees of a large, far-seeing benevolence.’122 This seems to argue for the sacrifice of individuals to the greater good.

Individualism and moral judgments Although individualism may seem to imply a judgmental approach to policy, it is not a straightforward relationship. Moral judgment has been tempered, in the first place, by a Christian tradition, which aims to accept, forgive and reintegrate. The personal social services in Britain have their origins in Victorian practice. The first probation officers were described by the courts as ‘missionaries’; probation was charged, until very recently, with the duty to ‘advise, assist and befriend’ offenders. In the principle of self-determination, and indeed in much of the practice of social work at an individual level, it is not difficult to see the Christian tradition of individual salvation and redemption. A second reservation comes from the desire to be consistent. If it is ethical to respond proportionately to circumstances, it is no less important to respond consistently. The effect of having exercised moral judgment in individual cases is to emphasise diversity and inconsistency. When the social security system was established post war, there was a determination to avoid the arbitrariness and judgment of local officials, and the system was devised so as to ensure equivalent treatment wherever possible. The discretion of the National Assistance Board, and subsequently the Supplementary Benefits Commission, was directed centrally, to ensure that people in comparable circumstances would be treated consistently.123 Whenever an issue came, it was referred back to 121 122

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L von Mises, 1956, The anti-capitalistic mentality, Auburn, AL: Mises Institute. H Spencer, 1851, Social statics, New York, NY: Robert Schalkenbach Foundation, 1995. See M Hill, 1969, The exercise of discretion in the NAB, Public Administration 47 (1) pp 75-90; J Bradshaw, 1981, From discretion to rules, in M Adler, S Asquith, Discretion and welfare, London: Heinemann.

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the centre for a decision, and the code of discretion – first the ‘A code’, then the ‘S manual’ – grew progressively over the years, moving from a loose leaf-folder to the point where it occupied a bookshelf. In an individualised system, that implied the development of many, complex rules – so much so that in the late 1970s the Department of Health and Social Services declared that the system had become unworkable, and that it must be adapted to its ‘mass role’.124 The third strand has been, of course, the development of individual rights. If people have rights, in the sense of established entitlements, the application of extraneous moral criteria in the form of conditionality may not be relevant. When Old Age Pensions were first introduced, they excluded people who had previously been in receipt of the Poor Law; that kind of proviso was later thought to be inappropriate. Ethical individualism seems immediately to imply a structure of praise, blame, reward and punishment. I think that easy conjunction needs to be treated with some caution. Ethical socialism came to much the same conclusion, because the same kinds of moral strictures apply to people’s responsibilities towards their community.125 Collectivist concepts also tend to emphasise moral duties. At a time when the Soviet Union was supposed to have abolished unemployment, its laws against ‘parasites, tramps and beggars’ were no less stringent than the conditions that apply to people seeking work in Britain.126 Some individualists have reacted by distancing themselves from these kinds of moral responsibility; there is no unavoidable connection between individualism and moral condemnation. This prompts some further reconsideration of the concept of ‘moral individualism’. Moral individualism argues that the appropriate unit of moral discourse is the individual, that individuals have rights, and that individuals are moral actors. However, the balance between the second and the third of those elements – rights and ethical individualism – is critical. When rights are emphasised, moral individualism appears to be protective of individuals, and a defence against oppression. As more weight is attached to individual moral responsibility, moral individualism verges into conservative thought, and may become difficult to distinguish from it. 124 125

126

Department of Health and Social Security, 1978, Social assistance, London: DHSS. N Dennis, 1997, The invention of permanent poverty, London: Institute for Economic Affairs, Health and Welfare Unit. R Beerman, 1960, The law against parasites, tramps and beggars, Soviet Studies 11 (4) pp 453-5; S Stephenson, 2006, Crossing the line: Vagrancy, homelessness and social displacement in Russia, Aldershot: Ashgate, ch 4. 43

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2.4 Possessive individualism There are points where the traditions in moral individualism face in different directions, and that is most evident in relation to rights to property. It is often taken for granted that contained within the idea of the ‘individual’ there is someone who not only acts independently, but also owns things. An individual’s property has at times been considered virtually as part of what it means to be an individual. Locke included ‘estates’ as part of the constellation of basic rights that each person had.127 When Nozick says that people have rights, he does not seem very much concerned with the sort of personal, economic and social rights that feature in the UN Declaration of Human Rights: on the contrary, he argues that any attempt to apply such criteria in the distribution of resources, implying a ‘patterned’ approach, is improper. The only rights that he accepts, after the security of the person is established, are rights of accession and succession.128 Macpherson introduced the term ‘possessive individualism’ in his discussion of Hobbes and Locke.129 The rights they recognised were the rights claimed by the emerging bourgeoisie. They depended, Macpherson argues, on a view of individuals who are able to sell their labour and their skills. Hobbes had ‘built his whole system on deductions from a model of man and a model of society which were ... models of bourgeois man and capitalist society’.130 As a Marxist, Macpherson’s concern was to justify Marx’s dismissal of ideas like freedom and rights as bourgeois constructs, serving the interests of a dominant class. The overall argument is unconvincing: the framework of concepts like freedom’, ‘rights’ and ‘social justice’, has been a radical critique that transcends the historical context, and it applies as much to the oppression practised in ‘capitalist’ and ‘communist’ states and tribal societies as it does in feudal ones. The kernel of Macpherson’s criticism, however, is worth noting: that the concept of ‘individualism’ was taken to include an understanding of rights as a form of movable property. Property rights are firmly entrenched in many people’s understanding of individualism, so it is perhaps worth taking a step backward and 127

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J Locke, 1690, Two treatises of civil government, P Laslett (ed) New York, NY: Mentor 1965. R Nozick, 1974, Anarchy, state and utopia, Oxford: Blackwell. CB Macpherson, 1964, The political theory of possessive individualism, Oxford: Oxford University Press. CB Macpherson, 1968, Introduction, in T Hobbes, 1651, Leviathan, Harmondsworth: Penguin, p 52.

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asking what individualism would look like without them. Property rights fall under the control of the individual; the individual can decide what is to be done with them, and has the option to trade. That is not a universal practice. In feudal times, the ownership of land was determined by grant, and land could not be bought or sold; some people, referred to as ‘vassals’, could have the status of free persons but did not have a power to act in relation to property. In some contemporary societies, women are denied property rights; in others, land is owned and controlled by tribal chiefs. It is not difficult, then, to imagine a society where people do not hold property rights in the same sense that they do in Western, liberal societies. Property rights have been key, however, to individual empowerment, and a major part of the policies of the World Bank and International Monetary Fund – responding to poverty, empowering women, promoting accountable governance and developing enforceable rights – has been rooted in the establishment of respect for property rights. It is questionable whether any of those aims could be realised without them.

Property The right to have property is evidently important. Where people are denied the opportunity to hold property, like women in parts of Africa, it can lead to serious, entrenched disadvantage; and poor realisation of property rights is a major impediment to economic development.131 That is not the same thing, however, as saying that the relationship that people have to physical goods is the same as they have to other rights, like rights to freedom, voting or assembly. Property rights are mainly particular rights. The right to hold property is a general one, like freedom of assembly, but the property one actually holds is always particular, relating to that property and to no other. Nozick argues that property rights are fundamental, and that they are the only rights which legitimate distributions in society.132 That seems to say that no other rights matter, but if so it is liable to be self-defeating: without a broad framework of rights, particular rights tend to disappear. There has to be a reason, then, why those particular rights, and only some general rights, are legitimate when others are not. The gap in the argument is sometimes filled by a distinctive view of what property is. Rothbard writes that ‘The central core of the 131

132

D Dollar,A Kraay, 2000, Growth is good for the poor, at www.worldbank.org/research/ growth/pdfiles/growthgoodforpoor.pdf Nozick, 1974. 45

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libertarian creed ... is to establish the absolute right to private property of every man: first, in his own body, and second, in the previously unused natural resources which he first transforms by his labor.’133 Brennan and Friedman argue that property is the product of an individual’s labour: The libertarian does not consider the world as a place in which bread falls from heaven, where the proper moral problem is one of dividing it, but as a place where individuals produce things of value – bake bread ... and where each such thing thus appears not as common property, but as the property of a particular individual.134 The rights that people gain are developed through their own actions – individuals produce products, they exchange them or they give them to others. Property rights, on this account, emerge as part and parcel of what it means to be a self-governing individual. In the libertarian argument, the individual is not endowed with a set of rights, as human rights theorists would argue; the rights of the individual consist only of particular rights established through a legitimate process. ‘Freedom’ itself is understood, not so much as a basic right, but as something that does not happen – the absence of ‘the deliberate interference of other human beings within the area in which I could act’.135 It is not so much a right, in that formulation, as a way of expressing the principle that other people cannot interfere with anything established by a legitimate process. And property rights are fundamental to the freedoms, capacities and actions that we wish to take: Rothbard claims, possibly with some exaggeration, that ‘there are no human rights that are separable from property rights’.136 For libertarians, then, property rights are particular rights, belonging to individuals, and protected by the general principles of noninterference. For a government to remove property illegitimately from someone who owns it comes very close to theft.137 If people hold 133 134

135

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M Rothbard, 1978, For a new liberty, Auburn, AL: von Mises Institute, p 47. G Brennan, D Friedman, 1981, A libertarian perspective on welfare, in PG Brown, C Johnson, P Vernier (eds) Income support: conceptual and policy issues, Totowa, NJ: Rowman and Littlefield, p 27. I Berlin, 1969, Two concepts of liberty, in Four essays on liberty, Oxford: Oxford University Press, p 122 Rothbard, 1978, p 52. See e.g. M Rothbard, The ethics of liberty, at http://mises.org/rothbard/ethics/ ethics.asp

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their property legitimately, then no-one can remove it unless there is an intervening principle of right; and if government is taking property it has no right to, it might as well be stealing it. For Rothbard, ‘Taxation is Robbery’.138 Nozick makes a slightly different argument, but it tends in the same direction: if goods are produced by the labour of individuals, taking the value of those goods is equivalent to taking the value of the labour. ‘Taxation of earnings from labor is on a par with forced labor.’139 The argument is taken forward in the idea of ‘Tax Freedom Day’, the proposition that you only start working for yourself once you have stopped working for the government.140 Biblical tithes may have worked that way, but taxation does not. Tax Freedom Day is a knowing misrepresentation; it is intended to portray government intervention in the distribution of property as illegitimate. The obvious weakness in this argument is that property is not primarily the product of individual labour. Property rights are complex and multifaceted. They need to be understood socially as well as individually. Even where there is labour involved, property is not something that is produced by an individual working in isolation. It depends on the circumstances and conditions of the society where it is produced; even a simple action, like baking bread, will be based on ingredients and tools produced by others, and the knowledge of how to do it will always be socially produced. An important qualification is made by Hayek, who thought that generalised views about property rights were facile. Individualism supported, in his view, a general principle of private property: but the expression of that general principle, the social relationships that it created, the distinction between different forms and types of property, meant that it was not possible to apply a simple general rule to every form of property. ‘The recognition of the principle of private property helps us very little until we know precisely what rights and obligations ownership includes.’141 The argument for possessive individualism is based on a series of difficult moral and substantive assumptions: that individuals are the basic unit of society; that individuals have no rights beyond the particular; or that government has no right either to raise resources or to alter a given distribution of property. The first two are normative propositions, which one either accepts or does not. The third is subject to many 138 139 140 141

M Rothbard, 1978, p 29. Nozick, 1974, p 169. Adam Smith Institute, www.adamsmith.org/tax-freedom-day/ F Hayek, 1948, Individualism and economic order, Chicago, IL: University of Chicago Press, p 20. 47

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objections. Property rights have not formed in isolation; the process of government has been part of their development. The rights stem from a complex set of conventions, traditions, a history of transactions and recognition of the validity of long possession. The distribution of resources does not depend on a given, natural, legitimate position, but on a long history, which includes both legitimate transactions and events, and illegitimate ones. Nozick himself acknowledges that many people are in their current situation because of a history of oppression, coercion, violence and exploitation. Even if one were to accept all the premises of the libertarian argument, then, there would be no reason to conclude that the current distribution of resources is legitimate.

Self-ownership One of the ways of understanding human rights and dignity has been based in a sense of property, or ‘self-ownership’. The idea is often attributed to Locke, who wrote that ‘Every man has a property in his own person: this no body has any right to but himself.’142 It is unlikely that Locke was thinking of ‘property’ in the modern sense, as a commodity; for that we have to thank (or blame) libertarians like Rothbard143 and Nozick.144 The basic proposition is that people own themselves, that such ownership gives them rights to decide what will happen, and that violation of the body is violation of the rights of ownership.145 Several major philosophers – including Kant and Hegel – have rejected the idea that ownership is an appropriate model146 – but Rothbard begins from the proposition that as humans have to be owned by someone it may as well be themselves, and Nozick, putting the same position, takes it as almost self-evident. A pamphlet from the Institute for Economic Affairs proclaims: ‘Freedom’s first principle is: each person owns himself.’147

142 143 144 145

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Locke, 1690, ch 5, s 27. Rothbard, 1978, p 33. Nozick, 1974. e.g. in M Gorr, 1995, Justice, self-ownership and natural assets, Social Philosophy and Policy 12 (2) pp 267-91; E Feser, 2005, Personal identity and self-ownership, Social Philosophy and Policy 22 (2) pp 100-25. A Ryan, 1994, Self-ownership, autonomy and property rights, Social Philosophy and Policy 11 (2) pp 241-58; M Radin, 2001, Contested commodities, Cambridge, MA: Harvard University Press. W Williams, 2004,The argument for free markets, in D O’Keefe (ed) Economy and virtue, London: Institute for Economic Affairs.

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Ownership implies control over one’s rights. That level of control does exist in some areas of human activity. People can, and do, sell their time, their attention or their expertise. Property rights, and rights in commodities, are alienable – people can decide not to have them.The idea of privacy has been interpreted in terms of a person’s control over when they may or may not reveal things about themselves. Privacy has been described as ‘the claim of individuals, groups or institutions to determine for themselves when, how and to what extent information about them is communicated to others.’148 If people own their privacy, they can also surrender it, or sell it, by publicising – that is, making public – details of their private life. The Australian Government National Health and Medical Research Council explains: Individuals have a sphere of life from which they should be able to exclude any intrusion. ... A major application of the concept of privacy is information privacy: the interest of a person in controlling access to and use of any information personal to that person.149 Privacy is being construed here as a form of property: it is something that a person decides to have or not to have, rather than something which inheres in the person. That can, sensibly, be described as ownership. However, there are other rights, which are not well described in that way. There are individual rights that, as property rights used to be, are inalienable – they cannot be bought or sold. If people have human rights, those rights stay with them no matter what they decide. A sense of individualism can be conceived in universal terms, like human rights, rather than a question of commodities. For example, saying that people own their bodies also implies that they have rights to deal with their bodies as they think fit, including sale of parts or the whole, disposal, consumption and so forth. There are things that people can sell – hair, blood – but many of us would have qualms about the sale of parts that are not replaceable, like teeth, a kidney or a lung. People do not in general have the right to sell their organs (it happens, but that does not make it a right); the idea that such things can be commodified and 148 149

A Kimmel, 1988, Ethics and values in social research, London: Sage Publications. Australian Government National Health and Medical Research Council, 1999, National statement on ethical conduct in research involving humans, Canberra: Commonwealth of Australia, www.nhmrc.gov.au/publications/_files/e35.pdf, part 18. 49

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traded is repugnant. However, there are those who advocate the sale of body parts.150 The arguments are simple: we already accept that it is legitimate to give body parts to relatives, it happens already, the trade ought to be regulated, legalising the trade is a way forward. The problem lies, I think, with the principle of ownership itself – and that, rather than the loss of body parts, is the element which is incompatible with human dignity. The problem with the principle is clearest in relation to slavery. If people can be owned, they can be sold; people can (and do) sell themselves into slavery, typically through debt or exploitative contracts. The main arguments given from the perspective of self-ownership are that slavery is a violation of self-ownership or that voluntary slavery is a contradiction in terms. But slavery that is voluntarily entered into, in the forms of debt bondage, the sale of children or daughters, trafficking or exploitation of unprotected workers like domestic servants, is still commonplace in much of the world.151 The fundamental problem here is the treatment of human beings as a commodity – and that is the same approach to the understanding of humanity that the idea of self-ownership promotes. The idea that people are owned by anyone is not just intellectually suspect; it is odious. The same rights that are being described here in terms of ownership can be better understood in other ways. The principal objection to slavery is, I have already claimed, an objection to the loss of freedom; we do not need an intervening concept of ownership to add to that. Privacy could be construed as quite another kind of right, related to liberty – not control over information, but immunity from unwanted intrusion. That is the sense in which the idea of privacy was initially used in the common law of the US: an area of immunity, a circle around the individual or a reserved territory. Warren and Brandeis, who have been credited with creating the tort of breach of privacy in US law, specifically attacked the idea that this could be construed as a property right: ‘The principle which protects personal writings and all other personal productions ... is in reality not the principle of private property, but of an inviolate personality.’152 They argued: 150

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e.g. J Savulescu, 2003, Is the sale of body parts wrong?, Journal of Medical Ethics 29 pp 138-9; R Kishore, 2005, Human organs, scarcities and sale, Journal of Medical Ethics 31 pp 362-5;B Hippen, 2008, Organ sales and moral travails, Policy Analysis no 614, Washington, DC: Cato Institute. M Peraz Solla, 2009, Slavery and human trafficking, international law and the role of the World Bank, Washington, DC: World Bank. S Warren, L Brandeis, 1890, The right to privacy, Harvard Law Review 4 (5) pp 193-220, p 205.

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The intensity and complexity of life, attendant upon advancing civilization, have rendered necessary some retreat from the world, and man, under the refining influence of culture, has become more sensitive to publicity so that solitude and privacy have become more essential to the individual ...153 The right to retreat from intrusion or the public gaze is alienable, in the sense that the individual can decide what it means in practice; but it is also an aspect of human dignity. John Stuart Mill wrote: Whatever theory we adopt respecting the foundation of the social union, and under whatever political institutions we live, there is a circle around every individual human being, which no government, be it that of one, of a few, or of the many, ought to be permitted to overstep: there is a part of the life of every person who has come to years of discretion, within which the individuality of that person ought to reign uncontrolled either by any other individual or by the public collectively. That there is, or ought to be, some space in human existence thus entrenched around, and sacred from authoritative intrusion, no one who professes the smallest regard to human freedom or dignity will call in question: the point to be determined is, where the limit should be placed; how large a province of human life this reserved territory should include.154 This frames the issues in very different terms to a question of property. Property rights are not, then, the model for all forms of individualism, even if they can be used for some of them.

2.5 Individual welfare After personal responsibility and possessive individualism, the third main area of dispute in interpretations of moral individualism relates to the understanding of individual welfare. ‘Welfare’ is an ambiguous term. It can mean ‘well-being’; it can refer to systems for social protection, including provision for income maintenance, health and social care; 153 154

Warren, Brandeis, 1890, p 196. JS Mill, 1848, The principles of political economy, ch 11, obtained at http://ebooks. adelaide.edu.au/m/mill/john_stuart/m645p/book5.11.html 51

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and in the United States, it refers more specifically to means-tested social assistance, aimed at the poorest people. Economic writing is mainly concerned with welfare in the first of these senses, but it is liable to depend on a particular construction of what ‘well-being’ might consist of. For most purposes, welfare in economic theory is based on what people want, what they are prepared to pay for, and so what they choose. Like much else in economic theory, this is at root a normative position: each person is considered to be the best judge, and generally the only judge, of his or her own well-being. That tends to lead to an identification of ‘choice’ and ‘preference’ with ‘interests’. This tends to gloss over some important conceptual differences – I will come back to those in Part Three – but there are also several normative objections. One is that what people want is not just an indicator of their own tastes and preferences: it is also a mark of socialisation and social norms. It is questionable whether the fashion industry is responding to consumer preference, or shaping it. There is the ‘green’ argument from environmentalists, that consumption can be inimical to well-being. There is a simple economic objection, that the choices that people exercise reflect their ability to choose, and that depends on their entitlements – in other words, money. People’s preferences change when their incomes change. Finally, a very large number of people in the world – probably more than two billion – are dispossessed. A test of well-being that denies any validity to the interests of hundreds of millions of people is not a good test. Welfare is also understood, in some cases, in terms of ‘interests’: for example, there is no real difference between the ‘welfare’ of a child and the ‘best interests’ of a child. The language of interests tends to be used in circumstances where people are unable to exercise autonomous choices for themselves; sometimes it is used paternalistically, as it is in the claim that a government is acting in the interests of the people, even if the people in question disagree; but for the most part discussion of interests is just another way of identifying welfare. Feinberg refers to some interests as ‘welfare interests’, they are interests that are essential to well-being, as opposed to interests that are chosen. Welfare interests, he suggests, include: • • • • • • 52

health; physical integrity and functioning; the absence of pain or disfigurement; a minimum degree of intellectual activity; emotional stability; the absence of groundless anxieties and resentments;

Part Two: The moral dimensions of individualism

• • • •

engagement in a normal social life; a minimum amount of wealth, income and financial security; a tolerable social and physical environment; some freedom from interference by others.155

For Nussbaum, basic human functioning depends on a range of ‘capabilities’: life, bodily health, bodily integrity, senses, imagination and thought, emotions, practical reason, affiliation, other species, play and control over one’s environment.156 Another lengthy list of needs is offered by Doyal and Gough.157 This kind of approach suffers from a common problem – the items in the list may seem sensible enough, but they rest on the personal preferences of the writers. Any such list is vulnerable to the general objection from individualists, what makes us think we know better? One way of responding to this argument is to ask people. Poor people are those who lack welfare – poverty is a state in which wellbeing is denied. The World Bank’s remarkable study, Voices of the poor, asked poor people from around the world what they saw the problems as being. The project took soundings from more than 60,000 people in 60 countries. The second volume of findings, Crying out for change, identified 10 overlapping dimensions of poverty. They include, first, issues of deprivation and economic position: • Precarious livelihoods. This is not just about income; it is about security, and the struggle that poor people have to maintain their position. • Excluded locations. In the developing countries where the studies took place, this often refers to isolated rural locations, often with no roads and communications, but the problem is more general than that; the way some communities are situated affects the resources and opportunities of the people who live there. • Physical health. For the poorest people, their health and strength is often their most important asset. The lack of welfare is most manifest when people are ‘hungry, weak, exhausted and sick’.158 155

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J Feinberg, 1980, Rights, justice and the bounds of liberty, Princeton, NJ: Princeton University Press, p 32. M Nussbaum, 2006, Poverty and human functioning: capabilities as fundamental entitlements, in D Grusky, R Kanbur (eds) Poverty and inequality, Stanford, CA: Stanford University Press. L Doyal, I Gough, 1991, A theory of human need, Basingstoke: Macmillan. D Narayan, R Chambers, M Shah, P Petesch, 2000, Voices of the poor: Crying out for change, Washington, DC and Oxford: World Bank/Oxford University Press, p 90. 53

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• Lack of security. Poor people are ‘at risk’, but the main issue is not so much risk as vulnerability – the harm people are likely to experience when things go wrong. People can have high risk, but low vulnerability (for example, those working in the banking industry); they can have relatively low risk, but high vulnerability (the position of many low-paid workers in the public sector). Poverty extends, however, far beyond these issues. Some of the recurring themes are about social and political arrangements: • Abuse by those in power. Corruption and harassment by the police are major problems in much of the developing world. • Disempowering institutions. Part of the problem here relates to the previous category: government is often part of the problems of the poor. There may also be, however, a lack of procedures, few avenues of redress, and institutions that exclude the poorest. • Weak community organisations. Community organisation is one of the core resources available to those with little else, but the strongest community organisations are often found in places that are already well served. It has become common to express this in terms of ‘social capital’,159 but social capital is not really capital at all; it is about solidarity, social networks and social relationships. The emphasis on social relationships implies in turn a powerful emphasis on issues of social exclusion: • Problems in social relationships. Poverty has been described in terms of the inability to participate in society. Poor people are liable to be left out, shut out, or pushed out. • Gender relationships. Women are liable to suffer disadvantage in most countries, but in some cases gender means that women are unable to have rights, such as rights to property. • Limitations on the capabilities of the poor. Amartya Sen identifies poverty strongly with lack of capability – the capacity to pursue desired objectives – and lack of entitlement.160 The problems of poverty and lack of welfare identified here relate to issues which conventional economic analysis fails to capture – issues of 159 160

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R Putnam, 2000, Bowling alone, New York, NY: Simon & Schuster. A Sen, 1981, Poverty and famines: An essay on entitlement and deprivation, Oxford: Clarendon Press.

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physical health, security, social relationships and political institutions. Feinberg touches on some of these issues, but the voices carry an authority that no academic theorist can match.

Individualism and individual welfare Individualism is not unequivocally committed to the welfare of the individual. That may sound paradoxical, but there are other things besides welfare, which an individualist may consider to be important. There is a longstanding tradition, in liberal thought, that people have not a right to outcomes, but a right to self-governance – to make decisions for themselves. John Stuart Mill wrote: the only purpose for which power can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to others. His own good, either physical or moral, is not sufficient warrant. He cannot rightfully be compelled to do or forbear because it will be better for him to do so, because it will make him happier, because, in the opinion of others, to do so would be wise, or even right.161 People’s benefit, happiness or well-being is not a justification for interference with their liberty. The argument for ‘self-determination’ fuses liberal individualism with a Christian tradition. Soyer argues that social work clients have a ‘right to fail’162 – the option to make the wrong decisions. I am sceptical about whether they genuinely have such a right, in theory or in practice – the consequences of making wrong decisions is only to invite further intervention: but the core of the idea, whether or not it is practised as it should be, is that self-determination is a primary value – more important than that person’s welfare, or the objectives of the social worker or the values of the society. In what sense, then, does individualism guarantee the welfare of the individual? I have argued that part of the individualist tradition is represented in terms of rights, infused with a strong sense of the equality of persons. If individuals have rights, those rights do not have to be confined to liberty or property. The UN Declaration of 161

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J S Mill, 1859, On liberty, in M Warnock (ed), 1962, Utilitarianism, Glasgow: Collins, p 135. D Soyer, 1975, The right to fail, in F McDermott (ed) Self determination in social work, London: Routledge & Kegan Paul. 55

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Human Rights, John Rawls’ case for maximising minimum standards (the principle of ‘maximin’)163 or Tawney’s argument that people must have access to ‘the conditions of civilisation’,164 call for people to have a basic level of resources. If there are such rights, there has to be a mechanism to make sure that the minimum is reached. Some of the rights to welfare claimed in these terms are contentious – there are individualists who are opposed to many of the provisions of the UN Declaration. There is, however, an exception, which even the diehards tend to support: that is the right to education. There are good reasons why individualists should recognise education as being particularly important – it is fundamental to issues like capacity, autonomy and self-development. Once a right to education is acknowledged, it establishes that a claim right can be legitimate within the individualist model. Whether or not the constellation of rights extends to other essential capabilities is a question of use, practice and convention, rather than a matter of principle.

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J Rawls, 1971, A theory of justice, Oxford: Oxford University Press. R H Tawney, 1930,Equality, London: Allen & Unwin.

Part Three

Methodological individualism and rational self-interest Summary Methodological individualism has been dominated by a set of concepts, which identify utility with choice, preference and welfare, but these terms are distinct. Individuals are characterised as rational, self-interested utility maximisers, who realise their objectives through the mechanism of choice. People are assumed to respond to incentives and to be motivated by gain. Welfare is said to be improved if at least one person gains when others are no worse off. These propositions are ill-formed and often self-contradictory.

3.1 Utility and choice Utility The greatest difficulty that individualists have with a commitment to welfare seems to be experienced by those who write about methodological individualism. The reasons for the conflict are not intrinsic to the approach, because a position that is intended to identify broad principles might reasonably have been expected to be more flexible and adaptable than the others. The problems arise because of the dominance within the methodology of a model, which identifies welfare with the operation of specific economic processes. That identification begins with the idea of utility. The concept of utility has referred, in its history, to a range of understandings about behaviour. When Adam Smith wrote about utility, he clearly intended it to refer to ‘usefulness’, not welfare.165 The idea in its modern form could be said to originate with Bentham. For Bentham, utility was:

165

A Smith, 1759, The theory of moral sentiments, part IV, obtained atwww.econlib.org/ library/Smith/smMS.html 57

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That property in any object, whereby it tends to produce benefit, advantage, pleasure, good, or happiness (all this in the present case comes to the same thing) or (what comes again to the same thing) to prevent the happening of mischief, pain, evil, or unhappiness to the part whose interest is considered: if that party be the community in general, then the happiness of the community: if a particular individual, then the happiness of that individual.166 Little explains: ‘Utility was a power in objects which would normally create satisfaction, and a man’s happiness was the sum total of his satisfactions.’167 That became, more or less, the position of a series of 19th-century economists, who identified utility with pleasure, with desire or with satisfaction.168 ‘By utility of material things’, Sidgwick wrote, ‘we mean their capacity to satisfy men’s needs and desires.’169 But there is an ambiguity here: what people feel pleasure in, what they express desire for, what satisfies them and what they ultimately choose to have, may not be the same.170 Broome identifies a range of meanings: what is useful, what is good, happiness, the satisfaction of desires and the representation of preferences.171 These are by no means equivalent. Sen is sceptical that the concept of ‘utility’ can be meaningful; he argues that utility deals with a series of issues that are not commensurable. ‘We cannot reduce all the things we have reason to value into one homogenous magnitude.’172 As the concept of ‘utility’ developed, it was identified strongly with economic preferences. Pigou was careful to confine that discussion to those issues ‘which can be brought directly or indirectly into relation with the measuring-rod of money’, but acknowledged that the boundaries between economic and non-economic satisfaction were ill-defined.173 The distinction has become no clearer in subsequent writing. Contemporary economists have tended to favour a tautologous 166

167 168

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J Bentham, 1789, An introduction to the principles of morals and legislation, Oxford: Blackwell, 1960, p 126. I Little, 1957, A critique of welfare economics, Oxford: Oxford University Press, p 7. R Martinoia, 2003,That which is desired, which pleases and which satisfies: utility according to Alfred Marshall, Journal of the History of Economic Thought 25 (3) pp 349-64. Cited in Martinoia, 2003, p 349. A C Pigou, 1932, The economics of welfare, London: Macmillan, ch 2. J Broome, 1991, Utility, Economics and Philosophy 7 (1) pp 1-12. A Sen, 2009, The idea of justice, London: Allen Lane, p 239. Pigou, 1932, p 11.

Part Three: Methodological individualism and rational self-interest

understanding of utility, identifying utility with the sum of a person’s expressed choices. Vickery was able to write, by 1961, that: Utility is the technical term that economists have settled on to designate the degree to which individuals attain the goals they are presumably pursuing when they choose among alternative courses of action.174 The key word here is ‘presumably’. There are indeed presumptions: that choice represents the satisfaction of goals; that people who choose act with those goals in mind rather than for other reasons; that the choices people make fall between courses of action; or even, that people do not make bad choices.175 For Buchanan, ‘An individual is nothing more than a set of preferences, a utility function as we call it.’176 In the same way, the UK Treasury suggests that: Utility, in the broadest sense, refers to the satisfaction that a person gets from consumption of a good, or to the change in their welfare or well-being. Because it is difficult to observe utility directly, it has traditionally been inferred by observing the choices that people make within related or hypothetical markets.177 The sort of utility associated with choice is sometimes called ‘decision utility’, as distinct from ‘experienced utility’ or satisfaction.178 What people choose is supposed to reflect their utility and ‘revealed preferences’ – the record of choices – are taken as a direct reflection of a utility function.179 Sen comments acidly on the conflation of definitions:

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W Vickery, 1961, Risk, utility and social policy, in E Phelps (ed), 1973, Economic justice, Harmondsworth: Penguin. M Kelman, 1979, Choice and utility, Wisconsin Law Review pp 769-97. J Buchanan, 1978, The economics of politics, London: Institute for Economic Affairs, p 4. UK Treasury, The green book, www.hm-treasury.gov.uk/d/green_book_ annex2_250711.pdf e.g. in D Kahneman, P Wakker, R Sarin, 1997, Back to Bentham?, Quarterly Journal of Economics 112 pp 375-405. B Bernheim, A Rangel, 2009, Beyond revealed preference, Quarterly Journal of Economics 124 (1) pp 51-104. 59

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A pair of distinct delineations is used, typically implicitly (by calling both ideas ‘utility’), to get an empirical rabbit out of a definitional hat. We are then left with an unscrutinized identification of two distinct entities, namely, (1) utility in the sense of the maximand of a person’s choice behaviour, and (2) utility in the sense of the self-interest (or even the welfare) of the person.180 There is a further ambiguity, too, in the understanding of utility either as a relative concept or as an absolute one. Conventionally, utility is represented in relative or ‘ordinal’ terms; it is not intended to represent quantities or set values, but a series of relative positions, and in particular a structure of rankings. But it is also sometimes used in an absolute or ‘cardinal’ sense to suggest that there is such a thing as ‘total utility’ or ‘average utility’. The idea that there is a total or maximum amount of utility that can be achieved, or a quantum of utility that can be attributed to different people, depends on the idea that there is a quantitative limit.

Preference and choice During the discussion of autonomy, I introduced the idea of choice as a process through which people make decisions. If choice is a process, however, it cannot be the same sort of thing as satisfaction or utility, which are outcomes. Choice is expressed through decisions and actions; utility and welfare are concerned with end states. When people make choices, what meaning can we attribute to their actions? There are several possible accounts: that, for example: • they are satisfying their wishes, desires or goals; • they are choosing what is consistent with their interests or welfare; • they are acting in conformity with their preferences between alternative intended outcomes; or • they are behaving in conformity with their utility function. The distinctions between concepts like ‘utility’, ‘satisfaction’, ‘revealed preference’ and ‘choice’ are often blurred. There is some distance between concepts of ‘choice’ and ‘preference’ on the one hand and ‘utility’ and ‘welfare’ on the other.

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A Sen, 2002, Rationality and freedom, Cambridge, MA: Belknap Press, p 27.

Part Three: Methodological individualism and rational self-interest

The idea of preference comes first lexically. March points to a series of standard assumptions made about people’s preferences in the literature. Tastes are taken to be: • • • • • •

absolute – they are not mixed with reservations; relevant – they are consistent with intended outcomes; stable; consistent; precise – they eliminate ambiguity; exogenous – they are not shaped by the circumstances or affected by the choices themselves.181

Behavioural economics shows that people’s preferences depend on the context where the preference is identified; choices are shaped by the market; and the assessment of satisfaction over time makes a marked difference.182 Our preferences, March argues, are constructed; they are managed strategically; we tend to treat them with reasonable caution, leaving options open, because preferences can change; they have to anticipate and work round uncertainty.183 Choice is often supposed to have a direct relationship to preference, as the references to ‘revealed preferences’ suggest. Sen argues that it is not possible to ‘read back’ from people’s choices to discover their preferences. The expression of preferences often makes little sense when looked at in detail. Sippel shows, in an experimental setting, that people’s choices of bundles do not conform to a simple, consistent pattern in which one item or combination of items is consistently preferred over another.184 People make choices for all kinds of reasons – because they have imperfect information, because they are indifferent, because they are influenced by others, perhaps because they are applying moral criteria.185 What people choose, Kahneman and Sugden explain, is about behaviour, what they prefer, what they think and feel. Attitudes and behaviour might drift apart because, for example, people make mistakes, and choose things that do not represent J March, 1986, Bounded rationality, in J Elster (ed) Rational choice, Oxford: Blackwell, p 153. 182 R Sugden, 2004, The opportunity criterion, American Economic Review 94 (4) pp 1014-33. 183 March, 1986. 184 R Sippel, 1997, An experiment on the pure theory of consumer’s behaviour, Economic Journal 107 pp 1431-44. 185 A Sen, 1986, Behaviour and the concept of preference, in J Elster (ed) Rational choice, Oxford: 181

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their preferences very well; or because preferences for bundles of goods are expressed differently in choices of specific items, so that it makes a difference what order they get to choose in.186 It is far from clear, then, that what people choose tells us what they ‘prefer’ in any consistent sense. And it follows that choice cannot be understood as being about fulfilling goals, satisfying interests or achieving well-being; people may choose things which have those effects, or they may choose things for different reasons, with other effects entirely. The exercise of choice also depends on a long series of external factors – not just on personal preferences or anticipated benefits, but also on the availability of resources, the supply of goods, prices and the alternatives. If people are making decisions, they can only obtain a result that is consistent with their desired outcomes if their desired outcomes are of a nature that can be satisfied, the options exist that could achieve those outcomes, and they have sufficient resources to make the choices between those options. If those desires are frustrated, the idea that they will settle for less of the same option may be true, but it may not; they may opt for a different choice altogether. DanCohen identifies four elements of the process: • there must be a choice set, or range of options, which people choose between; • choosing depends on preferences, or comparison of options; • choosing implies some kind of selection, deciding to do some things and not to do others; • choosing implies opportunity costs, because people have to accept that some choices are set aside in order to select others.187 The nature of an economic choice is that people have to choose between competing alternatives. In conditions of scarcity – and economics is all about the management of scarcity – people have to decide what they cannot have, as well as what they can. The implications of limited choice are most visible in poverty. Charles Booth described poverty in terms of a struggle for everyday existence.188 Research on poverty has emphasised its precariousness 186

187

188

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D Kahneman, R Sugden, 2005, Experienced utility as a standard of policy evaluation, Environmental and Resource Economics 32 pp 161-81. M Dan-Cohen, 2002, Harmful thoughts, Princeton, NJ: Princeton University Press, p 126. C Booth, 1889, Life and labour of the people in London: First series, London: Macmillan, 1903.

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– its dynamic, fluctuating character, the insecurity poor people feel and the vulnerability of poor people to changes in circumstances.189 Researchers have referred to the idea of a ‘web of deprivation’: like a fly trapped in a web, people who succeed in improving their situation in one way commonly find that they have worsened it in another.190 The experience of poverty is a constant struggle to balance competing needs without adequate resources. The choices most people have to make offer them more scope for manoeuvre than the choices of poor people, but the problem of poverty points to a general issue. Typically, choice involves compromise – foregoing one satisfaction to achieve another. If people are making choices between competing factors, then they are trading benefits off against other benefits; and if they are doing that, they are closing off potential routes to satisfaction in the process. When I discussed the idea of ‘choice’ earlier, I identified it with autonomy and self-determination. Choice and self-determination are not, however, directly equivalent. Choice is not just a matter of doing what one wishes; it is a process of decision making, and often one of selection.  If that is right, then most of the accounts of what people are doing when they choose cannot be true. Choice is a means to an end, not the end itself – and the process of choosing in itself may be the reason why personal ends cannot be reached.

Choice and well-being If we want to decide whether choice leads to well-being, we need some criterion of well-being by which to make the evaluation. Information about choices alone tells us nothing about welfare or happiness, unless we also apply further criteria allowing us to judge whether welfare or happiness have been achieved.191 If we think of welfare and choice in very general terms, there may seem to be a rough correspondence; but as the concept of ‘welfare’ is developed, becoming fuller and richer, the distance between people’s welfare and the outcomes of their choices becomes more obvious. Adler and Posner argue that the choices people make and a desire for well-being are quite different types of thing. 189

190 191

J Wresinski, 1987, Grande pauvreté et précarité économique et sociale, Journal officiel de la république française 6 Feb, p 6 ; R Walker, 1994, Poverty dynamics, Aldershot: Avebury; C Heady, 1997, Labour market transitions and social exclusion, Journal of European Social Policy 7 (2) pp 119-28. F Coffield, J Sarsby, 1980, A cycle of deprivation?, London: Heinemann. B Köszegi, M Rabin, 2008, Choices, situations and happiness, Journal of Public Economics 92 pp 1821-32. 63

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What people prefer and choose is not necessarily what they think will enhance their welfare. It may be a decision about what is available; it may be morally right. And people are able to choose things that are inconsistent with their future well-being, like drug use or smoking.192 Part of the difficulty of interpreting the outcome of choice is dealing with uncertainty. When people make choices, they may have to manage risk, and they have to accept some part of it. Consider a simple question: should an individual insure against all potentially serious risks, even if those risks are very remote? A competent individual, making informed choices, may reasonably decide to accept some limited exposure to risk. It follows that the reasonable exercise of individual choice can be directly detrimental to some individual interests. Any individual might reasonably accept a modest degree of risk – for example, odds of one in a thousand – but if odds mean anything, a risk of one in a thousand means that where there are five million people, five thousand people are going to be affected. A ‘risk’ for an individual becomes a virtual certainty for a large population. This situation has left some burns victims in the US unprotected by their medical insurance: if the insurance is not able to provide for unlimited expenses, then burns, which are extremely expensive to treat, are likely to be left out. I think few people would accept a conception of welfare in which the choices and preferences of the people affected were wholly disregarded; but equally, some of the interests identified in the discussion of welfare in the previous section have to be met before a choice can even be exercised. Probably the most important theoretical reservation to make about the identification of choice and well-being, however, is that it is impossible to choose welfare directly. Choices are generally choices between bundles of goods and services, not between states of being. ‘The means of satisfactory human living,’ Sen writes, ‘are not the ends of good living.’193 He distinguishes capabilities and commodities.194 Welfare can be interpreted in general terms, in the form of actions and the scope for action – the ability to do things and realise objectives, like to satisfy hunger, to move around, to communicate. Those are capabilities. The needs they respond to, and the class of actions they define, are commonly shared by human beings around the world. However, the way they are expressed and realised differs in different places. Capabilities, like movement or communication, have 192

193 194

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M Adler, E Posner, 1999, Rethinking cost benefit analysis, Chicago, IL: University of Chicago Law School. Sen, 2009, p 234. Sen A, 1983, Poor, relatively speaking, Oxford Economic Papers 35 (1) pp 153-69.

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been translated into objects, ways of doing things. Moving around implies different forms of transport – cars, bicycles, boats and trains. Communication calls for different kinds of media – postal services, telephones, electronic media and so forth. These are the commodities through which capabilities are made real. People can make choices which affect their welfare: they can choose to do things which should enhance their well-being, like being educated; they can choose to do things run counter to their well-being, such as smoking; they can choose things they think will improve their well-being, and be mistaken or disappointed. None is equivalent to choosing well-being. It makes good enough sense to say that people may have to choose between purchasing health care or leisure activity, and that they will allocate resources and time accordingly. It does not make so much sense to say that people are thereby making a choice between health and social relationships. The choices that people make in economics are generally choices between commodities – the resources and assets that are used to make certain things possible – rather than capabilities, the capacity for action they are trying to realise. When people get what they choose – if they do – satisfaction is not guaranteed. The distinction between capabilities and commodities has important implications for the idea of choice. Choice cannot be identified with welfare, personal objectives, desire, utility, revealed preferences or indeed any end state. If people want something simple, like a bed to sleep in, we can reasonably describe it as something they choose, and utility can be described in terms of a property of the object. Often the things that people want are translated into similar commodities in similar contexts. People generally need the capability of facilities for storing food; that used to be done in the UK by the availability of pantries, which were ventilated food cupboards (they are now so rare that I need the extra note of explanation to say what they were). The possession of refrigerators in British households is so universal that the official statistics no longer bother to ask about them. There is some sense, then, in considering specific types of commodity as a representation of people’s utility. When people make choices about their utility, the choice they are making has to be commodified – that is, translated into commodities – first. However, if the capability that people want is more complex, or general or subtle – education for a child, care for an older person, a secure income – it is much less clear what the commodity is that will satisfy the need. There is a range of options; none of the options is necessarily complete or satisfactory; and some of the commodities that people might wish to have may not 65

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even exist at the time and place where they are needed. Inevitably, Sen argues, there is a plurality of means, values and approaches.195 People can reasonably come to different judgments about means in pursuit of consistent ends. If well-being consists, as it seems to consist in some theories, of nothing but the product of the choices that a person has made, regardless of whether choices do anything for the chooser or anyone else, then the idea that choice leads to well-being is tautologous.196 If, however, the area of interest is supposed to be anything beyond the pattern of choices, like the pursuit of individual desires, or satisfaction or happiness, then it is uncertain whether people are able to choose these things at all. It may be true that a person who is presented with more options will be able to make a more satisfactory choice than if there were fewer options – but that depends on there being a surplus of things to choose from. In conditions of scarcity, choice is about sacrificing the least. Dan-Cohen argues that the idea of choice is ‘inherently frustrating’: the very act of choosing implies that the person who is doing it is giving up something else of value.197 The first impossible belief I mentioned in this book was the idea that ‘the exercise of choice leads to wellbeing’. It is a category mistake. The act of choosing does not realise well-being directly. Even if it reaches towards it, it can never deliver. It is still open to economists to argue for ‘utility’ or ‘revealed preference’ as notional concepts, standing for a theoretical, possibly non-existent construct that is constructed when choices are made. As the nature and character of economic decisions become better understood, this position is harder and harder to maintain. For nearly everything that really matters, utility cannot be achieved directly. If it can be realised at all, it has to be refracted through the prisms of commodification and choice. This is a methodological and substantive objection rather than a moral one. There are good ethical arguments for trying to increase the choices that people have available to them. Some of the arguments are normative: that people need, as a matter of principle, to be able to decide for themselves, in big affairs and in small ones. Liberty is a value, as well as a form of welfare. Some are based in the view that no-one else is better placed to know what is best for the person. Hayek argues: 195 196

197

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Sen, 2009. e.g. B Bernheim, A Rangel, 2009, Beyond revealed preference, Quarterly Journal of Economics 124 (1) pp 51-104, p 52. M Dan-Cohen, 2002, Harmful thoughts, Princeton, NJ: Princeton University Press, ch 4.

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The presumption that each man knows his interests best ... is neither plausible nor necessary for the individualist’s conclusions. The true basis of his argument is that nobody can know who knows best and that the only way by which we can find out is through a social process in which everybody is allowed to try and see what he can do.198 The moral core of this argument is strong – that individuals should be able to decide for themselves. The other elements in Hayek’s claim are more debatable – that the reason why individuals should decide for themselves is that no-one knows better, that we have a process that effectively allows people to try things out and that such a process is preferable to the alternatives. The problem with the first of these propositions – that no-one ever knows better – is that it seems to imply that individual decision making is as good as any other method. The main reasons why people who can afford it pay for specialist support, such as medical, financial, housing or legal advice, are either that they realise they do not know better or that the time, trouble and effort involved in making such decisions independently is excessive. I am generally suspicious of arguments that people who are on lower incomes than others should be required to make informed, selfdetermining, wholly independent decisions in fields where those who have the choice and the capacity often opt not to do so. The second proposition, that we have a process that allows people to try things out, is generally taken to be an argument for using economic markets to allow individual decision making.199 I will return to the question of the market in more detail in Part Four, but in this context the most basic problem lies in the assumption that it is good enough to rely on trial and error as long as people can have a go. Some degree of failure is built into the design of such a project, and if the welfare of individuals is ever a concern, there have to be safeguards. There are also some practical arguments for choice. The Audit Commission reports: Choice can, if managed properly, provide better matching of limited supply to preferences and needs. It can make small but very important changes, which users greatly value, in how and when services are offered. Choice can give users 198

199

F Hayek, 1948, Individualism and economic order, Chicago: University of Chicago Press, p 15. M Friedman, 1962, Capitalism and freedom, Chicago: University of Chicago Press. 67

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more control and therefore increase their level of satisfaction with local services.200 This does not depend, however, on a view that choice is the best way to achieve welfare – and the suggestion that the benefits are marginal, and that they depend on proper management, suggests an element of caution. Choice may be able to enhance welfare, but that is a long way from securing it.

3.2 Self-interest ‘The first principle of Economics,’ Edgeworth wrote, ‘is that every agent is actuated only by self-interest.’201 The idea of self-interest assumes that people have interests – ways of improving or deriving benefit – and that the benefit they derive is a benefit for themselves rather than for others. If this is not simply tautologous – that what people decide is what we deem to be in their own interests, regardless of whether it actually benefits them – the generalisation is untenable: it is clearly true in some cases and not in others.202 Some of the decisions people make are not made with personal benefit in mind; some are made about what should happen to other people; sometimes the decisions that people make are self-destructive, or foolish or otherwise not in their own interests. Laver qualifies the assumption of self-interest with the suggestion that ‘rational actors are motivated by the urge to fulfil their desires’.203 That is not quite the same thing as self-interest, though it is probably a better description of the method than a reference to self-interest alone. The idea that individuals are self-interested is largely reducible to the idea that individuals have their own preferences, and they will choose what they prefer to have – which could be true even if the preferences in question did not benefit the person. It does happen, however, that the view that people are selfinterested is extended far beyond that – in the implicit (and sometimes explicit) assumptions that people generally want more material goods or services, that they will respond to inducements, and ultimately, as Adam Smith argued in a much-quoted axiom, that their selfish concerns will drive economic production: ‘It is not from the benevolence of 200 201

202 203

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Audit Commission, 2006, Choosing well, London: Audit Commission. Cited in A Sen, 1977, Rational fools, Philosophy and Public Affairs 6 (4) pp 317-344, p 317. Sen, 1977. M Laver, 1997, Private desires, political action, London: Sage Publications, p 18.

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the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.’204 It is debatable whether that is enough to explain how people behave. From the point of view of producers, it is debatable whether motivation or behaviour can be appropriately described in terms of profit maximisation205 – several studies in the UK have found that most firms do not operate in that way206 – and there are recurring difficulties in determining why the employees of a firm should share the objectives of the firm. From the point of view of consumers, a growing literature suggests that people’s behaviour has the consistency required for methodological analysis even if people are not acting in a way that could be justified in terms of self-interest.207 Studies in behavioural economics – primarily, psychological tests of economic propositions – find that the choices people make are shaped and structured by their perceptions and by the conditions under which choices are made, so that (for example) people determine willingness to pay by relative choices rather than by valuing the commodity, and attach greater value on the things they already own or have committed to.208 Those exceptions seem to some to justify intervention to protect people from the consequences of their failure to act in their own interests.209 Sugden counters with the argument that the challenge posed by behavioural economics is not that people are unpredictable; it is that there are systematic differences between the way they exercise choice and preference, and the predictions of normative welfare economics.210 That seems to imply that with adjustment, the economic models can still work. For the purposes of economic reasoning, the assumption that people are exclusively self-interested is probably unnecessary.211 Economic descriptions of how people respond, like demand or supply functions, can readily bend round moral constraints, altruistic behaviour or complex motivations. 204 205

206

207 208 209

210

211

A Smith, 1776, The wealth of nations, book 1, ch 2. C Doucouliagos, 1994, A note on the evolution of homo economicus, Journal of Economic Issues 28 (3) pp 877-83. Cited in A Griffiths, S Wall, 2007, Applied economics, Harlow: Pearson Education, p 52. D Ariely, 2008, Predictably irrational, New York, NY: HarperCollins. Ariely, 2008. P Jones, J Cullis, 2000, ‘Individual failure’ and the analytics of social policy, Journal of Social Policy 29 (1) pp 73-94. R Sugden, 2004, The opportunity criterion, American Economic Review 94 (4) pp 1014-33. cf Sen, 2009, pp 188-9. 69

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Incentives and motivation The idea of incentives translates the analysis of self-interested action into a tool for analysing the behaviour of individuals in response to certain stimuli. ‘Incentives’ are an important approach in public policy, used to promote and encourage particular patterns of behaviour. Incentives are not the only means of promoting and encouraging behaviour – other methods include exhortation, education, advertising, the creation of opportunities and the removal of obstacles – but they fit with a general approach in which the role of government is seen as planning, persuading and guiding people, rather than coercing or controlling them. It has become fashionable to talk of governments ‘nudging’ people, through a combination of incentives, persuasion and marketing techniques.212 The evidence that this works is based on psychological experiments. Psychological method, like economics, approximates the behaviour of individuals by relying on aggregates: if some people in a group are affected, but others are not, it will yield a statistically significant result. Changing the behaviour of people in aggregate, or on average, is not the same as changing the behaviour of every individual. An incentive might not affect many people; it only has to affect some. When prices change, the key decisions are made by people at the margins, the people whose decisions are likely to be altered. A prize competition can be used to promote cultural activity, but relatively few people will enter. Incentives, in this sense, fit with a general approach, which is concerned to shift people in a desired direction, rather than to alter the behaviour of each and every person. For this to work, there is no need for everyone to respond in a self-interested manner. Some explanations do seem to suggest that people will respond, and respond consistently, to proffered rewards or punishments. The concept of the self-interested individual is taken ceteris paribus, ‘other things being equal’, which means that the existence of an inducement is taken as sufficient reason for action. I suggested before that a methodology based on aggregates or averages was inconsistent with models based on a theoretical individual, and the application to incentives is one of the strongest examples of that inconsistency. A theory based on aggregates, more modestly, suggests only that some people might; and if the response is inelastic, they may not respond at all. If people in aggregate are faced with an incentive, some will respond, and some will not – that is part of what being an 212

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R Thaler, C Sunstein, 2008, Nudge, New Haven, CT:Yale University Press.

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incentive means. Each person is faced with an individual choice, which can be represented in terms of costs and benefits. Figure 3.1 shows a simple graphical representation of this function. The horizontal axis shows the balance between costs and benefits. Incentives increase the balance of benefits over costs; disincentives increase the balance of costs over benefits. As the surplus of benefit over cost increases, so does quantity: the curve reflects initial reluctance to change, and reduced impacts when higher quantities are considered. The S-shape this implies has been identified previously in work in social psychology, under the name ‘prospect theory’.213 It has been supported empirically in psychological experiments,214 but the justification for applying it to incentives is straightforwardly theoretical: any notional cost-benefit function should have something like this shape. Figure 3.1: Costs and benefits Quantity

Benefit Cost

As with any generalisation, a graph of this kind relies on some bold assumptions. The first is that, other things being equal, people respond to benefits by doing more rather than less. That is plausible, but it 213

214

D Wittman, 1991, Contrasting economic and psychological analyses of political choice, in K Monroe (ed) The economic approach to politics, New York, NY: HarperCollins. G Quattrone, A Tversky, 1988, Contrasting rational and psychological analyses of political choice, American Political Science Review 82 (3) pp 719-36. 71

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may not be true: for example, some people may respond to increased rewards by relaxing their efforts (implying that the right-hand part of the curve dips downward). The actual shape of the function depends on the context, norms and circumstances it is being applied to. The second assumption is that costs and benefits can be set directly against each other. There may on the contrary be circumstances where the values of cost and benefit are interdependent; if there is ‘cognitive dissonance’, people’s perception of benefit depends on the number and intensity of costs, and vice versa.215 Third, the function has been assumed to be continuous: this is more likely to be true in aggregate than it may be at individual level, where there may be discontinuities. There is some evidence, too, to suggest that responses to economic stimuli may be delayed by initial inertia, reflecting the time, trouble and effort of gathering information, making judgments and making alternative arrangements.216 Quattrone and Tversky also suggest that loss aversion tends in practice to outweigh prospective benefits, and that implies that the negative quadrant should be a different shape from the positive quadrant.217 Fourth, the function describes marginal change; from an initial equilibrium, the origin would represent the starting point. If the origin represented zero instead – that is, the position which each person took when costs and benefits were equal – the function could in principle pass through a number of points on the positive axis. There are some important conceptual limitations in the approach. Motivation is complex, and establishing that the balance of costs and benefits lies in a particular direction does not establish that people will be motivated to take action. Bonner and Sprinkle identify four principal theories of motivation. These are: • expectancy theory – people act to maximise expected satisfaction; • agency theory – people act rationally to maximise their welfare or utility; • goal-setting theory – people act to meet personal goals, even if the specific action has negative consequences;

215 216

217

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L Festinger, 1957, A theory of cognitive dissonance, Evanston, IL: Row, Peterson. B Madrian, D Shea, 2001, The power of suggestion, Quarterly Journal of Economics 116 (4) pp 1149-87. G Quattrone, A Tversky, 1988, Contrasting rational and psychological analyses of political choice, American Political Science Review 82 (3) pp 719-36.

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• social-cognitive theory – people’s effort relates to their perceptions of self-efficacy in task performance.218 People do not respond immediately and directly to stimuli; for many, there are delays, hesitations and doubts before they act. Some of the circumstances in which concepts of ‘incentives’ are applied are concepts of that kind – for example, on the effect that unemployment benefits are supposed to have on the speed of return to work.219 Norms and pre-existing influences may affect decisions. Kreps argues that extrinsic incentives may at times conflict with norms and other intrinsic motivation, leading perversely to the effect that incentive schemes may have the opposite effect from that intended. 220 All this implies that, even if an incentive is capable of being analysed in terms of costs and benefits, understanding the balance may not be enough to establish the effects in practice.

3.3 Rationality The idea of individual rationality developed as a formal, strictly methodological approach to interpreting certain problems. It identifies individuals as rational, autonomous decision makers, who make consistent choices to maximise their utility. The idea of rationality in public choice theory can be identified with three key elements: • Rational actors are assumed to be consistent – if a person prefers A to B, the same person does not also prefer B to A. • Rational actors are self-interested – the decisions they make are intended to work to their own benefit. • Rational actors make decisions that are consistent with their selfinterest. Something like rationality is needed in methodological individualism because, without a degree of consistency, it would be almost impossible to generalise; if the models used in the methodology assumed that people were liable to be inconsistent, self-contradictory and 218

219

220

S Bonner, G Sprinkle, 2002, The effect of monetary incentives on effort and task performance, Accounting, Organizations and Society 27 (4-5) pp 303-45. S Nickell, 1979,The effect of unemployment and related benefits on the duration of unemployment, Economic Journal 89 pp 34-49. D Kreps, 1997, Intrinsic motivation and extrinsic incentives, American Economic Review Papers and Proceedings 87 (2) pp 359-64. 73

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unpredictable, it would be difficult to draw anything from them at all. Elster argues that rational conduct calls for consistency in motivation, intention and behaviour;221 the further emphasis on self-interest comes from economics, part of what Elster calls a ‘broad’ concept of rationality. The level of consistency that is looked for is sometimes more than seems feasible. However, Becker argues in a classic article, that it does not matter much whether or not the people whose decisions contribute to the process are individually rational or not; all that matters is that decisions in aggregate are more or less consistent with previous decisions, so that we can generalise a little.222 This position has been used to justify a range of recommended actions in public policy. Buchanan argues: In one sense, all of public choice or the economic theory of politics may be summarised as the ‘discovery’ or ‘rediscovery’ that people should be treated as rational utilitymaximisers in all of their behavioural capacities. ... because people will tend to maximise their own utilities, institutions must be designed so that individual behaviour will further the interests of the group ... The challenge to us is one of constructing, or re-constructing, a political order that will channel the self-serving behaviour of participants towards the common good in a manner that comes as close as possible to that described for us by Adam Smith with respect to the economic order.223 Constructing a ‘political order’ around this model crosses the line from methodology to substantive policy. It assumes both that self-interested utility maximisation is a true description of human conduct and that we know how best to respond on that basis. Both those assumptions are highly questionable. Hayek is particularly critical of the first of these assumptions: he argues for an ‘anti-rationalist’ approach which regards man not as a highly rational and intelligent but as a very irrational and fallible being, whose individual errors are corrected only in the course of a social process, 221 222

223

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J Elster, 1979, Ulysses and the sirens, Cambridge: Cambridge University Press. G Becker, 1962, Irrational behaviour and economic theory, Journal of Political Economy 70 (1) pp 1-13. JBuchanan, 1978, The economics of politics, London: Institute for Economic Affairs, p 17.

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and which aims at making the best of a very imperfect material ...224 In relation to the second assumption, it is not obvious that there are any clear, unequivocal policy prescriptions to be drawn from this kind of analysis. One problem with assuming that actors are rational is, unfortunately, that it leads writers to base their claims about what rational people would do on their own opinions. That is the central weakness of John Rawls’ book A theory of justice, where Rawls supposes that anyone would agree to allow people to be unequal if it made everyone better off.225 Reasonable people may reasonably disagree,226 and once they do, the main props of the argument are knocked away. A less weighty argument can be found in Charles Murray’s Losing ground, which claims to show that rational people will stay on benefit for as long as they can.227 That rings immediately false to anyone who has had any experience of benefits in practice – there would be something deeply irrational about opting for social exclusion, financial deprivation, stigma and lack of choice. In other words, commentators are liable to argue from their own preconceptions and pretend it is the outcome of a dispassionate, rational analysis.

Indifference curves The behaviour of the rational individual is usually represented in terms of indifference curves. To explain how these curves are arrived at, I am going to take the model in three stages. The first stage is shown in Figure 3.2. It is based on a nominal choice between food and health care. What an individual can choose is limited by resources, so there is a budget line, and where the limit applies, the individual can choose more of one thing only by sacrificing another.The point that is chosen depends on the individual. Now, the argument goes, if an individual is happy with that much food and health care, the same individual will be happy to have more of either, so long as there is not less of the other commodity. The shaded rectangle in 3.2 represents a large number of possible options,

224

225 226 227

F Hayek, 1948, Individualism and economic order, Chicago, IL: University of Chicago Press, pp 8-9. J Rawls, 1971, A theory of justice, Oxford: Oxford University Press. N Daniels, 1975, Reading Rawls, Oxford: Blackwell. C Murray, 1984, Losing ground, New York, NY: Basic Books. 75

Reclaiming individualism Figure 3.2: Choices

Food

Point chosen

Budget line

Health care

all of which are preferable to the initial choice.228 If the individual gets a bigger budget – a higher budget line – he or she will be able to choose more. That is the first stage of the model. The second stage entails some trade-offs. If the individual has the option of a lot more food for a little more health care, or a lot more health care for a little more food, that individual may be persuaded to trade off one against the other. We can identify a ‘marginal rate of substitution’ – the extent to which one bundle of options can be substituted for another.229 This is shown in Figure 3.3. The effect of trade-offs produces a curve. The curve is called an ‘indifference curve’, because it represents a series of options which an individual views as being no better than each other. The curve is conventionally drawn convex to the origin, because that is believed to be the most common position. Bending the curve inwards has been argued to reflect a diminishing marginal rate of substitution – that as people gain more of commodity A, an extra allocation adds less than an extra allocation of commodity B would, and they say that

228

229

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Versions of this argument can be found in H Green, 1971, Consumer theory, Harmondsworth: Penguin, pp 34-5 and C Jones, 2005, Applied welfare economics, Oxford: Oxford University Press, pp 4-5. M Blaug, 1968, Economic theory in retrospect, London: Heinemann Educational, p 348.

Part Three: Methodological individualism and rational self-interest Figure 3.3: Derivation of the indifference curve Area where health care is given up for food

Food Area where food is given up for health care

Health care

they would rather add some more of commodity B to the mix.230 That is also taken to imply a smooth curve, rather than a wobbly line or straight lines. However, the shape of the curve depends on how substitutable, and how complementary, the items are that are being chosen.231 Some curves are close to a right-angle; some are relatively flat; some may be concave. (If the curve was concave, it would imply that people preferred to have more of one set of commodities or the other, but not both at the same time. That makes little sense when the choice lies between ‘food’ and ‘health care’, but it may make sense if the choice lies between, say, bundles of commodities needed for urban and rural living.) It may also be appropriate to add a word of caution about the way the figure has been drawn. In common with many of the textbooks, the curve is wider and broader than is plausible – most graphical representations of indifference curves tend to be made in big, sweeping curves, because points on smaller, tighter curves are difficult 230

231

M Parkin, M Powell, K Matthews, 2005, Economics, Harlow:Addison-Wesley, p 164; N Mankiw, 2011, Economics, Andover: Cengage Learning, p 443; M McDowell, R Thom, R Frank, B Bernanke, 2009, Principles of economics, Maidenhead: McGrawHill, pp 137-8;S Ison, S Wall, 2007, Economics, Harlow: Prentice-Hall, pp 75-6. Parkin et al, 2005, pp 165-6. 77

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to distinguish on the printed page. A broad, flat curve does seem to imply that people might be ready to make substantial trade-offs, and that may not be true. The third stage of the argument describes an ‘indifference map’, a series of indifference curves.232 This is shown in Figure 3.4. People choosing on a higher indifference curve have a higher level of utility than when they choose on a lower indifference curve. The indifference curves run parallel to each other – they cannot ever cross, because that would imply that higher and lower points on the distribution are all equal. The budget line limits how high the indifference curve is that the person can achieve. Restrictive budgets tend to push people onto lower indifference curves, and higher budget lines give them access to higher curves, but if the bundle of goods is badly chosen or allocated, people working within a budget could be on a much lower indifference curve than the ideal. Figure 3.4: An indifference map

Food

Budget line

Health care

Indifference curves represent a range of choices where the individual is indifferent, but higher indifference curves are always to be preferred to lower ones. Representation of taste by indifference curves allows us to speak of choosing as maximising. Once indifference curves 232

78

See e.g. McDowell et al, 2006; Ison,Wall, 2007, pp 76-7; J Beardshaw, 1992, Economics: A student’s guide, London: Pitman, p 122.

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have been identified, Robinson Crusoe’s choices become logically equivalent to maximising utility, where utility is any numbering of indifference curves whatsoever as long as higher numbers are assigned to higher curves. To say that Robinson Crusoe maximises utility is just a convenient and expedient way of saying that he chooses consistently.233 It says much more than that. It is also saying that people will trade off their choices, that they will choose to have more, that they will always aim higher and that they will use their resources to the best effect. The theory makes most sense if the idea of utility is confined strictly to material terms, as a property of the commodities – but if it is used in that way, the idea of utility adds nothing to the analysis that we could not get by saying that people want ‘more stuff ’ instead. If on the other hand, utility has something to do with satisfaction, the model I have just outlined does not actually consider satisfaction at all; it is about preferences and choices. The marginal rate of substitution is defined in terms of the choices made between commodities, or at least between bundles of commodities. The model assumes that it is possible to deliver bundles in varying quantities, that the bundles can be set against each other and that people are making choices between those bundles. This is a complex model, and like the exposition, the criticisms are best taken in stages. The first stage of the model starts with the central assumption that preferences are ‘strongly monotone’, which means that more is better. The shaded area in Figure 3.2 is preferable to the point initially chosen on the budget line. This supposes that higher quantities of goods are generally preferable to lower ones. ‘One of the fundamental assumptions of economics,’ a basic textbook tells us, ‘is that consumers have unlimited wants. They would always prefer to consume more rather than less.’234 This assumption is usually referred to as ‘nonsatiation’. Wherever indifference curves are identified, there are higher indifference curves above them. There is no point at which satisfaction is reached, and no point at which progressively higher indifference curves converge. The maps are supposed to describe ‘ordinal utility’ – ranking preferences, rather than measuring them – rather than cardinal utility, based on any kind of measurement.235 233 234 235

D Usher, 2003, Political economy, Oxford: Blackwell, p 80. A Anderton, 1997, Economics, Ormskirk: Causeway Press, p 83. A Deaton, J Muellbauer, 1980, Economics and consumer behaviour, Cambridge: Cambridge University Press, pp 28-9. 79

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Within this model, there is no effective limit to the utility that is possible, other than a budget constraint, and no limit to potential demand. The idea of nonsatiation is hard to accept. Yes, taken as a whole, people have shown a tendency to consume more and more goods over time. However, that phrase ‘over time’ should make us pause; it is one of the surest indications that what is happening is a shift in preferences, not the expression of an insatiable appetite. It may be true, in many cases, that having more of a commodity is preferable to having less (or at least, that it does not make things worse), but it is not true in every case. There may well be a limit to how much people will consume. You can have too much of something – too much water, too much heat, too much attention from a social worker. In the not too distant past, many old people, admitted to long-stay geriatric care, received so much provision that they were unable to lead independent lives.236 Considerable advances may have been made in recent years in developing less intrusive, less presumptuous and less expensive alternatives, but there is still a way to go. The Adam Smith Institute supposes that, because the NHS is free at the point of delivery, the demand for health care in the NHS will carry on increasing without stopping.237 That is not how it goes. Some goods come with a cost attached, and it can happen that the costs exceed the benefits. Theoretical economists try to get round the obvious objections by referring to ‘local nonsatiation’ – nonsatiation only in the narrow, specific context where marginal decisions are being made – but even this does not work. Indifference curves have not often been put to an empirical test, but one of the few studies that did so found that people would only pay to eat so many pastries; after they had eaten enough, they had to be paid to eat any more.238 While many of us would like to have more possessions, or perhaps to renew what we have, there is no reason to suppose that everyone who has a bed, a pram, a fridge or a caravan must want another one. Many everyday items, including food, pharmaceutical products, energy and transport, have practical limits on how much is it possible or desirable to consume.

236

237

238

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e.g.A Cartwright, L Hockey, J Anderson, 1973, Life before death, London: Routledge & Kegan Paul; V Carver, P Liddiard (eds), 1978, An ageing population, London: Hodder & Stoughton, part 6. Adam Smith Institute, (n.d.) The NHS: A dysfunctional insurer, www.adamsmith. org/think-piece/health/the-nhs%3A-a-dysfunctional-insurer/ K MacCrimmon, M Toda, 1969, The experimental determination of indifference curves, Review of Economic Studies 36 (4) pp 433-51.

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The second stage of the argument is not quite so problematic as the first, but there are still difficulties with it. It depends on the individual’s willingness and capacity to trade off items against each other – if there was no willingness to sacrifice one commodity for another, there would not be a curve, but a right-angle, as there is in Figure 3.2. The indifference curve is usually assumed to be downward-sloping (it might go upwards when people have had too much239) and smooth, though that last bit is not essential. These assumptions are fairly important in later applications of the theory, because the trade-offs are necessary for people to be able to negotiate alternative settlements with each other. There are, however, items that are difficult to trade off against each other. For example, people who are very poor spend more on food than others do; the ‘Engel coefficient’ measures poverty by identifying the proportion of people’s income that is spent on food.240 The poorer people are, the more difficult the compromises become – they have to be made between essential items, not discretionary purchases. The kind of trade-off represented in these graphs is a rather questionable representation of many of the decisions that people make. The amounts people spend on housing, transport, child care and basic household expenses typically relate to choices made at some time in the past; household budgets need to distinguish settled liabilities, where trade-offs are no longer effectively possible, from disposable income. Other items, like emergency dental treatment or criminal fines, can occur, and when they do they may reasonably take priority over all other potential choices. (Agencies providing ‘money advice’ to debtors encourage them to prioritise debts; criminal liabilities, for example, have direct implications for physical freedom in a way that civil liabilities do not.) The nature of the decisions that people face in such circumstances can still be understood economically, but the kind of choice that people are able to make is rarely a choice between food and health care, or more education or more transport. What happens, rather, is that each decision has to be reviewed in its own terms, considering benefits, costs and the extent to which the expenditure can be said to be optional. There may be scope for choosing between commodities, but it is limited by a wide range of decisions, possibly including decisions relating to utility, and by decisions about priorities between types of expenditure.

239 240

MacCrimmon, Toda, 1969. P Spicker, S Alvarez Leguizamon, D Gordon, 2007, Poverty:An international glossary, London: Zed Books, pp 64-5. 81

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The third stage in the argument – the construction of an indifference map – is a way of relating the structure of preferences to a range of budget lines. The implication of an indifference map is that people will always aim to be on the highest indifference curve possible. The maximum is reached because there are limits to resources, not because there are limits to what people want. The assumption of nonsatiation is untenable, and that raises the question as to whether the model could not be adapted to introduce reasonable limits to consumption. Some writers think that indifference curves can form a full circle,241 and indifference curves have been represented in ‘contour maps’ of large, concentric circles, where a specific point in the centre of the curves marks out the ideal distribution.242 Drawing contours suggests a much greater flexibility and willingness both to trade off bundles of commodities and to accept the disadvantages of excess supply, than is plausible. When a circular curve is translated into behaviour, it implies that people will trade off the disadvantages of excess consumption; so, they will accept health care they do not want so that they can get a bit less food that they do not want. I do not think that makes any sense at all, which is why I have decided not to include any indifference contours here. Figure 3.5 suggests an alternative approach. It is much more restrained than a contour map, but for the avoidance of doubt, I should make it clear that I am leaving the literature on the subject behind in proposing it. If there are limits to consumption, the series of indifference curves will be limited. The figure marks out two ineligible areas – levels of consumption where utility would be impaired.There is a limit to how much someone would want to consume of either type of commodity, marked out by the line of dashes, and it follows that the indifference curves can only go so high. If the individual has a more restrictive budget line, marked out here as a dotted line, those restrictions would be irrelevant; but as the budget increases, it becomes possible, and even likely, that the person will stop consuming at a certain point, and use resources for something else entirely. The other constraint in the map is the budget line. That has been taken to tell us something important about the way that choice works in a free market. If there is a competitive market, prices are established in the market, rather than being negotiated by every participant. The 241

242

82

e.g.V Fon, B Boulier, R Goldfarb, 1985, On a more general rationale for circular indifference curves, Studies in Economics and Finance 9 (2) pp 29-36. D Begg, S Fischer, R Dornbusch, 2005, Economics, Maidenhead: McGraw-Hill, p 68.

Part Three: Methodological individualism and rational self-interest Figure 3.5: The limits to indifference curves

Ineligible level of food consumption

Satiation – the limits to consumption

Food

Budget line Ineligible level of health care

Health care

slope of the budget line depends on the relative price of the goods – the trade-off between goods always happens in the same ratio. That means in principle that in a market, everyone should be facing the same slope on the budget line – even if people have different amounts to spend, and different patterns of preference. Consumers maximise their utility – reaching the highest possible indifference curve – when the indifference curve just touches the budget line. At that point, their marginal rate of substitution must be the same as the slope of the budget line. As they are maximising their behaviour in relation to the same slope, they will be doing it at the same angle, and their marginal rates of substitution must all be the same.243 In a competitive market, Przeworski suggests, ‘it is easy to be a utility maximiser’;244 the way to maximise utility is to choose a point where the only information that people need to know is the price ratio. (In Huckleberry Finn, we are told that cows on a hill always graze with their heads pointed in the same direction.245 In the same way, it seems, utility maximisers always line up parallel to each other.) There are two obvious problems with this. The first is that people do not face the same price ratios. Markets do not offer uniform prices 243

244 245

A Przeworski, 2003, States and markets, Cambridge: Cambridge University Press, pp 20-4. Przeworski, 2003, p 24. Mark Twain, Huckleberry Finn, ch 11. 83

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– for example, prices are commonly discounted for bulk buyers – and it is well established that the options for poor people are different from the options of other people.246 The second is the assumption that the budget line is the only relevant constraint. I have argued that there are limits to what people will consume. Those limits could be reached before the budget line – someone who is allocating a budget could buy as much as desired, but stop before the budget is all spent. If that happens, the argument that everyone can use the price ratio to maximise their utility no longer applies.

The maximisation of utility The proposition that rational actors will ‘maximise’ their utility has been central to much of the analysis of economic behaviour. ‘The consumer,’ we are told, ‘is said to maximize utility, and utility is defined as that which the consumer attempts to maximize. This truism is completely general and cannot be false.’247 The attempt to make the definition seem circular is probably done to put the issue beyond challenge, but there are issues here, which go beyond the definitions. The first is that people are consumers – that the options they are choosing have been commodified and they can act to choose on that basis. If utility is confined to the sphere of consumer activity – if this is just a circular definition, referring to whatever a consumer maximises – it is not the same thing as self-interest. Self-interest depends on issues which cannot be identified as commodities – capabilities such as security, bodily health or family life. And if utility is defined as whatever people are trying to maximise, that leaves open the thorny question of what sort of thing utility could be, and whether people are even trying to maximise the same kinds of things when they make choices. The second assumption lies within the proposition that consumers must be trying to maximise something. It is not certain that they are trying to maximise anything at all. The model I have outlined describes a range of options that people might choose, a limit to what they might want, and a limit to what they might achieve. Winch writes: We can ... maximize the utility function, subject to the [budget] constraint, by the techniques of calculus, or find the tangency point between an indifference curve 246

247

84

See e.g. R Mendoza, 2011, Why do the poor pay more?, Journal of International Development 23 (1) pp 1-28. D Winch, 1971, Analytical welfare economics, Harmondsworth: Penguin, p 17.

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and the budget constraint by geometry. If the second order conditions ... are appropriate, we have a maximum solution ...248 This does have the look and feel of an optimisation problem. There is not all the information we need, because there are no numbers; indifference maps only show ordinal utility, rather than quantities. (Economists tend to treat optimisation and maximisation as if they mean the same thing. Sen explains that they do not – optimisation is concerned with finding the best solution, maximisation with reaching a point from which no improvement is possible, and there may be several of those. ‘While a best alternative must also be maximal, a maximal alternative need not be best.’249) The point at which choices are maximised is generally identified through the use of differential calculus. The standard defence for this model of behaviour is not to claim that individuals are capable of sophisticated mathematical calculations, but rather to suppose that the outcome of practical pressures will lead people incrementally to adopt behaviours which are more likely to benefit them. A billiard player does not need to know the laws of physics, the argument runs, and a consumer does not need to understand the maths to work out that he or she can do no better.250 For that to work, however, a long string of conditions have to be met. The items must be things that the consumer in question wants to choose at all. The items have to be capable of being traded off – there has to be an indifference curve. Then the budget line has to be a straight line – people cannot change how much they get by buying more of one thing than another. Every consumer must face the same price ratios. Even if those conditions were all satisfied, it would not tell us how much of a good people should be choosing to optimise their position, or in what proportions they would need to do it. The third smuggled assumption here is that utility is something that people actually can maximise. There is a critical difference between trying to maximise utility and doing it. Choices are not the same as preferences; preferences are not the same as self-interest; utility is not the same as either. Even if utility reflects the choices that people 248 249

250

Winch, 1971, p 18. A Sen, 1997, Maximisation and the act of choice, Econometrica 65 (4) pp 745-79, p 765. M Friedman, 1953, Essays in positive economics, Chicago, IL: University of Chicago Press. 85

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make (as Winch implies), there is no direct reason to suppose that what people choose will actually maximise the function. The conditions required for that to happen are hidden in the ‘second order’ conditions, such as curvature of the indifference curve. One effect of the process of choice, Sen argues, is that it puts people in a position where some options close. People might find themselves in a position they cannot improve, which is not the best position possible.251 Considered in aggregate, it is far from clear that people, whether they are understood as individuals, groups or aggregates, maximise anything at all. People compromise. If they are exercising choices, they have to. They look for satisfactory arrangements; they manage. Their decisions are made without perfect information; sometimes they are constrained by circumstances, and their decisions do not always reflect their wishes; sometimes they make bad decisions. Thaler comments: ‘the orthodox economic model of consumer behaviour is, in essence, a model of robot-like experts. As such it does a poor job of predicting the behaviour of the average consumer.’252 Steven Keen adds a devastating practical argument: there may be no conceivable way of making all the calculations that are needed to arrive at a rational solution. Sippel’s very limited experiment asked students to put together a preferred bundle of eight goods. They did not do it consistently.253 With 88 possible combinations to consider, there are 16.7 million combinations – far too many to calculate.254 This is what computer buffs call a ‘combinatorial explosion’. Full-blooded rationality is quite impossible; this can only be dealt with sensibly through decision rules, short-cuts and compromises. Lee and Keen write: The consumer can quite plausibly not be excluded from having a preference structure that is incomplete, is without a single preference ranking, is in part lexicographic, contains fixed proportions consumption patterns, and is based on satiated, non-maximization choice decisions. Such a preference structure is inconsistent with a utility function that permits utility maximization, generates marginal utility

251 252

253

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Sen, 1997. R Thaler, 1991, Quasi rational economics, New York, NY: Russell Sage Foundation, p 22. R Sippel, 1997, An experiment on the pure theory of consumer’s behaviour, Economic Journal 107 pp 1431-44. S Keen, 2011, Debunking economics, London: Zed Books, pp 70-2.

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(whether diminishing or not), and has indifference curves (whether strictly convex or not).255 The maximisation of utility is the second impossible thing we are being asked to believe. We get to it only through a long series of complex assumptions: that utility is realised through choices, that those choices lie between identifiable commodities, that people are willing to trade off the commodities against each other, that the choices they make are consistent with their preferences, that there is no limit to the satisfaction that people can achieve, that in the process of choosing there will be unique opportunities for optimisation and that optimising those choices achieves utility. The argument is full of holes: we never really get to know what is being optimised, which actors are doing it, or what kind of process they are going through to get there.

Some methodological problems The theory of rational self-interest suffers from a considerable number of defects. As we move through the sequence of the arguments, they become more and more elaborate, and the definitions become more slippery. The first problem is the question of whether we are talking about utility in any way as hedonic satisfaction, or whether utility consists only of preferences between commodities. The second lies in the difference between utility and preference on the one hand and choice on the other. Utility is supposedly about the realisation of selfinterest; but choice inevitably involves compromise, and the model of indifference curves is built on trade-offs. The third is the problem of maximisation, and whether there is anything here that is capable of maximisation. There might be no acceptable trade-off; there might be no optimum solution. The inconsistency and conceptual muddle make it difficult to put any confidence in it as a prescription for rational behaviour. But then there is another, deeper problem with the analysis: the concept of the ‘individual’, and the way that this concept is taken to explain behaviour overall. The mathematical techniques that are being used rely conceptually on the summation of infinitely small steps to produce a result. If we were genuinely concerned with the position of individuals, Rothbard argues, we could not talk about maximisation in these terms. Individuals cannot make decisions in impossibly small 255

F Lee, S Keen, 2004,The incoherent emperor: a heterodox critique of neoclassical microeconomic theory, Review of Social Economy 62 (2) pp 169-99. 87

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stages; they have to make decisions that change their state. That means that every individual function must be discontinuous – there is no smooth curve on a graph.256 Whose behaviour is being described, then? The rational individual in this case must be a representative of a group of people – the relatives and neighbours of homo economicus, where inconsistencies in behaviour are smoothed by averaging. I pointed before to the contradiction that lies between rational action and the model of the average individual; if we are considering decisions as averages, they cannot also be the decisions of rational utility maximisers. If ‘utility’ is based on optimisation of preferences, and anyone, anywhere ever makes a bad decision (that is, a decision that does not optimise utility), the aggregate decision must be sub-optimal, and so must the mean average be. This is an example of the distinction I made earlier between different approaches within methodological individualism. Methodological individualists cannot simultaneously claim both that their method represents behaviour in aggregate and that it represents the actions of rational, utility-maximising individuals. The model of rational choice does not stop with an idealised consideration of individual behaviour; it goes on to make statements about ‘emergence’, the way that individual behaviours interact to produce social effects. The strong version of methodological individualism – the belief that individual analysis is all that is needed to explain social action, and that the character of social action will emerge from individual interaction – depends on this being possible. At this point, the theory founders. The choice-based analysis I have been discussing cannot be aggregated to represent the preferences of a group of people. The arguments are made at some length by Steven Keen. In any indifference map, people’s choices depend on the level of resources they have. If people’s indifference maps are not the same, they will make different choices when income increases or falls. So, whenever there is a change in income, people will make further choices; and as independently minded individuals will make a variety of choices, the aggregate preference for a range of items is liable to produce wide-ranging and irregular combinations of choices. Unfortunately for neoclassical welfare economics, there are proofs to show that it is only possible to sum people’s preferences predictably and rationally if everyone chooses to spend extra income in the same way. That condition could only be met if everyone had the same 256

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M Rothbard, 1956, Toward a reconstruction of utility and welfare economics, originally in M Sennholz (ed) On freedom and free enterprise, Princeton, NJ: Van Nostrand, obtained at mises.org/rothbard/toward.pdf

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preferences, and the same indifference maps – in other words, if they were not individuals at all.257 This poses a very serious challenge to the version of methodological individualism that relies on aggregating together the choices of rational actors. The problem is not only that the description of the individual’s behaviour is wrong (though obviously, that does not help). Even if economists were to arrive at a better, more plausible description of individual behaviour, for example through behavioural economics, it would not be possible to put the results together to produce a model of social behaviour. Diverse, rational individual choices cannot be added together to yield a rational or consistent aggregate choice.

3.4 The Pareto principle The Pareto principle is an attempt to reconcile the conflicting interests of rational, self-interested utility maximisers. ‘Pareto optimality’ – not, by the way, what Pareto himself meant by the term – is usually understood as a condition where it is not possible to make any change without making someone worse off. The implication of a position where any change will make someone worse off is that total utility, benefit or resource has been optimised, not that every person has gained. This principle was intended primarily as a test of efficiency, rather than one of mutual benefit – indeed, the idea is sometimes referred to as ‘Pareto efficiency’. The Pareto principle was initially developed as an attempt to get round a thorny problem: how to determine whether people were better or worse off, without imposing any value judgments (that is, judgments that commend or recommend particular outcomes258). Economists argued that they could not legitimately make comparisons between the value of things to different people; they focused, then, on what they could assess (revealed preference) rather than what they could not (‘interpersonal valuations’, which are comparative valuations of different people’s personal satisfaction). This is an impossible boundary to hold to – if we are not allowed to make comparisons between different states of welfare, Kelman asks, how can we ever know that an individual is better or worse off?259 The standard answer to this is that individuals

257 258

259

S Keen, 2011, Debunking economics, London: Zed Books, pp 50-5. R Sugden, 1981, The political economy of public choice, Oxford: Martin Robertson, p 3. M Kelman, 1979, Choice and utility, Wisconsin Law Review pp 769-97. 89

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are better off if they are in a situation that they prefer – though there is also an assumption that individuals prefer to have more. This is generally expressed in two rather different forms. The first, known as the ‘weak’ Pareto criterion, says that a change is an improvement or ‘Pareto superior’ if everyone’s situation is improved as a result. For Arrow, a condition is Pareto optimal ‘if alternative x is preferred to alternative y by every single individual according to his ordering’.260 The second, ‘strong’ Pareto criterion, states that a change is an improvement if it makes at least one person better off without making anyone worse off. The mainstream expression of the principle, expressed for example by Sugden, states that a condition is Pareto optimal ‘if one person’s welfare is greater in some end state x than in another end state y, and if no person’s welfare is less ...’261 The use of the terms ‘weak’ and ‘strong’ seems to imply a connection between these two positions – that the weak principle is a step on the way to the strong one, and that if the strong principle is true, the weak principle must also be. However, the terms in which the issues are being considered are not equivalent. Arrow’s definition is looking at preferences, Sugden’s at the outcomes of choices; Arrow is concerned with process, Sugden with the end state;  Arrow’s definition focuses on every single individual, Sugden’s on one person. I think these are different criteria. Kaplow and Shavell think that the Pareto principle poses a fundamental objection to the use of any non-individualist criteria. They argue that: for any non-welfarist method of policy assessment (i.e., for any non-individualistic social welfare function), there always exist circumstances in which the Pareto principle is violated. In other words, any conceivable notion of social welfare that does not depend solely on individuals’ utilities will sometimes require adoption of a policy that makes every person worse off.262

260

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K Arrow, 1967, Values and collective decision making, in E Phelps (ed) Economic justice, Harmondsworth; Penguin; compare A Sen, 1970, The impossibility of a Paretian liberal, Journal of Political Economy 79 (1) pp 152-7. Sugden, 1981, pp 36-7. L Kaplow, S Shavell, 2001, Any non-welfarist method of policy assessment violates the Pareto principle, Journal of Political Economy 109 (2) pp 281-7.

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There is a naughty expression here – that moving away from Pareto optimality ‘makes every person worse off ’. Moving away from the Pareto optimum does not usually put ‘every person’ in a worse position; it means that at least one person is in a less preferable position, and that is not the same thing. ‘Every person’ is affected only in the rather specialised sense that the total sum of utilities is diminished. That seems to mean that the population as a whole is worse off, not that each individual is – which is a collective concept rather than an individualist one. Conventionally, Pareto efficiency is represented in terms of indifference curves. The pattern is shown in Figure 3.6.263 The point at which individual utility is highest is the point of the highest indifference curve. Each person has his or her own set of indifference curves; the small graphs to left and right show the preferences of persons A and B. In both cases, higher indifference curves run parallel to the lower ones: each curve represents a set of options, which the person views as having equal worth. In the middle of the figure, the graph for person B is flipped over and put on top of the graph for person A. This is known as an Edgeworth box. For any two people, there should be a point at which they are both on the highest possible curve for a given distribution of goods; given that there is a series of curves for both people (though I have already explained that there may not be), there Figure 3.6: Pareto optimality

Food

Food Person B

Person B

Person A

Housing

Housing Food

Person A

Housing

263

Compare R Starr, 1997, General equilibrium theory, Cambridge: Cambridge University Press, p 26. 91

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is a series of possible distributions, which represents the best settlement between them and the other party. The dotted line running through the box, sometimes called the ‘contract curve’, marks out the points where both parties are on the highest possible curves for a given distribution. At any point which strays from that line, they will both be on lower indifference curves than they could be for the same quantity of goods. There are reservations to make about using indifference curves this way. It is not self-evident that competing preferences can be reconciled, or that a contract curve can be identified. The trade-offs that are implicit in the way that indifference curves are drawn are not necessarily trade-offs that people are willing to make; and some of the options which are open to people are ineligible – not to be chosen. And although Pareto optimality usually begins from the proposition that noone should be made worse off, indifference curves express preferences rather than outcomes; they are not equivalent to utility, even if they have sometimes been represented in those terms. Beyond this, Keen points to a further problem: indifference curves are designed so as to be affected by the resources that people have available. Every individual has a map of indifference curves, and the contours of the indifference curves consequently reflect how much income the individual has. If individuals have different preferences, it follows that the aggregation of preferences, and the contours of indifference curves in aggregate, must reflect the distribution of resources, and that with a different distribution of resources, the pattern of preferences, and the optimum, must be different.264 I will return to the issue of distributions shortly. Economic critiques of collective action treat non-optimal distributions as evidence that collective arrangements do not work.265 That confuses Pareto superiority with legitimacy, desirability or mutual benefit. Even if we add the normative statement that ‘each person is the best judge of his own welfare’,266 which goes some of the way to reconcile expressions of preference with assessments of well-being, the Pareto principle does not tell us that the best option available for a person is good enough for that person. There are many possible situations which satisfy the requirements of the Pareto principle – situations 264

S Keen, 2011, Debunking economics, London: Zed Books, pp 46 ff.

265

e.g. Kaplow, Shavell, 2001; T Damjanovic, 2006, On the possibility of Paretoimproving pension reform, The Manchester School 74 (6) pp 741-54; A Hasman, L Osterdal, 2004, Equal value of life and the Pareto principle, Economics and Philosophy 20 pp 13-23. R Sugden, 1981, The political economy of public choice, Oxford: Martin Robertson pp 36-7.

266

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where distributions are not altered, there are no efficiency gains to be made, where reallocations cannot be conjured up to satisfy demand, and one person cannot be made better off without making another worse off – which nevertheless disregard fundamental principles of allocation, including rights and the demands of morality.267

The problem of inequality If a distribution makes one or more people better off without making anyone worse off, then, given that what is being produced is apparently what the people in question want, then other things being equal that might be thought to be a better distribution. Griffin writes: There are standards for the good of many persons that are as obvious and inevitable as the standard for one person. There is this one for instance: if some in a group become better off and none becomes worse off, the state of the group is better. It is hard to see how one could resist such a principle.268 I propose to resist it nevertheless. Market economics is not just about allocation; it is about allocation in conditions of scarcity. Prices tend to some degree to reflect the level of demand. If some people have resources substantially in excess of others, they will be able to use those resources in exchange for scarce commodities, effectively outbidding competitors, denying access to others in the process. Some things, like education, housing location and access to amenities, are ‘positional goods’; their value reflects exclusivity and their impact on social status.269 People’s ability to participate in society, or ‘economic distance’, depends on whether they have access to capabilities and commodities that others have; that is one of the key reasons why most European countries use relative income as an indicator of poverty.270 In the most extreme cases, people are not only disadvantaged but also effectively cut off, or excluded, from the basic structures that are needed to function in society:271 a person who is homeless and 267 268 269 270

271

A Sen, 1970, Collective choice and social welfare, Amsterdam: North Holland. J Griffin, 1986, Well-being, Oxford: Oxford University Press, p 147. F Hirsch, 1976, Social limits to growth, Cambridge, MA: Harvard University Press. A Atkinson, B Cantillon, E Marlier, B Nolan, 2002, Social indicators: The EU and social inclusion, Oxford: Oxford University Press. S Paugam, 1993, La disqualification sociale, Paris: Presses Universitaires de France. 93

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sleeping rough will have difficulties in gaining access to employment or income, but without housing they may also not be able to store food, or to get access to health care or basic communications. If inequality in resources increases, one of the direct effects of the ability of richer people to command resources is that those who are less rich will have to pay more, and those who are more seriously disadvantaged will be denied access. An unequal distribution does, then, tend to make those who are disadvantaged worse off. The same conceptual defect undermines Rawls’ proposal for a ‘difference principle’, which is a version of the weak Pareto criterion. If inequality leads to everyone having more, he suggests, then reasonable people are likely to accept it.272 Several critics have expressed concern that this underestimates the importance of inequality.273 When people complain that a distribution is ‘unfair’, they are not just griping about other people’s good fortune. They have a sense that they are hard done by, and they are likely to be right. The effect of positional inequality, and particularly inequality in the distribution of resources, is manifest in social problems such as health and life expectancy, education and issues of law enforcement. The most basic problem is that some people have very restricted entitlements, implying a limited ability to participate in their society; 274 but nations which have greater inequality tend to have not only greater poverty, but worse health, greater crime and more social problems. The lesson of The spirit level is that there are costs to inequality, even in prosperous societies, and we ignore them at our peril.275 Unequal distributions do not always have the same effects. Some prices are not much affected by relative demand, and if someone gains relative to a small group of people, and all of them are price takers in a wider economy, it may not affect the command of resources of others in the group. Sometimes those who are disadvantaged by the distribution will better be able to buy some goods, but less able to buy others. That is the position of many people who are disadvantaged in European countries; they may have access to some possessions, like electrical goods and clothing, but they do rather less well for positional goods like housing or land use. (The phenomenon is sometimes referred

272 273 274 275

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J Rawls, 1971, A theory of justice, Oxford: Oxford University Press. N Daniels, 1975, Reading Rawls, Oxford: Blackwell. A Sen, 1999, Development as freedom, Oxford: Clarendon Press. R Wilkinson, K Pickett, 2009, The spirit level, London: Allen Lane.

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to in terms of ‘distributional externalities’276 or ‘pecuniary external effects’; it has important consequences for the efficient operation of markets.277) Taken in the round,‘purchasing power’ is a relative concept, defined not only by the resources that an individual has, but also by the resources that other people have. That is potentially true whether one person gains disproportionately, or some people, or most. Small differences in distributions should not have much impact, but any substantial alteration in distributions has the potential to affect other people’s purchasing power. When that happens, it is not possible to separate the position of each person individually from everyone else. As such there is an implicit violation of the Pareto principle. To ensure that no-one is worse off, any loss of command over resources in some quarters would have to be offset by an increase in resources in other respects. That implies that any substantial improvement must be shared; the larger the gain, the larger the adjustment must be. In principle, it should be possible to formulate the Pareto principle so that the distributive implications of different arrangements are taken into account.278 If people think that inequality or unfairness is unacceptable, that implies that they will be on a lower indifference curve than they would be if there was a fair allocation.279 That general observation is supported by a set of experiments, which show that people in a range of societies are likely to reject settlements in a game that they consider grossly unfair, even if it implies some personal loss.280 (By contrast, intriguingly, the decisions of chimpanzees are not affected by the distribution: ‘one of humans’ closest living relatives behaves according to traditional economic models of self-interest,

S Robinson, 1976, Income distribution and the social welfare function, https://www. princeton.edu/rpds/papers/WP_52.pdf 277 Y Ng, 2011, Common mistakes in economics by the public, students, economists and Nobel Laureates, New York, NY: Nova Publishers, https://www.novapublishers. com/ catalog/product_info.php?products_id=23969, p 44 278 S Robinson, 1976, Income distribution and the social welfare function, https://www. princeton.edu/rpds/papers/WP_52.pdf 278 Y Ng, 2011, Common mistakes in economics by the public, students, economists and Nobel Laureates, New York, NY: Nova Publishers, https://www.novapublishers.com/ catalog/product_info.php?products_id=23969, p 44.. 279 J Henrich, R McElreath,A Barr, J Ensminger, C Barrett,A Bolyanatz, J C Cardenas, M Gurven, E Gwako, N Henrich, C Lesorogol, F Marlowe, D Tracer, J Ziker, 2006, Costly punishment across human societies, Science 312 (57181) pp 1767-70. 280 K Jensen, J Call, M Tomasello, 2007, Chimpanzees are rational maximisers in an ultimatum game, Science 318 pp 107-8. 276

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unlike humans, and ... this species does not share the human sensitivity to fairness.’281) From the outset, however, the Pareto principle has been taken to exclude any consideration of fairness, on the ground that any comparison of the relative positions of individuals calls for an interpersonal valuation.282 This is really two objections bundled into one. The first part concerns the difficulty of comparing the satisfactions or utilities of different people. It is debatable whether the aim should be to gauge satisfaction, or more simply to judge whether people are better or worse off. If welfare is gauged in economics with the ‘measuring-rod of money’,283 that measuring rod can be used to compare people’s relative positions. The second objection is that any comparison calls for a value judgment. Robbins argued that while it was possible to ask an individual whether or not things were better, or to observe the individual’s behaviour, it was not possible to do that for more than one person.284 His position is inconsistent. If it is possible to use these methods to decide that individuals are better or worse off, it is also possible to use them to decide that two or more people are. If it is not possible to make judgments about relative positions, it is not possible to make judgments about the situation of individuals either. The upshot of this, however, is that analytical welfare economics – the ‘new welfare economics’ of the 20th century – is almost silent about the problem of inequality. In psychological and sociological terms, the exclusion of issues of distribution is completely unconvincing.285 In economic terms it is blinkered – deliberately excluding relevant factors from the account. In moral terms, it is indefensible. As Figure 3.6 suggests, the Pareto criteria would be satisfied routinely if one person had all the resources, and the other had none. Ryan comments: There are innumerable Pareto-efficient situations which strike observers as intolerable ... An economy in which all resources belong to one person and everyone else is starving to death is Pareto efficient, since there is no way 281 282 283

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I Little, 1957, A critique of welfare economics, Oxford: Oxford University Press, p 57 A Pigou, 1932, The economics of welfare, London: Macmillan, p 11. Cited in S Marglin, 2008, The dismal science: How thinking like an economist undermines community, Cambridge, MA: Harvard University Press, p 177. see W Runciman, 1966, Relative deprivation and social justice, London: Routledge & Kegan Paul; M Tomasello, 2009, Why we cooperate, Cambridge, MA: MIT Press. A Ryan, 1989,Value judgements and welfare, in D Helm (ed) The economic borders of the state, Oxford: Oxford University Press, p 47.

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in which anyone’s welfare can increase without someone else’s diminishing. It is also repulsive.286 The strong Pareto principle does not just propose that a distribution where all goods and resources are held by one party is better than the alternatives. It says that such a distribution is always superior to an inefficient compromise, provided only that the individual who gets everything is on the highest possible indifference curve. This, then, is the third impossible thing we have been asked to believe. The Pareto principle was never intended to be taken as something that should be valued or approved of in itself. It was meant to be a test of efficiency, considered without reference to the distribution of income.287 Robinson argues that this strategy was intrinsically flawed: ‘it is clear that it is not possible to ignore equity and to deal only with efficiency. Such an approach is not more ‘scientific’, it is simply based on invalid assumptions.’288 That is, perhaps, a little harsh. If I may draw an analogy, learning about Pareto efficiency is a little like being given the nutritional information on processed food. It adds to our knowledge, it takes a degree of technical skill to produce the information and it may influence our decision making at some levels. However, as it does not tell us what we most want to know about food, such as what the food tastes like, what it costs or how we will react to it, it is almost never decisive. In the same way, once we learn that an option is Pareto superior, we have more information, and we might well think that the information is useful and interesting, but we still have an evaluative decision to make, and that decision may be based on other factors entirely. If we learn that an option is highly Pareto inferior, we may reject it; if we learn that a Pareto-superior allocation is available, we may think it worth examining the situation further. But a Pareto-efficient allocation is not self-evidently appealing even when other things are equal, because of the aspects that have not yet been considered, and we cannot tell from the Pareto criterion alone whether an allocation is desirable. Being given information about Pareto efficiency, then, a critical observer is entitled – and expected – to ask: so what?

286 287

Little, 1957, ch 6. Robinson, 1976, p 28.

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Part Four

Substantive policy

Summary If individual welfare is best protected through the exercise of choice, markets are believed to allow those choices to be expressed. Using market mechanisms is appropriate in some cases, but not in others. Markets may fail, but beyond that there are many things that they cannot do – for example, managing relationships that are not commodifiable, or protecting individual rights. Attempts to simulate market mechanisms do not necessarily work as markets are supposed to work, and quasi-markets, for example in the personalisation of care, can operate quite differently. Individualised responses in social policy are not always preferable to generalised responses.

4.1 Choice and the market There is no clear point at which methodological individualism gives way to substantive individualism – when arguments framed in terms of people who act as if they are individuals give way to arguments that people really do act as individuals, and have to be responded to on that basis. Much of the methodology considered up to this point is prescriptive: it identifies not so much what people do, as what they would need to do in order to achieve certain effects. However, those prescriptions are often overlain with a further substantive assumption – the conviction that an individualist analysis tells us something about the way that people behave, and that it can be used in practice to develop policies with predictable outcomes. Taken together, the two positions establish the rationale for an increasingly wide range of public policies. The central principle, which I will leave until last, is the view that policy has to be individualised – conceived, designed and implemented in a way that responds to everyone according to their individual circumstances. This is often translated in practice, however, into a much narrower set of propositions: that

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• individual choice is realised most effectively through economic markets; • markets work most effectively if they are left alone; • the price mechanism is the best way to allocate scarce resources; • in circumstances where people cannot exercise choice through a conventional market, the best options will still be those which mirror market processes best. Markets are held to emerge through the expression of individual choices – we use the word ‘market’ to describe the accumulated actions of producers and consumers. They are also the mechanism through which choice is expressed. So it is not surprising, when choice is discussed, that the language used should commonly reflect the issues of the market – terms like supply, demand, prices and consumption. Markets represent both a methodological stance – a range of theoretical arguments about what markets can achieve – and a set of substantive claims about the way that individuals interact in practice. Eamonn Butler writes, for the Adam Smith Institute: Markets are amazing. They unite the populations of the world in peaceful trade, co-ordinating the efforts of millions of diverse individuals. They enable us all to swap things we don’t want for things we do. They steer resources to where they are most valued. They discourage waste and encourage fresh ideas. And they do all this without any governments or authorities needing to tell them how. It’s amazing, but it’s true.289 For David Green, from Civitas, markets have delivered prosperity, they express liberty, and they act as a ‘process of discovery that reveals new possibilities and allows us to adapt to the uncertainty that is an inescapable part of the human condition’.290 The discourse of markets offers, in the conventional analysis, a way of communicating information and of making choices. Arthur Seldon waxes lyrical about the virtues of the price mechanism: the effect of distributing something with a price is neutral, useful, informative, nonauthoritarian, educative and able to solve or avoid conflicts. Beyond

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E Butler, 2009, How markets work, in R Wellings (ed) A beginner’s guide to liberty, London: Adam Smith Research Trust, p 17. D Green, 2010, Prosperity with principles, London: Civitas, p 37.

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that, it is unavoidable: wherever people are able to exercise choice, what will emerge is in some sense a market.291 A similarly glowing view of the market shapes contemporary interpretations of choice. Le Grand argues that It fulfils the principle of autonomy, and promotes responsiveness to users’ needs and wants; it provides incentives for providers to provide both higher quality and greater efficiency; and it is likely to be more equitable than the alternatives.292 This depends on the belief that the market can satisfy the circumstances of consumers and producers at the same time – that these two elements are complementary rather than contradictory. That is a big assumption. In the course of Part Three, I explained that ‘choice’ for the consumer inevitably involves some compromise of preferences. But ‘choice’ in the market is not just about the choice of the consumer. Producers provide greater efficiency, in a competitive market, because they too are exercising choices – who to supply, to what extent, at what level. They can choose who not to serve. The market, then, cannot offer any guarantee that it will meet consumers’ needs and wants – it is not in its nature. It offers, instead, a means of reconciling and accommodating different interests. That is not negligible, but it is not the same thing. Greener and Powell identify a range of discourses about ‘choice’ in the UK. In the field of education, choice is presented as a way to ensure diversity: the choices parents make lie between a range of options, according to their preferences. In the field of health care, choice is represented as a way of making providers responsive to the needs and wishes of consumers, both because the prospect of consumers choosing other options makes providers accountable, and because having a wider range of options makes it feasible to offer solutions that are better fitted to the individual. In the case of social housing, choice is presented mainly in terms of personal responsibility, control and affordability.293 These options are not mutually exclusive, but they are different in terms of emphasis: the users of health care are not being offered control or diversity, the consumers of education are not being offered individual 291 292

293

A Seldon, 1977, Charge!, London: Temple Smith, ch 2. J Le Grand, 2007, The other invisible hand, Princeton, NJ: Princeton University Press, p 42. I Greener, M Powell, 2009, The evolution of choice policies in UK housing, education and health policy, Journal of Social Policy 38 (1) pp 63-82. 101

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responsiveness or control, and the consumers of social housing are not being offered responsiveness or diversity. It looks as though a generalised discourse about choice is being translated uncritically into a narrow context, picking out the benefits that seem to apply without considering too closely what is being offered.

How markets reconcile choices The structure of microeconomics seems to show that the logic of the market depends on an accumulation of rational individual actions. The core of the argument is that decisions about consumption and about production are all made independently. Economic markets make it possible for producers and consumers to adjust to each other, or to accommodate, through a progressive or interactive adjustment to circumstances. This happens without the necessity of guidance or the intervention of any decision maker responsible for the process. Figure 4.1 describes this accommodation in theoretical terms. The technique used to produce the box should at this stage be clear enough – it is derived in the same way as Figure 3.6. The indifference curves of a consumer represent the marginal rate of substitution (as in section 3.3); the consumer decides the balance of competing options according to preference. The indifference curves of a producer represent a marginal rate of transformation; the producer determines what to produce, and how much, according to profitability, and will shift from one form of production into another in order to achieve this. Both the producer and the consumer will seek to exchange at the highest indifference curve they can, because that will maximise their utility. Each of the points where the curves are tangential to each other – the points where they touch, but do not cross – represents a point of balance, a ‘valuation equilibrium’.294 The process by which their interests are gradually accommodated is not by direct reference to the position of the other, but because each is referring to the circumstances prevailing in the market. In a free market, the argument runs, the outcome is balanced, efficient and optimal. This is a highly simplified, formal model. There are important reservations to make. The presentation suffers from all the problems of indifference curve analysis – the assumption that items are capable of substitution, that people are willing to make trade-offs, that substitution will be regular and smooth, that more is better and so forth. It may 294

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G Debreu, 1954, Valuation equilibrium and Pareto optimum, Proceedings of the National Academy of Sciences 40 pp 598-92.

Part Four: Substantive policy Figure 4.1: Reconciling the preferences of consumers and producers

Producer MRS MRS Marginal MRS rate of substitution (MRS)

Food Marginal rate of transformation MRT (MRT) MRT MRT

Consumer

Health care

be possible to imagine this kind of accommodation taking place in a limited kind of market where consumers and producers are making choices between specific, related commodities, like apples and pears. It is rather more difficult to apply to the complex choices that are basic to welfare, like the choice in Figure 4.1 between health care and food. But then there are further problems as the scope of the model is extended. Production can hardly be ‘transformed’ in this way. A consumer can switch elements of a budget, provided the issues are represented by distinct commodities, but it makes very little sense to say that an individual producer can switch between growing fruit and running a hospital. Figure 4.1 may make more sense as a representation of an economy – the productive capacity of an economy can be diverted into more hospitals or agricultural production, even if the capacity of an individual producer cannot be. If it is meant to be a representation of an economy, however, there is something wrong with the representation of consumers. Saying that each consumer individually will refer to the conditions of the market does not mean that the behaviour of all consumers can be aggregated into a collective mass. The only way to describe this in terms of indifference curves would be if there was a collective indifference curve for consumers as a group, and (as I have already explained) there isn’t.

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When we make the leap to substantive policy, the approach looks even more questionable. The idea of the ‘market’ is a shorthand for a complex set of interactions and relationships, made up of a long series of uncoordinated, independent, individual actions. The methodological argument for the market is that the market can achieve such a resolution, and that other arrangements cannot. Since Adam Smith referred to the ‘invisible hand’, economists have taken the view that markets act to reconcile the conflicting requirements of producers and consumers. Under certain conditions, they argue, ‘free’ markets will achieve the optimum resolution of different positions. Those conditions include assumptions about terms of exchange, location, information costs and so forth. The ‘First Fundamental Theorem of Welfare Economics’ purports to show, provided the assumptions of perfect competition are complied with, that every competitive market equilibrium is Pareto optimal. The Coase Theorem states further that the parties to exchange, if left to negotiate, will arrive at an efficient, Pareto-optimal resolution, provided that there are no impediments and no transaction costs; that remains true even if they begin from unequal bargaining positions.295 To the economists who use these theories, they seem to represent analytical proof of the case for free markets: ‘The First Fundamental Theorem of Welfare Economics’, Starr writes,‘is a mathematical statement of Adam Smith’s notion of the invisible hand leading to an efficient allocation.’296 Blaug thinks the attribution to Adam Smith is misconceived: There is actually a world of difference between the ideal output enshrined in the First Fundamental Theorem and the real-world dynamic performance of a competitive economy. Adam Smith never made that leap from one world to the other but modern general equilibrium theorists do so without the slightest hesitation.297 Starr’s ‘proof ’ of the invisible hand consists of the claim that as market negotiations lead to an equilibrium that is Pareto optimal,298 and that as any situation which is not Pareto optimal will lead to consumers 295

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M Blaug, 2007, The fundamental theorems of welfare economics, historically contemplated, History of Political Economy 39 (2) pp 185-207, p 18. R Starr, 1997, General equilibrium theory, Cambridge: Cambridge University Press, p 146. Blaug, 2007, pp 13-14. Starr, 1997, p 29

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and producers changing their behaviour until a new equilibrium is reached, the situation will end up back at Pareto optimality.299 This is completely removed from reality. Even strong pro-market advocates accept that it is not what actually happens: The Pareto concept of efficiency, narrow and rigorous as it is, has great pedagogical value in price theory. It can help one grasp the abstract, barebones logic of a competitive market economy ...Theorems of correspondence between competitive equilibria and Pareto optima can have an austere intellectual beauty ... All of this is quite different from erecting a Pareto-optimal state as a benchmark or ideal in comparison with which states of affairs in the real world are to be approved or condemned.300 Part of the problem is that market negotiations are often not capable of producing valuation equilibria. Stiglitz shows that as soon as elements of uncertainty creep in, issues such as imperfect information and risk management, the theory fails to deliver.301 Radner argues that people cannot come to firm conclusions unless they know what others are going to do.302 Another part may be that there are sets of markets, each reaching settlements separately without referring to each other; when that happens (Przeworski suggests it may happen most of the time) there may be multiple settlements, rather than an optimal one.303 However, the assertion that Pareto optimality is what people would settle on in conditions of certainty is also questionable. If people do not actually adjust their behaviour individually to maximise their utility – I have outlined, in section 3.3, several arguments that they do not – a necessary condition for Pareto optimality has not been met. I noted before that among the many peculiarities of the Pareto principle was its exclusion of consideration of real income. If any participant in a negotiation was to consider their real income, or make a comparison with other people’s income, it would change the basis on which relative prices are assessed; and that would imply that people were working to 299 300

Starr, 1997, p 146. L Yeager, 1978, Pareto optimality in policy espousal, Journal of Libertarian Studies 2 (3) pp 199-216, p 209.

301

J Stiglitz, 1994, Whither socialism?, Cambridge, MA: Massachusetts Institute of Technology, ch 3.

302

R Radner, 1968, Competitive equilibrium under uncertainty, Econometrica 36 (1) pp 31-58. Przeworski, 2003, pp 46-63.

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different market signals, not to uniform ones. It would no longer be possible to claim that competitive markets were always Pareto superior, or that competition made no-one worse off.304 The ‘proof ’ that markets lead to optimal solutions is a house of cards. It depends on a fragile series of assumptions, and if any of them does not apply, the structure collapses. But there are further weaknesses, because of the issues that the theorem does not address. There is no good reason to think that competitive processes actually do lead to Pareto optimal outcomes.305 There is no process by which they could do so, and not enough reason why they should. It is disputable whether the idealised theoretical case for the market has ever been realised in practice, or even approximated. The main gap is any adequate consideration of well-being – the so-called ‘Fundamental Theorem of Welfare Economics’ is not about ‘welfare’ at all. This is about an efficient allocation; there is no reason to suppose that what is efficient is also fair, reasonable, desirable or satisfactory. An equilibrium that apparently satisfies the Pareto conditions could still imply extreme inequality, mass unemployment or economic stagnation.

The limits to markets Even if the theoretical argument does not stand up, there is a good practical case for markets. Markets often do deliver enhanced quantity of goods, quality and choice. That is why, when people receive social security payments or pensions, they get the money to spend in the market, rather than vouchers or food parcels. And there is also a strong moral argument for markets, based partly on the position that markets are the consequence of the expression of choice, and partly on the view that they facilitate such choice. However, there are many important limitations to the scope of markets to reflect the principles, or achieve the outcomes, that are claimed for them. The economic literature is dominated by a narrow range of imperfections, which go under the name of ‘market failure’.306 I will come back to market failure very shortly, but the limitations extend far beyond that. The first major limitation concerns what markets can do, and what they cannot. Markets do not encompass the whole field of human 304 305 306

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Robinson, 1976; Ng, 2011, pp 65-6. Stiglitz, 1994, ch 3. S Connolly,A Munro, 2006, Economics of the public sector, Hemel Hempstead: Pearson, ch 9.

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activity. Some things cannot be bought and sold – or, if they are, they do not mean the same. Family life, friendship, love and dignity are not commodities – aspects can be commodified, but in the process they cease to be the same things. Marglin argues that economic relationships can be incompatible with the personal and communal obligations that used to be fundamental to social organisation; that is an important reason why people in traditional communities may refuse to take advantage of modern technologies or methods of working.307 Relationships in a community, empowerment and social life have been described in terms of ‘social capital’, as a way of persuading economists to take account of them,308 but these things are not ‘capital’ in the usual sense of the term; they might be measured, but they cannot be stored, invested or used up. The second major limitation lies in the inability of markets to establish the conditions they need to function. Markets give signals, through the price mechanism, about costs and scarcity. That is unquestionably useful, but it is not everything that matters. If people have rights, there is nothing intrinsic in the mechanism of markets to protect those rights – and if they do not have such rights, the moral argument that markets enhance the liberty of the individual starts to look very shaky. Most liberal advocates of the market accept that for markets to operate, there needs to be a framework of law and a system of rules.309 However, lack of entitlement remains a fundamental problem: those who are dispossessed cannot begin to function in the market. One of the key strategies for dealing with world poverty has been to ensure that such people are integrated into the formal economy, so that they can begin to have rights and start to realise the potential benefits that markets can deliver. The same argument can be extended to poor people in developed countries, who suffer from the problems of social exclusion – lack of entitlements and an inability to participate in society.310 The third limitation lies in what markets can be expected to provide. The market is a practical arrangement; it works through the production and distribution of commodities. Even if capabilities are translated into commodities, the commodities may not deliver the outcomes that are 307

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S Marglin, 2008, The dismal science: How thinking like an economist undermines community, Cambridge, MA: Harvard University Press. M Edwards, 1999, Enthusiasts, tacticians and sceptics: The World Bank, Civil Society and Social Capital, www.worldbank.org/poverty/scapital/library/edwards.htm D Green, 2010, Prosperity with principles, London: Civitas. A Bhalla, F Lapeyre, 1999, Poverty and exclusion in a global world, Basingstoke: Macmillan. 107

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desired. Health care is not a guarantee of health; education does not always deliver knowledge or skills; insurance reduces vulnerability to risk, not the risk itself. A fourth set of issues stems from what providers in markets are prepared to do. Providers have to make choices about what they provide. There will be circumstances where they can pay their way, and circumstances and where they cannot. In a commercial market, providers expect to make a profit; but even where there are non-commercial arrangements, such as charities, non-profits and cooperatives, they have to work within their resources. There is evidently a problem, then, in circumstances where providers cannot retrieve an adequate return for their costs. The most obvious circumstance where that is true happens because people who have the least resources cannot pay. Pro-marketeers such as Seldon or Friedman have responded with the easy answer that where that is true, the appropriate answer is to make it possible for poor people to purchase goods in the market, rather than providing them with services311 – a position which might carry more conviction if the liberal right were not also opposed to redistribution. Market-based redistribution happens in some cases – notably in income maintenance to pay for food. However, there is often resentment of income maintenance payments to the poor, and where such payments are made, they are made restrictively and parsimoniously.312 The effect of creating markets is often, in practice, to exclude the poor. Another important restriction of activity occurs because some circumstances are more costly than others. I referred earlier to the importance of the choices exercised by providers. In the provision of health or social care, for example, some people’s circumstances may be complex, demanding and expensive. In the US, Hunter comments: cream-skimming is all too often present in marketdominated settings and not at all straightforward to avoid or eliminate. ... companies employ large marketing departments whose job it is to devise selective recruitment schemes to attract healthy people. Financial incentives are used to encourage doctors to persuade sick patients to leave

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M Friedman, 1962, Capitalism and freedom, Chicago, IL: University of Chicago Press, ch 12; A Seldon, 1977, Charge!, London: Temple Smith, p 149. R Titmuss, 1968, Commitment to welfare, London: George Allen & Unwin; P Townsend, 1976, Sociology and social policy, Harmondsworth: Penguin; D Reisman, 1977, Richard Titmuss:Welfare and society, London: Heinemann.

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the health maintenance organisation. Care is focused on the modest needs of healthy (and profitable) older people.313 ‘Cream skimming’ is also sometimes referred to as ‘adverse selection’, the deliberate exclusion of some circumstances.314 Another problem is ‘moral hazard’, where some people are deliberately excluded because insurers consider they have a choice about whether or not to expose themselves to risk. The specialised terms disguise a more basic issue – that in a market, any provider has to be selective. It may be, for example, that a particular provider is able to justify activity for more expensive cases, but cannot profitably provide lower-cost services more widely. The nature of selection implies that some people, somewhere, will be less attractive to providers, and more likely to be excluded. Even if there is a moral argument for markets, it makes little sense to claim – as Nozick attempts to do – that markets meet all legitimate moral criteria. Markets may reward desert,315 but they do not reward all deserving cases. They may have beneficial effects that are desirable for society,316 but they do not achieve every beneficial effect that people could reasonably want. Economic development often improves the living standards of the poorest,317 but it does not always do so.318 Part of the structural character of markets is that they are competitive, and in a competitive market there is ‘creative destruction’; some people may fail. It may be argued that ‘a rising tide lifts all boats’, but as Mishra comments, ‘a rising economic tide not only does not lift all boats, it can upturn, destroy and sink many boats’.319 The fourth impossible thing we are asked to believe is that markets satisfy human needs. They can satisfy some, certainly; they cannot conceivably satisfy all. That is why there are, and need to be, so many alternative systems to achieve human ends. It is perhaps also appropriate to note that whatever the theory, the way markets work in practice can fall far short of the ideal. The market often does not deliver: it can be costly and wasteful. Medical 313 314 315 316 317

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D Hunter, 2008, The health debate, Bristol: The Policy Press, p 111. N Barr, 2004, The economics of the welfare state, Oxford: Oxford University Press. H Acton, 1971, Morals of markets, London: Longman. B de Jouvenel, 1951, Ethics of redistribution, Cambridge: Cambridge University Press. D Dollar,A Kraay, 2000, Growth is good for the poor, at www.worldbank.org/research/ growth/pdfiles/growthgoodforpoor.pdf D Macarov, J Dixon, 1998, Poverty in review, in Poverty: A persistent global reality, London: Routledge, pp 274-5. R Mishra, 1994, The study of poverty in North America: CROP/UNESCO symposium on regional state-of-the-art reviews on poverty research, Paris: CROP/UNESCO. 109

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care in the private sector, the paradigmatic example, offers inferior coverage for a population, but it is also generally more expensive than a national health service; financial administration (like marketing and billing) has to be paid for, facilities are duplicated, and the separation of purchase from consumption, which is often true of insurance, provides inadequate cost constraints.

Market failure The idea of ‘market failure’ focuses on a set of special cases: where markets are operational, where goods or services are commodified and traded, but where the impact is sub-optimal nevertheless. There are two main classes of market failure: cases where markets do not conform to the norm of free competition, and cases where the mechanism of the market is incapable of addressing the issue. The first category includes circumstances where competition fails, for example because of monopoly supply, the operation of cartels, restrictive trade practices or the existence of oligopolies; or where problems of information, or locational or transactional costs limit the interplay of market forces. Besley, writing for the World Bank, points to a long series of deficiencies in the availability of credit and financial support in the rural areas of developing countries – scarce collateral, underdeveloped complementary institutions, segmented markets, simultaneous exposure to risk, enforcement problems, imperfect information, adverse selection and moral hazard among them. (He still argues, despite the problems, that this does not make a case for government intervention.)320 The usual response of governments to these situations has been to make laws relating to the market framework, trying to create a ‘level playing field’ and the conditions in which markets can flourish. The other set of failures, cases where the market is just not capable of dealing with the issues, typically happen because of the character of what is being traded. The best-known examples are externalities and public goods. Externalities occur when people who are not involved in a transaction are affected by the transaction, positively or negatively; this implies that the value of the good is not adequately reflected in market transaction. Education offers positive externalities: when people are educated, it is of benefit to others, such as future employers. Pollution offers negative externalities: people who cause pollution transfer the costs or burden to others, often others who are not directly 320

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T Besley, 1994, How do market failures justify interventions in rural credit markets?, World Bank Research Observer 9 (1) pp 27-47.

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identifiable. The idea of externalities is more problematic than seems to be appreciated. Wherever firms compete, there is the possibility of an externality – one business puts another out of operation. Large supermarkets cause high-street traders to close. In planning decisions, every building, every road, every programme of works, are liable to be seen as affecting others. Population changes, including births, migration and death, affect others. The very idea of externalities depends on a contrast with a norm, a model of individuated, private behaviour that does not affect others beyond the contracting parties. That is deeply implausible; if markets depended entirely on private exchange in the absence of externalities, they could not function at all. Public goods are goods which are not divisible or attributable to individuals. Examples are roads, parks and policing. Some writers also argue that they are non-exclusive, in that use of some goods like roads does not prevent the use of the facility by others; the problem with that is that parks or roads can get very crowded or over-used, so use by some parties can indeed exclude others. Where there are public goods, the value to individuals tends to exceed the proportion of the cost that can be allocated to that individual, so market valuations and signals do not work. Roads, sewers and drains (the last two are not the same thing) are immensely important for well-being. Hettige writes an inspiring account of the impact that a road can have in an isolated rural area, transforming communications, trade and social relationships.321 The special cases where market failures occur can be important. That does not explain, however, the extraordinary prominence that is given to market failure, not only in economics textbooks, but also in the making of policy. The UK Treasury’s Green Book advises: Before any possible action by government is contemplated, it is important to identify a clear need which it is in the national interest for government to address. Accordingly, a statement of the rationale for intervention should be developed. This underlying rationale is usually founded either in market failure or where there are clear government distributional objectives that need to be met. Market failure refers to where the market has not and cannot of itself be expected to deliver an efficient outcome; the intervention that is contemplated will seek to redress this. Distributional 321

H Hettige, When do rural roads benefit the poor and how?, Manila, Philippines: Asian Development Bank, www.adb.org/documents/books/ruralroad_benefits/ruralroads.pdf 111

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objectives are self-explanatory and are based on equity considerations.322 Market failure is taken here to be the ‘usual’ criterion for intervention. It presumes that markets can normally be assumed to be a better way of doing things, and government acts only where markets fail. The reference to distributional issues in the Treasury’s guidance concedes the point, raised earlier, that people need purchasing power in the market to be able to make the market work for them. The issues raised in the previous section – the importance of values, rights, social priorities and intangibles – are not recognised at all. Kleiman and Teles comment: It would be perverse, though possible, to use the language of market failure to analyze a litter-strewn neighborhood, a neglected child, dangerously aggressive driving, an ethos hostile to learning, or a culture wanting in altruism or inclined to violence. It would be equally perverse to insist on such an analysis as a prerequisite for treating those conditions as possible targets of public intervention.323 If the Treasury’s guidance was to be taken literally, it would not be good enough for government to justify its actions because they would benefit the population, because they protect people’s rights, because the government has a moral commitment or because it has been elected to address an issue. I began to write this book when I realised that this misplaced economic dogma was now official.

4.2 More of the market: one solution for everything The ‘Second Fundamental Theorem of Welfare Economics’ claims to show that every Pareto-optimal solution can be achieved through a competitive equilibrium. In other words, whatever people might wish to do, it can be done through a competitive market: ‘No matter which Pareto efficient state we specify, it is possible to have a competitive market equilibrium yielding precisely that state, by choosing the initial

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HM Treasury, nd, The Green Book, at www.hm-treasury.gov.uk/d/green_book_ complete.pdf M Kleiman, S Teles, 2006, Market and non-market failures, in M Moran, M Rein, R Goodin (eds) The Oxford handbook of public policy, Oxford: Oxford University Press, p 625.

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distribution of resources appropriately.’324 Sen thinks this has very little practical application. Blaug comments, similarly, that ‘virtually all writers on welfare economics, and certainly all applied economists, dismiss the Second Theorem as being of limited practical relevance.’325 That dismissal is not universal, however; debates in social policy are increasingly being driven by a closely related argument. It was initially made by the radical right, but it has spread into mainstream politics, and it runs like this. Markets are a superior way of distributing resources. They lead to optimum results, and the greatest utility, regardless of the initial distribution. If there are problems with the initial distribution, it can be changed by redistributing income; but after that, it is possible to leave things to the price mechanism to sort out. What you do not need, then, is the public provision of goods or services. ‘A competitive society with no externality producing activities will inevitably allocate its resources efficiently. Thus it will have no role for government.’326 This claims far more than the theory can deliver. It assumes that a competitive society is as good as the theory of perfect competition, that externalities are the only exception, that efficient allocation is everything a society could want to have and that government has no other role. Even if that goes too far, there is always, pro-marketeers argue, the possibility of spontaneous, market-based resolutions of distributive problems. The Second Theorem provides the intellectual underpinning for that position. Starr argues: The Second Fundamental Theorem of Welfare Economics represents a significant defense of the market economy’s resource allocation mechanism. ... This is the basis of the common prescription in public finance that any attainable distribution of welfare can be achieved using a market mechanism and lump-sum taxes (corresponding to the redistribution of endowment). On this basis, public authority intervention in the market through direct provision of services (housing, education, medical care, child

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A Sen, 1993, Markets and freedoms, Oxford Economic Papers 45 (4) pp 519-41, p 521. Blaug, 2007, p 14. R Auster, M Silver, cited in A Coram, 2001, State, anarchy and collective decisions, Basingstoke: Palgrave, p 11. 113

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care etc.) is an unnecessary escape from market allocation mechanisms with their efficiency properties.327 In section 4.1, I considered a range of circumstances where markets may not produce the best outcomes. The argument that free marketeers make goes beyond the claim that markets have good effects. MuhammadYunus – the founder of the Grameen Bank, and one of the most influential social entrepreneurs of our era – claims: ‘the freer the market, the better is the result in solving the questions of what, how and for whom’.328 If the test was only a question of what kinds of outcomes markets achieve in practice, this would be very questionable. Freedom for the pike, Tawney wrote, is death for the minnows,329 and the freer the market, the more likely there are to be casualties. I think Yunus may be making a different kind of point, a claim for the market as a process; whether or not the market actually achieves good outcomes, the method of the market is more likely than any other to achieve a resolution that is adapted to the preferences of the individual. The commitment to market mechanisms has become an important strand in liberal politics. If governments want to achieve social ends, the argument runs, they can do it best, and with minimal interference, by using the mechanisms of the market.330

Structural adjustment Neo-liberal policies became prominent in the 1980s, notably in the US, the UK and some other countries (such as Chile) where the ‘radical right’ moved into the ascendant.331 The programme of reforms they argued for was wide-ranging, but two strands in particular are closely related to the arguments I have been considering. The first was laissezfaire – the view that markets are best left alone, and that government should disengage from economic processes to the greatest degree possible. That position was taken through the sale of government industries and property, deregulation of private commerce and the withdrawal of subsidies, which were held to distort the operation of 327 328

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Starr, 1997, p 151. M Yunus, 2011,Vision 2050: a poverty-free world, Journal of Social Business 1 (1) pp 7-23. R Tawney, 1931, Equality, London: Unwin Books, p 164. M Friedman, 1962, Capitalism and freedom, Chicago, IL: University of Chicago Press, ch 1. H Glennerster, J Midgley (eds), 1991, The radical right and the welfare state, Brighton: Harvester Wheatsheaf.

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markets. Second, there was ‘marketisation’, developing and encouraging markets, and creating commodities and market mechanisms where they did not exist otherwise. Examples are markets for security, transport and social care. Although the arguments were most strongly linked with particular countries and politicians (for example, in ‘Reaganomics’ and ‘Thatcherism’), the influence of these approaches was felt much more generally. The policies were exported to developing countries, through the medium of the World Bank and the International Monetary Fund. In the 1950s and 1960s, governments around the world had been heavily engaged in economic development, partly to promote economic prosperity, partly to undertake major projects and partly to support important industrial sectors.332 In the 1980s, these systems were represented as an obstacle to economic progress, and the international organisations promoted an agenda of ‘structural adjustment’, based on the ‘Washington Consensus’. Neither of those terms was ever clearly defined, but both can be taken to represent the application of market-based solutions to the economic problems of the developing world. Structural adjustment programmes were negotiated between the international finance institutions and debtor countries, including most of the countries in Africa. Their key elements were: • policies for economic stabilisation, including measures to reduce inflation, cut government deficits and limit the use of credit; • institutional reforms, including changes to banking, trade and the public sector; • policies to promote markets, including privatisation, liberalisation, an end to subsidies and the use of price incentives to govern public policy. The overlapping idea of the ‘Washington Consensus’ has been attributed to John Williamson, who suggested the term covered ‘the common core of wisdom embraced by all serious economists’333 – in other words, the prevailing economic orthodoxy. Williamson identified ten key measures, most of which relate closely to the aims of structural adjustment: SAPRIN (Structural Adjustment Participatory Review International Network), 2004, Structural adjustment, London: Zed Books, p 111. 333 Cited in C Gore, 2000,The rise and fall of the Washington Consensus as a paradigm for developing countries, World Development 28 (5) pp 789-804, p 790. 332

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• • • • • • • • • •

fiscal discipline; reordering public spending priorities; tax reform; liberalising interest rates; competitive exchange rates; liberalising trade; liberalising foreign direct investment; privatisation; deregulation; the establishment of property rights.334

Williamson emphasised that the Washington Consensus is not ‘a synonym for neoliberalism or market fundamentalism.This,’ he wrote, ‘I regard as a thoroughly objectionable perversion of the original meaning.’335 There is a distinction to make, but the lines are blurred. Neo-liberals favour actions which develop private markets, such as competition and user fees in health and educational provision, and they are likely to oppose any action which might interfere in the spontaneous order of the market, such as public spending or foreign aid. These policies were sometimes pursued as part of structural adjustment,336 but they could not be said to be part of an orthodox consensus. It ought to be understood, however, that even if we leave this kind of action aside, the policies that can be attributed directly to the Washington Consensus have been deeply contentious – the emphasis on privatisation and deregulation, the pressure on poor countries to open trade barriers when richer countries did not do likewise,337 the disregard for national priorities and the lack of support for the poorest. The World Bank claimed at the time that structural adjustment did well, so long as governments cooperated. In the African countries that have undertaken and sustained major policy reforms, adjustment is working. But a number of countries have yet to implement the reforms needed to restore growth. And even among the strongest adjusters, 334

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J Williamson, 2000, What should the World Bank think about the Washington Consensus, World Bank Research Observer 15 (2) pp 251-64. J Williamson, 2004, A short history of the Washington Consensus, www.iie.com/ publications/papers/williamson0904-2.pdf See SAPRIN, 2004. Oxfam International, 2002, Rigged rules and double standards, Oxford: Oxfam International.

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no country has gone the full distance in restructuring its economy.338 The same report goes on to note that of 29 countries considered in sub-Saharan Africa, 6 countries experienced an improvement in policies – not in outcomes – 9 a small improvement, and 11 were worse than when they started.339 Most of the encouraging comments which follow about structural adjustment relate to the best performers; viewed overall, the material findings could be seen as being more negative than positive.340 The evaluations of the Structural Adjustment Programme are full of excuses for its uneven performance – local conditions, different political structures, external shocks, imperfect implementation, lack of coordination between donors, economic disruption before the policies started and so on.341 The relative success of recent policies,342 which have taken a different tack, puts that into perspective. Structural adjustment was a failure. The effect on economic growth was erratic, sometimes undermining productive capacity,343 sometimes deflationary;344 and economic growth rates in Africa and Latin America were higher before structural adjustment started.345 The process of privatisation was often open to abuse; liberalisation and deregulation could lead to new monopolies.346 There were insufficient protections for poor people, and other casualties of the process of adjustment.347 And the

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World Bank, 1994, Adjustment in Africa: Reforms, results and the road ahead,Washington, DC: World Bank, p 1. World Bank, 1994, p 3. S Schatz, 1994, Structural adjustment in Africa: a failing grade so far, Journal of Modern African Studies 32 (4) pp 679-92. D Dollar, J Svensson, 2000, What explains the success or failure of Structural Adjustment Programmes?, Economic Journal 10 pp 894-917; and see K Donkar, 2002, Structural adjustment and mass poverty in Ghana, in P Townsend, D Gordon (eds) World poverty, Bristol: The Poverty Press. See S Radelet, 2010, Emerging Africa?, Baltimore, MD: Center for Global Development. SAPRIN, 2004, chs 2-3. G Mohan, E Brown, B Milward, A Zack-Williams, 2000, Structural adjustment, London: Routledge. S Babb, 2005, The social consequences of structural adjustment, Annual Review of Sociology 31 pp 199-222, p 209. SAPRIN, 2004, ch 5. T Killick, 1995, Structural adjustment and poverty alleviation, Development and Change 26, pp 305-31; SAPRIN, 2004, ch 9. 117

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policies were seen as being imposed externally.348 The policies which have replaced structural adjustment, the Poverty Reduction Strategy Papers, are based on dialogue, commitment, stakeholder engagement and improvements in governance. ‘The key point,’ Radelet argues, ‘is that these country-led PRSs – as imperfect as they sometimes are – ... have shifted the balance toward countries establishing key policies and priorities themselves.’349

The price mechanism Markets have come to occupy a dominant position in public policy. It used to be thought that some issues, like housing supply or diet, were too important to be left to the vicissitudes of the market.350 That position is rarely expressed nowadays. Wherever there are alternative ways to distribute resources, markets have a distinct claim best to satisfy the needs, and to maximise the utilities, of individuals. The process of ‘marketisation’, creating the conditions of a market where there has not been one before, depends partly on extending the terms on which a market can operate, but also a process of changing the character of non-market activities. In the former sense, marketisation has been used to alter structures that seem to restrict the process of competition in the market: dismantling natural monopolies, and creating arrangements to develop multiple providers, for example in the provision of energy or water supplies; and requiring governments to withdraw from engagement in the economy, through privatisation of publicly owned industries. In the latter sense, the push to develop markets has included commodification of previously non-traded items, such as pension entitlements, education fees or placements in residential care; parcelling out previously untraded activities for commercial exploitation, such as refuse collection or hospital cleaning; and requiring non-profits to account for their activities in monetary terms, which has happened as a result of commodification of adult care. As part of the process of marketisation, considerable emphasis has been put on using the mechanism of pricing to convey information and to bring demand into line with supply. Pricing is treated as if it 348 349 350

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C Gore, 2004, MDGs and PRSPs, Global Social Policy 4 pp 277-83, p 279. Radelet, 2010, pp 101-2. See e.g. M Clapson (ed), 2000, Contemporary British History, Special issue: Planning Politics and Housing in Britain 14 (1); Rose R, Falconer P, 1992, Individual taste or collective decision? Public policy on school meals, Journal of Social Policy 21 (3) pp 349-74.

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self-evidently offers a way to reconcile conflicting interests. Examples include contemporary arguments on road pricing,351 water meters,352 charging for rubbish collection by weight353 and university tuition fees354 – all issues that were formerly considered to be public services. I am not going to look at the specifics of these arguments; rather, I am going to focus on the central proposition that the market process – in particular, the way that pricing interacts with supply and demand – represents the best way to manage such situations. The price mechanism plays a key role in the market in directing the behaviour of different economic actors. The use of money as a unit of exchange makes transformation or substitution possible. A price conveys a message about relative costs. Where there are shortages, pricing helps to balance supply and demand. What is supposed to happen in theory is usually shown in economics textbooks as a basic graph where supply and demand curves cross (Figure 4.2). The Figure 4.2: Supply and demand Inelastic demand (relatively insensitive to price)

Supply

Price

Demand

Quantity

Campaign for Better Transport, 2012, Problems with private roads, London: Campaign for Better Transport. 352 A Walker, 2009, Independent review of charging for household water and sewerage services, London: Department for the Environment, Food and Rural Affairs. 353 J Foley (ed) A zero waste UK, London: Institute for Public Policy Research/Green Alliance. 354 J Browne, 2010, Securing a sustainable future for higher education, obtained at http:// webarchive.nationalarchives.gov.uk/+/hereview.independent.gov.uk/hereview/ 351

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quantity supplied increases when price increases, because the returns to producers are greater; the demand diminishes when the price is higher. In circumstances where demand exceeds supply, an increase in price will reduce demand and promote an increase in supply. Where people are faced with higher prices, they will either abstain from buying the item or they will buy something else instead. If there are waiting lists for products, the market should, in principle, act to increase prices until the demand reduces, clearing any excess demand. While some products and services are highly responsive to changes in price, some are very unresponsive. The level of responsiveness is referred to in terms of elasticity, represented by the slope of the curves. Different patterns of elasticity reflect different patterns of responsiveness; that happens because the impact of price changes on resources will be expressed differently by people with different preferences. The dotted line in Figure 4.2 shows a position where demand is relatively inelastic – the quantity demanded does not change very much when the price falls. It is often assumed that demand increases when price falls, and falls when it increases, but that is an overgeneralisation. For example, there are some commodities which most people will need, such as soap, but they will not always choose to have large quantities when the price falls – they may reasonably opt to buy other things. There are some commodities which are so important that people continue to buy them regardless of price increases, sacrificing other items instead; that seems to have been true of car fuel in recent years. And there are commodities where the choice is not just about money; the demand for vasectomies is not limitless. There are many circumstances when pricing affects the choices made, but the market should not be expected to be responsive to price alone. Demand is influenced by a range of factors, of which price is only one. The component elements can be represented as a ‘demand function’, attaching different weights to different considerations. When prices increase, as a general proposition, demand is expected to fall. This happens in two main ways. The first is that people may decide not to purchase the item at all. They have other uses for money, and they may prefer to employ it for those other uses. Smoking is an optional purchase, and a major part of the strategy to reduce smoking has been to reduce consumption by increasing the price.355 The second is that they may decide to purchase a substitute item – meeting the same preferences in different ways. When the price of motoring increases, 355

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H Reed, 2010, The effects of increasing tobacco taxation, London: Action on Smoking and Health.

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people should (in principle) try to use their cars less; that does not have to mean that they will travel less, but that some will use alternative modes of transport. Whether or not demand actually falls, however, depends on further considerations. Prices help to shape preferences – and there is some evidence that valuations and willingness to pay are conditioned by the asking price. People may reallocate their income so that they are no longer doing some other alternative activity that they cannot afford to continue, in which case an increase in price in one item leads to a shift in a series of demand functions. The assumption tends to be that as increasing price reduces demand, we know more or less what people will do if price increases. That is uncertain. Supply, in the same way, is influenced by a range of factors. In a private market, firms will gauge the potential for making a profit, and in principle increasing prices should increase the potential for a profit, inviting existing firms to expand and new firms to enter the market; decreasing prices leads to reduced supply and exit from the market. However, that is still a very general statement. Rent controls in the UK are often held up as an example of the way that supply depends on prices; rent controls are supposed to limit the supply of rented housing by restricting the price.356 This is based in a model where supply can be assumed to respond to market prices; it is misapplied. Context is everything. Rates of return depend on capital values, and the capital value of residential property in the UK is mainly determined by its value to owner-occupiers, not its potential rental income. That has been true since the 1920s. Rental housing declined in the UK because the demand was diverted to alternatives. By the 1920s, owner-occupation was both more secure and cheaper for those on higher incomes. The construction of two million council houses between the First and Second World Wars removed much of the market for working-class housing, and urban renewal from 1930 onwards mainly removed older private rented housing. By the 1950s, the private rented sector was in steep decline, with a dilapidated stock and limited market. Landlords’ best option was to realise the capital value. The effect of removing controls in 1957 was consequently not to revitalise the sector, as the government imagined it would, but to hasten landlords’ exit from

356

P Minford, M Peel, P Ashton, 1987, The housing morass, London, Institute for Economic Affairs; R Albon, D Stafford, 1987, Rent control, Beckenham: Croom Helm; and see P Krugman, 2000, A rent affair, New York Times, 6 July, obtained at www.pkarchive.org/column/6700.html 121

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it.357 Controls were reintroduced seven years later to stem the abuses which followed. The later abolition of most rent controls in 1988 had no visible effect on supply;358 subsequent increases in the rental stock, especially since 2007, mainly reflect changes in the rates of return. The contemporary rental market is diffuse, but the economic position remains that the return for landlords depends as much on capital gain as it does on rental income. Having a tenant is a way of maximising income while waiting to sell a house at its best price – fluctuations in the rented market consequently reflect fluctuations in property values. That also implies, however, that both tenants and landlords are likely to see renting as a relatively short-term prospect, and when finance is again available for ownership, both supply and demand will be cut off. The supply of public services is another case where the normal assumptions about markets hardly apply. In market theory, changes in prices affect both supply and demand. The supply of public services is not necessarily responsive to price; using the price mechanism to affect public services, if it works at all, is aimed principally at demand. That is true partly because some public services are based on infrastructure, which is difficult to alter rapidly – increasing the price of road use or water does not increase the supply, and reducing the price does not diminish them. It is more true, however, because the rationale for providing public services is governed by public policy rather than consumer demand. The numbers of children requiring education is primarily determined by demographics and by policy, not by the interplay of supply and demand. There is a limited responsiveness to demand, because even if parents have the choice about which educational provider they may go to, the total number of places required for universal education is determined by the requirement for universality. Neither demand nor supply has, then, an obvious, automatic relationship to price. Because the factors which constitute and influence supply and demand differ for different products and services in different circumstances, the shape and position of these functions has to be determined empirically. The demand curves may be more responsive, but that is uncertain, and elasticity has to be determined by empirical investigation. In the arguments that have been made for allocating resources through the price mechanism, that has hardly ever been done. 357

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See S Lansley, 1979, Housing and public policy, Beckenham: Croom Helm; UK Government, 1960, Rent Act 1957: Report (Cmnd 1246), London: HMSO. See Lansley, 1979.

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Rationing by price Markets are supposed to accommodate individual interests by adjusting to circumstances. The interaction is not done all in one direction; people’s behaviour changes according to circumstances, as well as circumstances altering in response to behaviour. That leaves open the possibility of guiding or steering market signals in order to achieve the aims of policy. In situations where the price mechanism is already in use – principally in the private market – governments will alter prices in order to affect its operation. There are two main methods used to alter prices. The first is to fix the price by regulation. This is rarely done in its most direct form nowadays, because it tends to generate imbalances in markets and is liable to create a partly concealed or ‘grey’ market. It is more commonly done through the use of industry regulation to determine whether prices and profits are reasonable. In the UK, regulation of the price of mobile phone use has been an example. The second option, which is much more commonly used, is to try to alter behaviour by adding or removing costs. Where the price is intended to alter patterns of use in the private sector, such as the cost of air travel, the main option open to government is to impose a tax, either as a fixed amount (such as the amounts set on wine and spirits) or as a proportion of the price charged (purchase tax or VAT). Tax can be seen as a cost on the producer as well as the consumer; it is usually uncertain whether the costs will be passed on fully to consumers, or whether suppliers will seek to absorb part of the charge. A subsidy is a direct converse of tax, and the same mechanisms apply. Subsidies to agriculture, as an example, can be both a means of encouraging suppliers and a way of reducing costs to consumers. Both these options begin from the assumption that the price mechanism is already in operation. In the provision of public services, this may not be true, and the charges that are being introduced are for pre-existing services which were not charged for, or for new services. Price rationing is done by introducing charges or levying costs from consumers. Examples of charges introduced in this way include the introduction of car parking charges in city centres, which was intended to regulate the flow of traffic into city centres and to ensure circulation, or the means-testing of social care, which introduced differential costs for domiciliary and residential services provided by the public sector. It does happen that charges or taxes are also introduced to help governments cover the costs. Clearly, this can influence decisions as to whether or not price rationing is thought of as an appropriate approach, but it is not the primary issue. Public services are characterised by a 123

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range of features, but one of the central issues is that they are provided for reasons of public policy, rather than a profit motive. Public services are often provided in excess of the services that people might want or choose at a market price, like subsidised opera or universal secondary education. Since the supply is determined independently from the market mechanism, the main implication of price rationing is that it is intended to affect demand – and so, to change the behaviour of people who seek to use the service. Market-based policies do not need to change everyone’s behaviour to achieve their desired outcomes. What they need to do is to affect aggregate demand, and they can do that by affecting only some people. The apparent success of the congestion charge in London has depended, not on deterring the use of all traffic, but on deterring some of it – prompting some people who formerly would have taken cars into the capital into using alternatives, or not making the trip. Although some products or services are relatively inelastic to price, introducing an element of price rationing – for example, a supplementary tax on certain activities, like air travel – usually has some effect. Despite the vogue for ‘smart’ targets (specific, measurable, achievable, realistic and time-bounded),359 policy makers are rarely concerned about precise quantities; they want to move policy in the right direction, they want to be able to signal approval or disapproval of certain conduct and they want to be able to show people that they are doing something. Price rationing achieves all three. Altering prices can, however, have unanticipated consequences. The first problem is the substitution effect. One of the key mechanisms by which price rationing works is to change relative prices, so that consumption of one sort becomes less favourable than consumption of another. This is the core principle behind increasing the costs of carbon emissions, personal transport or using certain roads. However, where people are encouraged to adopt substitutes, it is not always clear what the substitutes might be. There are some circumstances where this is largely predictable. The effect of road pricing is to encourage people to use alternative routes – ‘rat runs’; the effect of charging people to have heavy rubbish removed is that people do different things with their rubbish, such as dumping it in public space. It was less predictable – even if the process seems clear enough in hindsight – that increasing the prices of alcoholic drinks might lead to substitution of illegal

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HM Treasury, The green book, at www.hm-treasury.gov.uk/media/785/27/Green_ Book_03.pdf, p 13.

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narcotics,360 or that the effect of restricting city centre traffic and the consequent movement to out-of town shopping would change diets.361 The second problem is the income effect. If the result of raising prices is to reduce the amount of resources that people have available, the changes in patterns of behaviour which might result will lead to shifts in demand functions for products or services which have no direct connection with the subject of the policy. Where the item is a limited part of people’s personal expenditure, like air travel, this should not be a problem. Where it is substantial, like fuel or housing, the effect may be very significant – but it is difficult to predict that before one knows what the item is, what role it plays and what the level of price change may be. The reduction in smoking since the 1960s has been brought about partly through public education and partly through the use of taxation as a means of deterring consumption. It is clear, however, that one of the impacts of the increased taxation on smoking has been that some people have to decide whether to smoke or to eat. For many years, evidence on benefit rates suggested that it was not possible to subsist on benefits while smoking – which prompted a moral dilemma as to whether benefits had to be large enough to allow people to smoke. The third problem is distributive. The effect of any particular price measure is likely to impact most directly on those for whom that price has the largest impact on their incomes. Rich people are unlikely to be much affected by charges for water use; poorer people may be. There was no charge made for water rates in the UK until 1974. The main effect of disconnecting poor people for non-payment of water was to create problems in the disposal of human waste.362 Disconnections were eventually stopped by law in 1999. Currently there is a strong movement towards metering water – the suppliers hope to restrict the excessive use of domestic water for gardens and swimming pools. But an immediate, predictable consequence is that some people, seeking to economise, will flush the toilet less, and that this will disproportionately be true of people on lower incomes. Those who advocate markets as the answer to anything respond that desirable balance can be achieved through a redistribution of income, but that

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N Petry,W Bickel, 1998, Polydrug abuse in heroin addicts: a behavioral economic analysis, Addiction 93 (3) pp 321-35. T Lang, 1998, Food poverty and shopping deserts, Health Education Journal 57 (3) pp 202-11. A Herbert, E Kempson, 1995, Water debt and disconnection,York: Joseph Rowntree Foundation. 125

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ducks some obvious problems – how much income, by what test, to whom and by what process? There are many different ways of changing the behaviour of producers and consumers without using price mechanisms at all. Common forms of rationing include delay (waiting lists), dilution, filtering (using referral and assessment to make selections, for example by controlling access to medical specialists through family doctors) and the use of eligibility qualifications.363 The price mechanism may be good at restricting demand; but it may not be relevant to other aims, such as achieving specific distributions, targeting particular population groups or promoting procedural fairness. If we want as a matter of policy to regulate the demand for social housing, music education or brain surgery, using the price mechanism is a very clumsy way of doing it. The limits of market mechanisms, and the unintended consequences, are not so serious as to imply that market mechanisms cannot resolve some conflicts of interest, but they do raise questions about the simpleminded faith that there is nothing else we can do, or nothing better. The effects that market processes have depend heavily on context and circumstances, and until those circumstances are taken into account, it is not possible to make a sensible policy decision about the process and method that ought to be used.

4.3 Personalised services In the market, the negotiation of choice through the price mechanism is supposed to mean that individual utilities are expressed in people’s choices about consumption. There are circumstances, however, where this is unrealistic. Some services are concerned with control or coercion – for example, provision for offenders, or the compulsion on benefit recipients to be ‘actively seeking work’. Some services are provided in situations where the competence or ability to choose of the service user is limited: that happens, for example, in services for children, or the care of people with dementia. If people are not able to exercise choice, it is difficult to see how the market can be brought to respond to the needs of the individual. This is what personalisation is supposed to do instead. Even if it is not possible to duplicate market mechanisms, the argument runs, it should be possible to duplicate some of the flexibility, choice and satisfaction of personal utilities that markets would 363

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E Scrivens, 1980, Towards a theory of rationing, in R Leaper (ed) Health wealth and housing, Oxford: Blackwell; and see P Spicker, 2008, Social policy, Bristol: The Policy Press, ch 11.

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otherwise achieve. This has been the rationale for the development of ‘quasi markets’, measures which imitate market mechanisms but may not have all the features that might be expected of a market.364 Personalisation is being touted as a new idea,365 but it has been around for some time. Michael Bayley argued, in the 1970s, that services could be ‘interwoven’ to meet the needs of individuals flexibly.366 This concept paved the way for the ‘packages of care’ advocated in the 1988 Griffiths report.367 Griffiths argued for a system ‘taking full account of personal preferences (and those of informal carers)’368 and ‘tailored ... to meet the needs of individuals’.369 Those terms are recognisably the same as those now being used to describe personalisation. The system that developed could not be a conventional market, but it was supposed to be as much like the market as possible. Griffiths argued: care and support can be provided from a variety of sources. There is value in a multiplicity of provision, not least from the consumer’s point of view, because of the widening of choice, flexibility, innovation and competition it should stimulate. The proposals are therefore aimed at stimulating the further development of the ‘mixed economy’ of care.370 The system that emerged was less individualistic, and arguably less market oriented, than Griffiths proposed. In practice, the Griffiths reforms came to rely on services planned and commissioned by local authorities. Service providers were subcontracted by the purchaser, typically in complex agency arrangements. Personalisation is a restatement of the plan; it is supposed to offer choice, flexibility and responsiveness to individual needs. Personalisation is:

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B Hudson, 1992, Quasi-markets in health and social care in Britain, Policy & Politics 20 (2) pp 131-42; J Le Grand, W Bartlett, 1993, Quasi-markets and social policy, Basingstoke: Macmillan. I Ferguson, 2007, Increasing user choice or privatizing risk? The antimonies of personalisation, British Journal of Social Work 37 (3) pp 387-403. M Bayley, 1972, Mental handicap and community care, London: Routledge & Kegan Paul. R Griffiths, 1988, Community care:Agenda for action, London: Department of Health and Social Security, p 1. Griffiths, 1988, para 1.3.2. Griffiths, 1988, para 6.5. Griffiths, 1988, para 3.4. 127

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transforming social care to give people greater choice, control and flexibility over the publicly funded support they receive and providing greater advice and assistance to people paying for their own care.371 Giving people more power to decide for themselves is treated as a matter of ‘common sense’.372 It is supposed to work for older people, psychiatric patients, people with learning disabilities, people with addictions, offenders, school pupils373 and homeless people; the fields of operation include social care, education, health, housing and criminal justice.374 Most recently it has been extended to the administration of social security benefits, including provision for unemployed people375 and for people with long-term sickness.376 It is part, then, of a general movement towards individualisation.

Personalised approaches Personalisation is sometimes referred to as a system where professionals match services to needs: ‘Personalisation places an emphasis on providing social care services tailored to the individual needs of the user, rather than fitting people into existing services that may not deliver the right kind of support for their particular circumstances.’377 Individualised assessments depend on identifying the particular circumstances of the person being assessed. A very different interpretation of personalisation focuses on the preferences of the user, rather than on a process of assessment. Assessment by a professional usually implies that the professional, rather 371

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J Manthorpe, M Stephens, 2008, The personalisation of adult social care in rural areas, London: Department of Health, p 8, obtained at www.dhcarenetworks.org. uk/_library/Resources/Personalisation/Research_evaluation/CRC_Adult_Social_ Care.pdf C Needham, 2011, Personalising public services, Bristol: The Policy Press. Scottish Government: Curriculum Review Group, 2004, A curriculum for excellence, Edinburgh: Scottish Executive, www.scotland.gov.uk/Publications/ 2004/11/20178/45862, p 14. Needham, 2011, ch 4. D Freud, 2007, Reducing dependency, increasing opportunity, London: Department for Work and Pensions. P Gregg, 2008, Realising potential: A vision for personalised conditionality and support, London: Department for Work and Pensions. J Harlock, 2010, Personalisation: emerging implications for the voluntary and community sector, Voluntary Sector Review 1 (3) pp 371-8, p 371.

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than the consumer, will make the decisions. Choice, in principle, is an alternative to that approach. Under market conditions, the person who decides what is appropriate is the consumer, and utility is expressed through the mechanism of choice. This should mean that services are appropriate to the individual. According to the Department of Health, ‘every person who receives support, whether provided by statutory services or funded by themselves, will have choice and control over the shape of that support in all care settings’.378 There is an obvious tension between emphasising user choice, on the one hand, with a process on the other that is heavily dependent on professional judgment. That is partly because there is an imbalance of power, but also because choice and professional assessment often point to different outcomes – there would be little reason to offer professional assessments otherwise. A third model attempts to reconcile these competing claims. Personalisation is sometimes represented in terms of a model where the task of professionals is to facilitate and inform personal choice: ‘Personalisation means that people become more involved in how services are designed and they receive support that is most suited to them. ... Personalisation means enabling people and professionals to work together to manage risk and resources.’379 A personalised response consists of selecting options or actions that are appropriate to the individual. Regardless of whether the selection is being made by a professional, or by the service user, or by the two together, developing a response tailored to the needs of the person depends in principle on providers offering a sufficiently varied or adaptable range of options to meet those needs. From this range, it should be possible to adapt services to the needs of the individual. An individualised response should avoid the situation where people are expected (or forced) to fit preconceived categories. This is essentially an attempt to mimic the conditions of the market. Whether a market would be able to achieve this level of individualisation depends on a range of assumptions, and there are cases where markets cannot do it – where imperfect information, locational costs, externalities and disadvantage conspire to limit choice, control and responsiveness. These circumstances – the kinds of condition 378

379

Department of Health, 2008, Personalisation, archived at http://webarchive. nationalarchives.gov.uk/+/www.dh.gov.uk/en/SocialCare/Socialcarereform/ Personalisation/DH_080573 Changing Lives Service Development Group, 2008, Personalisation: A shared understanding, www.socialworkscotland.org.uk/resources/pub/Personalisation Papers.pdf 129

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where the market cannot operate – are just the circumstances where personalised services are being extended.

Personalisation in practice Any quasi-market model depends on there being, not just a range of possible responses, but a set of available choices. That means there has to be enough excess provision for a choice to be possible, and that rarely happens. People are trapped by the pattern of existing provision: ‘The experience of self-funders of social care is instructive here, with many carrying on paying for and receiving quite traditional and often inadequate services, either because better alternatives do not exist, or because people lack the information and advice to find them.’380 When older people find themselves in hospital and unable to return home, their choices are constrained – partly because of their physical condition, partly as a result of local options and provision and partly because of the concerns of professionals and carers.381 Both service users and carers tend to feel that crucial decisions have been made by other people.382 There are frequent mismatches of people’s needs with the provision they receive.383 In the same way, the housing options for people with intellectual disabilities are limited by scarce supply, competition for resources and restricted social networks: ‘the problem of mismatches in group-homes are so common now all across the system, that even if new residents coming in were given a choice, they are not likely to find any appropriate option anyway’.384

380 381

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ACEVO, cited by Needham, 2011, p 95. See e.g. I Allen, D Hogg, S Peace, 1992, Elderly people: Choice, participation and satisfaction, London: Policy Studies Institute; B Hardy, R Young, G Wistow, 1999, Dimensions of choice in the care and assessment process, Health and Social Care in the Community 7 (6) pp 483-91. S Davies, M Nolan, 2003, ‘Making the best of things’: relatives’ experience of decisions about care-home entry, Ageing and Society 23 pp 429-50; H Arksey, C Glendinning, 2007, Choice in the context of informal care-giving, Health and Social Care in the Community 15 (2) pp 165-75. See e.g. S Tucker, J Hughes, A Burns, D Challis, 2008, The balance of care: reconfiguring services for older people with mental health problems, Aging and Mental Health 12 (1) pp 81-91; A Andrews, S Bartels, H Xie, W Peacock, 2009, Increased risk of nursing home admission among middle aged and older adults with schizophrenia, American Journal of Geriatric Psychiatry 17 (8) pp 697-705. I Wiesel, R Fincher, 2009,The choice agenda in disability housing provision, Housing Studies 24 (5) pp 611-27, p 622.

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In these circumstances, there is little reason to suppose that the options that are available to be selected for any individual are tailored to the needs of the individual. After more than 20 years of mainstream practice, the evidence for the effectiveness of personalisation in these terms is patchy at best.385 The strongest evidence so far lies in the evaluation of Individual Budgets, a scheme which tries to develop a market by allocating resources for use according to the needs and preferences of the individual. The evaluators’ summary of the findings was as follows:



• For people with learning disabilities, there is a costeffectiveness advantage in terms of social care outcomes but only really when we exclude people without support plans in place from the analysis. ... the potential is there to achieve cost-effectiveness, but ... we did not observe this ... • Cost-effectiveness evidence in support of IBs [Individual Budgets] is strongest for mental health service users ... • For older people, there is no sign of a cost-effectiveness advantage ... • There appears to be a small cost-effectiveness advantage for IB over standard support arrangements for younger physically disabled people ...386

This offers some support for personalisation, but it is limited and dependent on context. The largest groups of people being supported are older people and people with learning disabilities; that means that in practice, most of the people who are being served by these programmes are not benefiting from them. The findings offer no justification for developing a programme of personalisation for all of the groups, all of the time. Personalisation has been over-sold.387 If the evidence falls short of the claims that are made for personalisation, that may have more to do with the overblown rhetoric that has been used to justify the policy than 385

386

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M Samuel, J Dunning, 2010,Are personal budgets more cost-effective?, Community Care, 12 February. C Glendinning, D Challis, J-L Fernández, S Jacobs, K Jones, M Knapp, J Manthorpe, N Moran,A Netten, M Stevens and M Wilberforce, 2008, Evaluation of the Individual Budgets Pilot Programme,York: Individual Budgets Evaluation Network, p 111. P Spicker, 2012, Personalisation falls short, British Journal of Social Work doi: 10.1093/ bjsw/bcs063 131

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with any fundamental defect in the principle. The variation in results seems to suggest that the appropriate response would be to review which people might be able to benefit from greater decentralisation of control, under what circumstances.

4.4 The individualisation of social policy The issues I have been considering in this part of the book are expressions of a broader principle: that if we are concerned with the circumstances of individuals, the policies, mechanisms and responses adopted should be conceived at the level of the individual. This process can be described as one of ‘individualisation’. (The term ‘individualisation’ is also used in sociology to refer to the construction of the self;388 I am using it here in a more straightforward sense.) The task to be undertaken is seen as work with individuals. The ideal response is likely to be personalised, responding to the circumstances of people one by one, rather than together. The case for individualisation in these terms may seem strong. Moral individualism warns us that if we do not take account of the needs and circumstances of individuals, we are likely to over-ride them. Substantive individualism implies that policies that are not adapted to individuals will mistake their purpose: for example, a policy which is intended to benefit ‘older people’ will not work if it cannot be adapted to the circumstances of each and every older person. Even if services are provided generally, they have to be designed for work with individuals. That fuels the argument for more individualisation – personalisation in social care,389 individual learning plans in schools390 or focusing social security more on the individual rather than the household or the family.391 There is a flaw in the argument here, but it is only when we come down to cases that the problem becomes clear. The same unemployment can be responded to with support for the unemployed person, policies affecting employers, a programme of job creation or policies to deal with the economy. Child abuse may call for monitoring and supervision 388

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I Ostner, 2004, Individualisation: the origins of the concept and its impact on German social policies, Social Policy and Society 3 (1) pp 47-56. C Leadbeater, 2004, Personalisation through participation, London: Demos. Ofsted, nd, Ofsted Good Practice Database: Individual learning plans, www. excellencegateway.org.uk/page.aspx?o=108288 J Millar, 2003, Squaring the circle? Means testing and individualisation in the UK and Australia, Social Policy and Society 3 (1) pp 67-74; T Knijn, 2003, Challenges and risks of individualisation in the Netherlands, Social Policy and Society 3 (1) pp 57-65.

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of the behaviour of deviant families, but it might also need a culture where families hit their children less often.392 Homelessness can be addressed by a service to homeless people, but it can also be responded to by building houses – and if there are not enough places to live, no personalised service can overcome the problems. The existence of general forms of provision, such as pensions, schools, libraries and hospitals, offers individuals a broader set of options than they could expect to have from individual provision alone. It does not follow, because problems are experienced by individuals, that the response should be individual too. Social policies are usually ‘targeted’, or aimed, at a particular group of people.393 Policies can be directed towards individuals, but they can also legitimately be based on families, communities, groups, blocs in society (such as women or people with disabilities), sectors (education, health, employment and so on), geographical units or the population as a whole. There are policies which are personalised. Medical care is organised to allow each person to have an appropriate response to their individual needs. Social work is based on the relationship between the individual and the professional social worker, who assesses need and establishes an appropriate response for the person in question. The target group may be people who fit a particular criterion, such as teenage mothers or low-income home owners, or a group of people who have particular needs, such as unemployed younger people or rough sleepers. Then there are policies aimed at broad categories of people, or sectors of society – older people, people with disabilities and so on. And there are policies which are aimed at whole communities – economic growth, road construction or sewers. The idea of targeting is sometimes used in a very specific, rather narrow sense, as if it referred only to means-testing.394 The concept is much wider than that. Any kind of group or category – such as mothers, older people, students, service personnel or local communities – could be ‘targeted’ for certain policies. For some people, targeting is a selective process, designed to exclude those who are not eligible. (This is not an essential feature of targeting: a soup kitchen can target poor people very effectively without having any test or exclusionary 392 393

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M G Sheppard, 1982, Perceptions of child abuse, Norwich: University of East Anglia. P Spicker, 2005,Targeting, residual welfare and related concepts: modes of operation in public policy, Public Administration 83 (2) pp 345-65. e.g. D Mitchell,A Harding, F Gruen, 1994,‘Targeting welfare’, The Economic Record, 70 (210) pp 315-40; P Whiteford, 1997,Targeting welfare: a comment, The Economic Record 73 (220) pp 45-50. 133

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process.) Those assumptions have led the advocates of targeting to argue that targeting is cheaper, less wasteful and more direct than alternatives. However, the assumptions are suspect, and the evidence on such services is that targeting rarely achieves that kind of specificity. The process of exclusion depends on accurate definition of the categories, and perfect administration. Inevitably some people will be wrongly included, while others will be wrongly excluded. It is a commonplace of social security provision that many people do not receive the benefits they are entitled to, for complex reasons including ignorance, lack of knowledge and stigma.395 Exclusion means there will be boundary problems, where it is difficult to establish who should be entitled and who should not, where decisions have to be made about marginal cases, and where people whose circumstances improve have to suffer a withdrawal of benefits or services if equity is to be maintained. Disability is hard to assess and harder to respond to appropriately. Means-tests have particular problems, because the unstable, fluctuating nature of income and difficulty of identifying and balancing diverse sources of income make the task administratively hard to manage.396 The general experience of selective or means-tested benefits has been that they are complex, expensive and difficult to administer – not at all the streamlined, efficient and individually tailored systems that advocates claim. By contrast, benefits and services which are consistent, predictable and unresponsive – like Child Benefit or the insurancebased State Pension – provide individuals with a stable income and allow them the maximum degree of freedom and choice without penalising people for desired behaviour. This points to a general issue in the relationship between problems and responses. Regardless of what the causes of problems are, regardless of whether the target group should be an individual, a group or a commonwealth, the best methods to use may not be either the methods that individuate responses most directly or the methods that mirror the circumstances most closely. There may be circumstances where a degree of further individualisation might be welcome, but it is a question of balance. Where the issues are distinctive, multifaceted or isolated, a personalised approach may make sense; but as the issues become more common, more general and more extensive, individualised approaches become more complex, more cumbersome, more likely to throw up anomalies and more expensive. Individualisation is not always the 395

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C Davies, J Ritchie, 1988, Tipping the balance, London: HMSO; P Craig, 1991, Costs and benefits, Journal of Social Policy 20 (4) pp 537-65. W van Oorschot, 1995, Realizing rights, Aldershot: Avebury

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option that responds most effectively to the circumstances of individuals. An older person’s specific, individual financial need to pay a vet’s bill for a sick cat is likely to be met better by a general system of income in old age than it is by an individuated and sensitive personal assessment of the financial circumstances of the older person and an appraisal of the health of the cat. There is a tendency, in some policy discussions, to assume that policies that are individualised, adapted to the individual and specific must be superior to ones which are not.397 If a service is not personal, it must be impersonal; if it is not responsive, it must be unresponsive; if it is not tailored to the individual, it must be ill-fitting; if people are not able to exercise choice, it must be forced on people. These are false dichotomies. The alternative to arranging services to meet particular circumstances is a generalised response. In some cases, we need to have general rules, such as human rights or minimum standards. If we want no child to be without schooling, or no-one to live in a house without a water supply, we need general rules, not individual dispositions. General rules are usually easier to understand, easier to publicise and easier to enforce than individuated responses. The alternative to a service oriented to personal needs is one oriented to common needs. Some services provide public goods – roads, parks, water supplies, sewerage and so on. These services can be used by individuals, but they are provided collectively and available to all. Some commodities that are sold in the market can be provided for the needs of groups and communities instead: examples are drinking water, district heating and wireless broadband connections. There are also services that, even if they are delivered to individuals, are not exclusively aimed at the individual. Rubbish collection, education and sewerage have important externalities; there are good reasons for not leaving whether they happen to individual choice. The alternative to an individual service may be a group one. Schools, for example, are provided for groups of children. There are arguments for personal tuition, but they are not usually thought to eclipse the argument for schools. An individual tutor can provide a sensitive, individually gauged response to the needs of the pupil. (It is also notoriously difficult to guarantee standards or child protection, but let that pass.) However, there are other aspects of education in schools – such as socialisation and the development of social networks – which a personal tutor cannot provide. The group character of education is 397

e.g. Adam Smith Institute, www.adamsmith.org/; Leadbeater, 2004. 135

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an important part of the experience. (Individualisation is still possible within a group experience – schools should both provide common standards for pupils while allowing for individual variation.) There are other services where it is more practical and desirable to offer standardised or group provision than individualised provision. Where there is no road, the answer is not necessarily to issue people with boots. The alternative to a responsive service is a consistent one. There are circumstances where people want services to respond by adapting to their needs, increasing at some times and stopping at others. For example, there are good reasons why people would want some services to stop when their situations improve, like social baths (help with personal hygiene, assisted by someone in the bathroom) or help in getting into bed. The same is not true of every service. School terms, transport timetables or rubbish collections need to be regular, diarised and predictable. Financial benefits that go up and down are disruptive. It is obvious enough that people do not mind if they carry on getting benefits they no longer need; it is less obvious, but seems also to be true, that people are deeply concerned about income that is unstable.398 The operation of Tax Credits has shown that they may not want to claim benefits that are unpredictable and might stop or be reclaimed;399 the UK Parliamentary Ombudsman has questioned ‘whether a financial support system which included a degree of inbuilt financial insecurity could properly meet the needs of very low income families and earners’.400 There are often, then, viable and defensible alternatives to individualised responses. Individualism provides a broad set of principles; individualisation, by contrast, refers to a narrow set of methods. The principles do not dictate the methods. None of these examples prevents individuals being taken appropriately into account, but they do weigh against the presumption that individualised responses are intrinsically superior to collective alternatives. Nursery education has developed through several alternative models – personal choice, subsidised private care, universal education and personal social services. Probably the least satisfactory has been the last of these – a system where admission of a child to nursery care was based in an individualised assessment of 398

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C Goulden, 2010, Cycles of poverty, unemployment and low pay, Y   ork: Joseph Rowntree Foundation. P Gerrard (HMRC Transformation Programme Director), 2008, Tax Credits and Child Benefit, DWP Annual Forum, Glasgow, 20 November. UK Parliamentary and Health Service Ombudsman, 2007, Tax Credits: Getting it wrong?, HC 1010, London: The Stationery Office, p 5.

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need and the risk to the child – because it was a formulation designed to stigmatise the recipients.401 Even if there are circumstances where an individualised, personalised response is best practice, there are other cases where good practice calls for services that are not individualised. The basic question to be asked is whether individualisation is the best response, or even a good one, in the case under consideration.

401

C Armstrong, M Hill, 2008 Support services for vulnerable families with young children, Child and Family Social Work 6 (4) pp 351-8. 137

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Individuals and collective action Summary There are reasons to be sceptical about whether it is possible to move from an individualist position to considering the interests of groups. The ‘impossibility theorem’ seems to imply that people might always have inconsistent preferences, and that nothing can be done by groups that is not in some way imposed. Collective action is assumed by some theorists to be unstable. There are, however, many forms of collective action, there are good, strong reasons why even selfinterested individuals should cooperate and some collaborative mechanisms have proved remarkably resilient. The main problems which public services pose for individualists are not best considered by generic criticism of collective action, but by how within collective structures the position of individuals can be respected and defended.

5.1 Individual and social choices Both methodological and substantive individualism start from the position that individuals make their own choices, that these choices are made independently and that they are diverse. None of those assumptions is unreasonable, but once that much has been accepted, it can be difficult to move from there to any meaningful concept of social choice or welfare. Bentham proposed that the welfare of a society could be found in ‘the greatest happiness of the greatest number’.402 This outweighs the position of the individual in both moral and substantive terms: the good of anyone can be set aside for the good of the majority. It is possible to dismiss this as a position no-one really believes, but people who do not believe it commonly end up doing it anyway. It happens in the practice of cost-benefit analysis, a procedure recommended by

402

J Bentham, 1789, An introduction to the principles of morals and legislation, in M Warnock (ed) Utilitarianism, Glasgow: Collins, 1962. 139

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the World Bank and the UK Treasury.403 Cost-benefit analysis works by summing up all the costs experienced by all parties on one side, and all the benefits on the other. It is not quite the sum of happiness, but it is the sum of economic well-being, usually expressed in terms of money. The main justifications for cost-benefit analysis are modest: that it is a useful decision-making procedure, that it adds to transparency and that it is probably better than the alternatives.404 The principle is nominally based in methodological individualism, in the sense that it begins from examining the utility of each individual distinct from others, and aggregating results; but it is not morally individualistic at all. On the contrary, it over-rides the position of individuals who face different outcomes. Cost-benefit analysis, when it is used as the basis for decisions, does not in general have in it anything to protect the position of those who incur costs, if others benefit. The compensation principle (also known variously as the Hicks-Kaldor criterion, the Kaldor-Hicks standard and variations thereon) states that a measure can be said to be an improvement if the gainers could in theory compensate the losers – regardless of whether or not they actually do. It sounds at first like a short cut – just a way of glossing over the problems – but the justification for the procedure is more sound than it might first appear. Hicks argued: How are we to say whether a reorganisation of production, which makes A better off, but B worse off, marks an improvement in efficiency? The sceptics declare that it is impossible to do so in an objective manner. The satisfactions of one person cannot be added to those of another, so that all we can say is that there is an improvement from the point of view of A, but not from that of B. In fact, there is a simple way of overcoming this defeatism, a perfectly objective test which enables us to discriminate between those reorganisations which improve productive efficiency and those which do not. If A is made so much better off by the change that he could compensate B for his loss, and

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Independent Evaluation Group, 2010, Cost benefit analysis in World Bank projects, Washington, DC: World Bank; HM Treasury, nd, The green book, London: The Stationery Office, at www.hm-treasury.gov.uk/d/green_book_complete.pdf M Adler, E Posner, 1999, Rethinking cost benefit analysis, Chicago, IL: University of Chicago Law School.

Part Five: Individuals and collective action

still have something left over, then the reorganisation is an unequivocal improvement.405 This makes it clear that the focus of the improvement is a narrow question of productive efficiency; and if that is all the criterion is meant to say, it could indeed be used to identify how much benefit has been produced, at what cost. However, it is based on the same premise as the Pareto principle – that there is no argument in welfare economics for preferring one distributive outcome to another – and it has the same intrinsic flaw, that it cannot in consequence answer many of the problems it is set to answer. A second attempt to develop a concept of social welfare is based in the Pareto principle itself. Sugden puts forward three propositions, which he describes as ‘basic individualist or liberal values’. These are that:

1 Each person is the best judge of his own welfare. 2 Social welfare depends only on the welfare of persons in society. 3 If one person’s welfare is greater in some end state x than in another end state y, and if no person’s welfare is less, then social welfare is greater in x than in y.406

The first two propositions are needed because there has to be a mechanism of translating the reconciliation of revealed preferences described in the Pareto principle into a concept of social welfare. I have already discussed some of the problems with the concepts, but there is also a key methodological problem in the process. One of the most important claims that has been made from methodological individualism is that it is impossible for a society to express a collective preference that is consistent with the preferences of individuals. The argument is not that there cannot be a social preference, but that one cannot go from individual choices to social choices without submitting to certain conditions. The conditions – like not having preferences subject to dictatorship – seem to imply that any attempt to arrive at social priorities must violate the well-being of individuals. The core of the ‘impossibility theorem’ rests in a paradox first identified by the Marquis de Condorcet. Condorcet’s problem is 405

406

Hicks, cited in I M D Little, 1957, A critique of welfare economics, Oxford: Oxford University Press, p 92. R Sugden, 1981, The political economy of public choice, Oxford: Martin Robertson, pp 36-7. 141

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conventionally presented in terms of voting systems, but to show what it might mean in practice I am going to compare the income distributions in three countries. The figures are based on indicators in the World Bank’s World development report.407 I have calculated what the percentage share of national income for each quintile implies for the distribution of Gross National Income (GNI) per capita. A quintile is a fifth part; each quintile accounts, then, for 20% of the population. The precise indicators are disputable, because they are based on uncertain sources, slightly different timeframes and the conversion of different currencies into equivalent purchasing power, but they are still revealing. Table 5.1: Distribution of income in three countries (US$ equivalent) Average income of bottom 20% of population Finland $17,794 Belgium $16,273 Canada $13,813

Average income of second 20% of population $26,134 $24,889 $24,365

Average income of middle 20% of population $32,436 $31,206 $32,998

Average income of fourth 20% of population $40,962 $39,822 $44,126

Average income of highest 20% of population $68,023 $79,260 $76,548

GNI per capita, purchasing power parity, 2010 $37,070 $38,290 $38,370

If the test is based on what produces the biggest total – the highest sum of individual utilities, or the ‘greatest happiness of the greatest number’ – the best option would be the distribution in Canada, though it is also the country that allocates least to the lower-income groups. Finland has the highest minimum – John Rawls’ ‘maximin’ 408 – and it reduces inequality to the greatest degree. If we look at the position of the majority of the population, however, a curious result emerges. • Four quintiles in Finland – all bar the top – are better off than they would be in Belgium. • Three quintiles in Belgium – the first, second and top – are better off than they would be in Canada. • Three quintiles – the top three – are better off in Canada than they would be in Finland.

407 408

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World Bank, 2012, World development indicators 2012,Washington, DC:World Bank. J Rawls, 1971, A theory of justice, Oxford: Oxford University Press.

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Three quintiles equals 60%, a clear majority of the population, and four quintiles is 80%. If 80% of the people in Finland are better off than they would be with the distribution in Belgium, and 60% of people in Belgium are better off than they would be with the distribution in Canada, it seems to follow that most people in Finland must be better off than they would be in Canada. But the opposite is the case. At first sight, this makes no sense. The indicators I used are open to challenge, and admittedly I selected these three countries to make the case, but that is not the reason why things look this way. What has happened is a genuine paradox – a case where rational component elements lead to an irrational aggregate result. The implication is that we genuinely cannot work out, from the information provided, which option might be best for most people in a society. This is the springboard for Arrow’s famous ‘impossibility theorem’. Arrow begins by identifying preferences with well-being. He posits four key assumptions: • preferences are rational, in the sense of being consistent: if people prefer A to B, they do not also prefer B to A, and if they prefer A to B and B to C, then they prefer A to C; • the Pareto principle (or at least, the modified ‘weak’ Pareto principle considered earlier); • the independence of irrelevant alternatives; • non-dictatorship – that no solution is imposed on the collective body by a dictator.409 Various commentators have pointed out that the proof involves more than these assumptions. One is the purely formal requirement that preferences are ordinal, and that intensity or strength of preference is not what is being taken into account – the same issues can be shown in terms of quantities, but it takes longer to do. The other is the condition that people actually do make different choices. Little points to Arrow’s implicit assumption that ‘individual orders should not be unduly restricted a priori’,410 but the assumption goes further than that: for the proof to work, there has also to be a range of options, which people actually do choose in different orders. If everyone agrees preferences in the same order, there is no problem to resolve, and no paradox. 409

410

K Arrow, 1967, Values and collective decision making, in E Phelps (ed) Economic justice, Harmondsworth: Penguin. I Little, 1972, Social choice and individual values, in E Phelps (ed) Economic justice, p 137 143

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I have reviewed some of these conditions already. The idea of rationality is needed for any formal proof; the Pareto principle disregards key aspects of distribution. The third condition is ‘the independence of irrelevant alternatives’. Arrow presents it in this form: ‘The social choice made from any environment depends only on the orderings of individuals with respect to the alternatives in that environment.’411 He suggests that we exclude ray guns, a leap into the world of fantasy, but we do not need to wrestle with silly examples. What he wants to say is that people cannot introduce new, extraneous factors into the discussion. That much is uncontentious. In the discussion above, I have not reviewed the attractions or problems of the distribution of income in Lesotho, Sweden or Switzerland. (I did, in an early draft of this section, work out figures for Australia, Ireland and the US; the paradox was there on the 2009 figures but it disappeared on the 2010 ones.) There are always other potential choices, and if any of them can be dumped into the discussion, no-one will ever resolve any decision. But there is a further proposition hidden in here, that the preferences depend ‘only on the orderings of individuals’ – a phrase which does not seem to belong with the rest of the assumption. Arrow is assuming not only that people choose between specified alternatives, but that they will rank those choices differently. This feeds into the more contentious assumption of ‘universal domain’, the name Sen attaches to the implicit assumption that a social preference function must ‘yield a social ordering for every possible combination of individual preferences’.412 If every option was selected by someone, and people selected the options with equal priority, it would certainly be difficult to construct a sense of social priority. It must be true to say that if people have extremely divergent individual preferences, then we cannot usefully make any useful generalisation about what they want as a whole without compromising the position of individuals; but it is not much of an insight, and it is not very useful. People do not, as a point of fact, differ in their preferences about every issue. Some options are completely ineligible; others are undesirable. We form our behaviour, and choose our ways of life, according to the circumstances we live in. A series of studies of the way people define need has found that the vast majority of people in the UK consider

411 412

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Arrow, 1967, p 129. A Sen, 2000, Rationality and social choice, in R Kuenne (ed) Readings in social welfare, Oxford: Blackwell, p 122.

Part Five: Individuals and collective action

certain items to be essential, such as heating or beds for each child.413 The Living Costs and Food Survey asks households in the UK what durable goods they own. For example, from a survey in 2009, we know that 96% of British households have a washing machine, 95% have central heating, 93% own a microwave oven and 90% have a DVD player414 – the question about DVDs is there because there is no longer much point in even bothering to check if they have a television. The same extraordinary evidence of consensus can be found in Australia, another apparently individualist culture, where despite the diversity of personal experience more than 99% of the population agreed in 2006 that access to medical treatment, warm clothes and bedding and a substantial meal at least once a day are essential.415 There is little reason, then, to suppose that fundamental differences in expressed preferences are always the norm; and once the assumption of universal domain is relaxed, there are many preferences and values which may prove to be held across society. Arrow addresses the issue of consensus only by excluding ‘dictatorship’. Non-dictatorship is defined by Arrow in these terms: ‘There is no individual whose preferences are automatically society’s preferences independent of the preferences of all other individuals.’416 In other words, no single person can impose his or her preferences on others. Arrow developed this proposition from an earlier paper, which I think stated the position more clearly: ‘the only methods of passing from individual tastes to social preferences which will be satisfactory and which will be defined for a wide range of sets of individual orderings are either imposed or dictatorial’.417 That explanation also helps us to identify what is wrong with the position: imposition and dictatorship are not the only way of achieving consensus. People are influenced by everyone around them. There are norms and expectations. We are taught by our parents, our peers and our schools. We have not 413

414

415

416 417

D Gordon, C Pantazis (eds), 1996, Breadline Britain in the 1990s, London: Avebury; D Gordon, R Levitas, C Pantazis, D Patsios, S Payne, P Townsend, L Adelman, K Ashworth, S Middleton, J Bradshaw, J Williams, 1999, Poverty and social exclusion in Britain, York: Joseph Rowntree Foundation; J Mack, S Lansley, 1985, Poor Britain, London: Allen & Unwin. UK Office for National Statistics, 2010, Family spending 2010 edition, Table A50, London: Office for National Statistics. P Saunders, 2011, Down and out: Poverty and exclusion in Australia, Bristol:The Policy Press. Arrow, 1967, p 129. K Arrow, 1950, A difficulty in the concept of social welfare, Journal of Political Economy 58 (4) pp 328-46, p 342. 145

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decided haphazardly that we ought to go to bed at night, wake up in the morning, have breakfast, clean our clothes, use a bathroom and so forth; we have learned to do them. Most are things we are taught to do as part of growing up (and when people have not learned how to do these things, we tend to think there is a problem). This is the process of socialisation. Morals, values, preferences and responses are social, not independent. We share understandings of values like property, rights, personal intrusion or family relationships. Often these issues will be so much taken for granted that they do not make the agenda to be eligible for choosing, but in a wide range of fields people follow the preferences and views of other people, not just their own. In cases where choices are disputed and contentious – religion, drugs, sexuality, gambling – people are not thrown onto their own stock of wisdom; they will draw views and options from the people around them. The ability to form joint perceptions and intentions is part of what it is to be human. Basing their argument on the contrast between the development of human children and the great apes, Tomasello and his colleagues argue that ‘the crucial difference between human cognition and that of other species is the ability to participate with others in collaborative activities with shared goals and intentions: shared intentionality’.418 The idea that people’s preferences are individual and formed in isolation is inconsistent with human experience; and the idea that accepted patterns of thought only take shape if they are imposed by a dictatorship is ridiculous. Condorcet’s paradox is an intriguing problem, which calls for caution in the identification of majority preferences wherever there are complex issues. Its extension into the impossibility theorem goes several steps too far. The idea that there can be no social preferences is the fifth impossible thing to believe considered in this book, though there have been other indigestible assumptions buried along the way. The theory rests on a tissue of unwarranted assumptions about the way that people think and behave. It is already difficult to be certain that a formal, methodological proof has any substantive implications; but there is no reason to suppose beyond that, even within the strictly formal confines of the theory, that people may not want just the same things, that all possible options will be chosen, or that distribution is irrelevant. There is no justification for supposing from it that individual preferences can never be aggregated into collective ones. 418

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M Tomasello, M Carpenter, J Call, T Behne, H Moll, 2005, Understanding and sharing intentions: the origins of cultural cognition, Behavioral and Brain Sciences 28 (5) pp 675-91.

Part Five: Individuals and collective action

5.2 Collective action Many substantive individualists are suspicious of the very idea of collective action. The patterns of individualism considered in Part One include several comments to the effect that only individuals matter; everything else is a construct, based on the people who make it up. At the same time, most people are prepared to accept that some collective units do have some meaning, and that they are more than the sum of the parts. An obvious example is the family. Families are, of course, structured differently in different places and at different times: in the community I was born in, my parents, aunts, uncles, cousins and grandparents all lived in the same street, and during my lifetime family has been redefined as something rather narrower. Schools are more than the people who happen to go to them. Firms are another example: as I explained before, they exist as persons, quite independently from the individuals who make them up. The basic collective unit is the ‘group’. The idea of a ‘group’ can be confusing, because the term is used in lots of ways, but for practical purposes a social group is defined by three key characteristics: identity, membership and relationships with other group members. Identity is straightforward enough; it must be possible to talk about the group as a whole. Families, schools and commercial firms are examples, but some collections of people are identifiable when they have none of the other characteristics of a group – homeless people, people with disabilities or older people. Membership implies not just that people are identifiably part of the group, but also that they have a relationship to the group itself – a family, a church, an association, a company. Social relationships are not just about proximity or contact; they are based in obligations, commitments and mutual responsibility – a cluster which the Catholic Church and the European Union refer to as ‘solidarity’.419 The relationships of a group are relationships between the people who are part of them. Family members, trades unions and religious congregations are part of a network of relationships. The idea of a group is fundamental to collective action in two senses. In the first place, it is the structure in which social relationships are realised. In the second, groups like family, community and associations are the building blocks of which a society is based. Some individualists have reservations about the very idea of a society, for the same reason that they are doubtful that any action is collective. There is more 419

N Coote, 1989, Catholic social teaching, Social Policy and Administration 23 (2) pp 150-60. 147

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justification for that scepticism, because it is more difficult to see how an individual can have a relationship with a society than with a family or a company, but that is only because ‘society’ is both more abstract and more remote. A society has the same characteristics as a group – identity, membership and relationships – but the relationships do not have to be directly between the individual and the society which the individual belongs to. Society is, rather, a network of groups – if you prefer, a group of groups. That is why it is amorphous, but it is also why extreme individualists like Bentham and Thatcher are wrong to suggest that it is nothing more than a collection of individuals. On the contrary, the patterning of social relationships through the interaction of overlapping groups is a central part of everyday life. Any action by a group is collective. It can be done to form or maintain a group – dissolving a group can be done by individuals. It can be solidaristic action, where members support each other. Or it can be concerted action taken by the group, such as having a party, attending a meeting or making a decision. In each case, the actions taken by individuals in the group are done, and understood, as actions by the group. When groups act collectively, they can be seen as a unit, just as individual human beings are. Groups have an identity; they are capable of collective action. A family can go on holiday; a school can revise its policies; a firm can expand its business. For the purposes of analysis, the social unit, rather than the people in it, becomes the individual decision maker. When a family celebrates, a firm makes a contract, a parliament passes a law, it is not just a matter of individuals doing things together. If a group benefits from collective action, it seems plausible to suggest that the individuals in it will benefit, too. There is a danger, however, that too strong a focus on the interests of the group may undermine the interests of the individual within the group. The position of women, the protection of children and the management of industrial relations all depend on the recognition of conflicting interests within groups. An individualist perspective seems to imply that cooperation with a group and participation in collective action must be at best conditional; and that in circumstances where the interests of the group and the interests of the individual diverge, the individual should act independently.

Collective action and the individual From the perspective of methodological individualism, there are three main circumstances in which individuals might join in collective action. First, there are circumstances where self-interested individuals 148

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may determine independently to follow a shared course of action – effectively, the position of the economic market. This is not group action in the sense I have just defined it, but interaction and exchange are part of the stuff of social relationships, and we tend to use collective phrases, like ‘business community’ or ‘local services’, to refer to it. Second, there are voluntary groups, where rational individuals realise that they have a common interest and active collectively to realise those interests. Third, there are circumstances where the benefits of mutual action cannot be realised spontaneously or through voluntary agreement, and some degree of compulsion would be needed to make the benefits possible. In The logic of collective action, Mancur Olson looks at the circumstances in which a self-interested, rational individual will participate in collective action in a group. Olson suggests that it may well be in the interests of individuals to opt out of collective groups, by exiting from collective responsibility, declining to meet costs which reflect the position of people with greater needs or ‘free riding’ – taking the benefits without making a contribution.420 Declining to meet costs determined by the needs of others is a problem for insurers. If it is possible to join a less expensive scheme for health care, on the basis that one’s own risk is low, the people left in the previous scheme will not have lower needs – and the average cost of support, if people with less need drop out, must be higher. The problem of free riding is widely reflected in tax avoidance or evasion. Where services are funded by taxation, failure to pay tax does not generally lead to any reduction in entitlement. (This is a different problem from insurance or pensions, where reduced contributions generally imply reduced entitlement.) In either case, the effect of diminishing engagement is to increase the costs and burdens for those who remain. Olson hypothesises that group size and heterogeneity consequently play a part in the viability of collective action. The empirical evidence on this is equivocal: Poteete and colleagues suggest that in practice, the character of the association, the complexity of relationships and the context in which the interactions are set act to make success or failure unpredictable.421 (That kind of finding is consistent with many others in social science. It should not be surprising – the key problem with any argument developed on the assumption that ‘others things are equal’ is that they never are.) 420

421

M Olson, 1971, The logic of collective action, Cambridge, MA: Harvard University Press. A Poteete, M Janssen, E Ostrom 2010, Working together, Princeton, NJ: Princeton University Press, ch 3. 149

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Many arguments about the feasibility of collective action are now represented through game theory. The classic representation of a game is the ‘Prisoner’s Dilemma’. There are many different versions of this, but here is the gist. Two criminals have been arrested. If neither confesses, they may be acquitted. If either confesses, that person will be acquitted, or get a reduced sentence; the other will get a longer sentence. If both confess, both will be convicted and sentenced. It may be in the interests of both to keep silent, but it depends on trust; if they cannot trust the other party, it is in their interests to confess, and to hope that the other will not. The precise rules of the ‘game’ are variable – game theorists use the variations to model different outcomes according to changes in the set-up – but for our purposes they are unimportant. What the Prisoner’s Dilemma offers is a scenario, in which people choose between cooperation and selfish action, where there is a conflict between self-interest and common interest. The principles of that choice, represented in formal terms, can then be extended to other scenarios. The Prisoner’s Dilemma is only one in a complex series of possible games. Most of the games are conflictual, because where there is no conflict there is little to be interested in. The games seem to show, for example, that one-off voluntarily negotiated settlements are liable to be unstable, that repeated or iterative games have different, more stable consequences, and that in some circumstances it may be in the interests of the parties to establish a framework of rules or to exercise coercion in order to stabilise arrangements.422 In important ways, Argyle argues, the game fails to reflect cooperation in real life. People in real life do not make decisions in ignorance of other people’s actions; they do not make decisions simultaneously; they communicate; they know each other; they understand the situation; and they share social norms or rules.423 If the analysis is going to be of any use, however, a stripped-down game like the Prisoner’s Dilemma has to be taken to capture something about real-life situations where cooperation and self-interest are in conflict. It is possible to think of many situations where there is more generally a dilemma between the benefits of cooperation and selfish action – should an individual worker support a strike for higher pay, or go into work? Should one marital partner clean out the joint bank account and apply for divorce before the other one does? However, to date all this has proved to have a surprisingly limited application to social policy. That is true because, despite the determination of some governments 422 423

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A Coram, 2001, State, anarchy and collective decisions, Basingstoke: Palgrave. M Argyle, 1991, Co-operation, London: Routledge, pp 30-2.

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to promote competitive provision, collective action and cooperation for social protection have become the norm. Much of the comparative literature focuses on identifying patterns in the differences between approaches to policy in different countries;424 the surprise is not that there are differences, but that there are so many similarities. State education, extensive arrangements for pensions, public funding of roads and social assistance schemes are the commonplaces of contemporary governments in industrialised countries.425 The benefits of protection against the unpredictable costs of medical care are so obvious that it has become common practice through much of the developed world – the US case is strictly anomalous – with the whole population covered to meet the costs of hospitalisation. In many countries there is now an element of compulsion, but that does not mean that such schemes have been imposed; where services have been voluntary, they have been used extensively by all who could afford them, and compulsion has primarily been introduced to extend the same advantages to those who otherwise would be too poor to afford similar arrangements. If there is a conflict between collective action and self-interest here – which it is not clear there is – it has been firmly resolved in favour of collective action. If people are fundamentally selfish, it begs the question why they should ever cooperate with each other, or do something that is not in their interest, or do something that is in someone else’s. Methodological individualism has a powerful answer to at least two of these three problems. The explanation rests in one of the earliest economic theories, drawn from the discussion of international trade: it is Ricardo’s theory of comparative advantage.There is a mathematical proof,426 but an alternative graphical demonstration is available. Figure 5.1 shows the argument in principle. The idea of a budget line was introduced in the discussion of indifference curves in section 3.2. The options that are available to a single individual are subject to a limit – a budget line (if that individual is thought of as a consumer) or a production possibility frontier (if the individual is a producer). The position a person can achieve on the line – the balance between different forms of production or consumption 424

425

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G Esping-Andersen, 1990, The three worlds of welfare capitalism, Cambridge: Polity Press. A de Swaan, 1988, In the care of the state, Cambridge: Polity Press; P Spicker, 2000, The welfare state: A general theory, London: Sage Publications. M Blaug, 1968, Economic theory in retrospect, London: Heinemann Educational, pp 126-30. 151

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– represents a trade-off between the two options. The upper part of Figure 5.1 shows the possibilities for two individuals, each restricted by their own frontier. Figure 5.1: Comparative advantage

Fuel

Fuel Person A

Person B

Food

Food Person B

Fuel

Person A Food However, if the two people cooperate, and each person specialises in the item where they have an advantage, they can achieve something that neither can achieve individually. In the lower part of the figure, using the same technique that we used to identify Pareto optimality, the graph for Person B is flipped over and put on top of the graph for Person A. The effect of a division of labour is that an area beyond each person’s frontier – the white area in the box – becomes available to both, and each person can be better off. The principle of comparative advantage was developed in terms of exchange between countries; it is central to the argument for specialisation and free trade. It also applies, in principle, to exchange 152

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between individuals, helping to explain why in a market economy people specialise in different occupations. But it is also visible in other divisions of labour, such as the division of labour in families: if one partner in a relationship specialises in one field, such as earning, while another specialises in another, like domestic duties, both can be better off. That is a form of cooperation. Axelrod shows that with repeated iterations of the Prisoner’s Dilemma, self-interested actors who show a tendency to cooperate tend to benefit more than those who default.427 But the principle of the Prisoner’s Dilemma – modelling mutual disadvantage – is misleading; mutual gain is far more common. Comparative advantage shows that, in a wide variety of activities, people who work together and share tasks are able to achieve more than they can by themselves. Self-interested individuals should cooperate. The theory of comparative advantage is one of the strongest and simplest demonstrations available of the benefits of methodological individualism. It is not tautologous, it is not self-evident, and it has profound implications for policy. However, it also has a down-side, and knowing the expertise and interest of the likely readers of this book, my reference to ‘domestic duties’ should have been enough to set the alarm bells ringing. The first problem with this pattern of specialisation is that it can be limiting; it can have a profound effect on capacities and capabilities for the future. Second, there is a problem of power. Some activities and patterns of production carry higher status; some give people power over others. If a man has an income and a woman has domestic duties, the man is able to use that income as a lever – and the man has an option for exit where the woman does not. If one country specialises in armaments, and another in food, it can (and does) happen that the country with the armaments goes into the other country and takes the food away. The third problem, which may or may not reflect the second, is a problem of distribution. Saying that both parties can be better off does not mean that they will be; many of the potential distributions in the box in Figure 5.1 favour one party rather than the other. Developing countries have often complained that the effect of international trade is ‘structural dependency’, where they become locked into exploitative relationships.428 In the context of domestic relationships, feminists have made a similar case. Exchange is necessary and desirable, but it is not sufficient. There have to be rules and norms to protect people from the adverse consequences. 427 428

G Axelrod, 1990, The evolution of co-operation, Harmondsworth: Penguin. R Packenham, 1992, The dependency movement, Cambridge, MA: Harvard University Press. 153

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The tragedy of the commons Even if people begin to cooperate, the argument runs, rational, selfinterested individuals will ultimately default. Things fall apart; the centre cannot hold. This position masquerades as methodological individualism, but in practice it is almost wholly a substantive claim: people are selfish, so those of us who want people to work and live together are wasting our time. A corollary is, paradoxically from a liberal standpoint, that if we want the benefits of cooperation, we must rely on compulsion and coercion to achieve them. Elster puts it in these terms: In general, collective action will either be individually unstable (large free-rider gains), individually inaccessible (large losses from unilateralism) or both. ... for collective action to take place so many conditions must be fulfilled that it is a wonder it can occur at all. Wolff is withering about this passage. Elster, he writes, is careful, precise, rigorous, apparently aware of the complexities of human motivation ... and yet the entire passage is utterly mad – a crackpot account that sounds as though it comes from Swift ... the most casual study of history and society shows us that collective action is the norm in human affairs. In every human group one can think of, collective action dominates the waking hours – and even the sleep – of everyone over the age of one and a half or two. ... Clearly there is something badly wrong with a theory that concludes that the norm is so abnormal that it is almost never likely to occur!429 A prominent example of the substantive argument against cooperation is Hardin’s much-cited article entitled The tragedy of the commons.430 Hardin’s central question is what happens to shared resources, held in common. His answer is that because it is in the interests of a selfish individual to default, and take advantage of the common resource, the

429

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R Wolff, 1990, Methodological individualism and Marx, Canadian Journal of Philosophy 20 (4) pp 469-486, pp 472-3. G Hardin, 1968,The tragedy of the commons, in R Kueenne (ed) Readings in social welfare, Oxford: Blackwell, 2000.

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resource will gradually be over-used, and ultimately destroyed as more people default. Therein is the tragedy. Each man is locked into a system that compels him to increase his herd without limit – in a world that is limited. Ruin is the destination to which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons. Freedom in a commons brings ruin to all.431 Hardin’s argument has been seen as an extension of the Prisoner’s Dilemma – that each actor, deprived of information about the behaviour of others, has an incentive to act selfishly in a way that prejudices everyone else.432 That is a generous construction of the problem, because his core presentation is much less coherent than that. The major part of his article is given over to myths about the world’s population – that population increases exponentially (it doesn’t) and that we will breed ourselves out of existence. A smaller part of Hardin’s argument engages with arguments about common property; those bits are the reason why the article is so widely cited. The central flaw in Hardin’s main case is that he supposes that common lands and resources are unregulated. He imagines that in a commons every person does what he or she wants. Bank robbery is the same kind of act: ‘The man who takes money from a bank acts as if the bank was a commons.’433 The examples have nothing to do with each other. The bank has rules, which the robber has disregarded, and a commons has rules, which are not like a bank’s. What Hardin seems to be thinking of – his examples of population and pollution fit this – is the use of unclaimed territory. This was the situation in the development of the American frontier; it is arguably the situation in relation to deep sea fishing or the exploration of the Arctic; but it has no relationship, and no connection with, either common land or other forms of collective action. The whole point about unclaimed territory is that it is not common land – it is not anybody’s. Common land is land held by a community rather than by its individual members. The regulation and maintenance of common land depends on that community, but the character of the rules directly affects what people 431 432

433

Hardin, 1968, p 154. A Poteete, M Janssen, E Ostrom, 2010, Working together, Princeton, NJ: Princeton University Press, ch 2. Hardin, 1968, p 159. 155

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can and cannot do on it. It is untrue to suggest either that commons depend on low population density or that collective arrangements break down under conditions of scarcity.434 People are socialised into how to behave in relation to common resources. Many commons have existed, with a remarkable degree of stability, for centuries. The main point of breakdown has occurred, where it has occurred, because – as in the Highland Clearances (and some would argue, the settling of America) – the land was stolen by rich, powerful outsiders. An illustration of common property in practice might be the story of mutual housing finance. The building societies in Britain developed because people voluntarily pooled their financial resources in order to make it possible to purchase property. In the beginning, there were both temporary building societies, aimed to help a specific group of members, and permanent building societies: the temporary societies, once they had achieved their objectives, ceased to exist, and the permanent societies remained. The Halifax Building Society, which became the largest, was founded in 1853. They were mutual, nonprofit making and used surpluses to expand. Despite – or perhaps because of – some early scandals, most notably the Liberator scandal of 1894, the building societies were reformed into models of financial probity.435 They were non-profit making – they did not distribute profits to members – and they were secure – much more secure after legislative changes in the 1920s, which made it almost impossible for them to fail to recover a loan. They had grown by the 1980s to be among the largest financial agencies in the UK, and indeed in Europe. They were ultimately destroyed by demutualisation, a product partly of government disapproval (the UK government forced demutualisation of the mutual Trustees’ Savings Bank, which had not previously been under government control), deregulation and the consequent arrival of self-interested raiders – the societies that managed to stay mutual put restrictive clauses on new members to stop them voting the society out of existence. Most moved into the private sector, mainly during the 1990s; all the societies that were demutualised lost their independence, and several were implicated in the banking crises of 2008 and after. Ultimately, then, it is true that the building societies were destroyed by selfish action. But that statement neglects the obvious counter-

434

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H Kaplan, M Gurven, 2005, The natural history of human food sharing and cooperation, in H Gintis, S Bowles, R Boyd, E Fehr (eds) Moral sentiments and material interests, Cambridge, MA: MIT Press. E Cleary, 1965, The building society movement, London: Elek.

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argument – that building societies were able to provide stable, secure finance, acting as mutuals, for nearly a hundred and fifty years. The idea that cooperative action is unsustainable is evidently wrong; the proofs that it must be are spurious. There may be failures in collective organisations, but they do not show that collective action is impossible. The flaw in a model where there are only ‘cooperators’ and ‘defectors’, Hauert and colleagues argue, is that it misses the crucial contribution of a further category of participants – ‘punishers’, those who enforce the rules, even if they lose out personally for doing so: ‘If individuals have the option to stand aside and abstain from the joint endeavour, this paves the way for the emergence of and establishment of cooperative behaviour based on the punishment of defectors.’436 Gintis and colleagues similarly point to the importance of strong reciprocity, including ‘altruistic punishment’ for breaches in convention.437 There are always moral codes governing cooperative action. The stability of collective arrangements is generally achieved through a combination of rules, norms and conventions. As Mantzavinos argues: ‘The raison d’être of conventions is that they are solutions to the social problems of coordination.’438 Fundamental to the operation of collective action is the acceptance of a system of rules, norms or conventions that will guide and channel behaviour, clarifying the operation and limiting potential abuse. (The same could, of course, be said about the operation of markets.) Arrow makes a critical, telling point about game theory. Game theory, although it is set within a framework of methodological individualism, is not an exclusively individualistic exercise. In virtually every case, the conditions in which decisions are made are determined by a set of social constraints. ‘The rules of the game,’ Arrow emphasises, ‘are social.’439

5.3 Solidarity and voluntary collective action There are many collectivist arguments for cooperation – among them, the development of culture, socialisation, the norm of reciprocity and the structure of social obligations – but for present purposes I 436

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C Hauert, A Traulsen, H Brandt, M Nowak, K Sigmund, 2007, Via freedom to coercion: the emergence of costly punishment, Science 316 pp 1905-7. H Gintis, S Bowles, R Boyd, E Fehr (eds), 2005, Moral sentiments and material interests, Cambridge, MA: MIT Press. C Mantzavinos, 2001, Individuals, institutions and markets, Cambridge: Cambridge University Press, p 102. K Arrow, 1994, Methodological individualism and social knowledge, American Economic Review 84 (2) pp 1-9, p 5. 157

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want to leave them all aside, and focus solely on the implications of individualism. Methodological individualism demonstrates that rational, self-interested individuals stand to gain through cooperation and exchange. The proof is rather stronger than the analogous proofs of the benefits of market exchange. It does not show that individuals must benefit – that depends on the social and commercial arrangements that are made – but only that they can. The need for cooperation and exchange lies at the root of arguments for exchange and for markets. But a world where people specialise, trade and recognise common terms of exchange is not a world, like Thoreau’s Walden,440 where each person is solitary and unconnected to others; it is a world where people are interdependent, where personal interests may become mutual interests and where solidarities – mutual responsibilities – can be formed. Green claims cooperation, I think rightly, as a core principle of liberal individualism; and part of the purpose of the public sphere, in liberal thought, is to create the conditions where individuals can cooperate to best effect.441 It is fairly uncontentious to say that economic production and exchange lead to interdependence; that is the basic premise of The wealth of nations.442 The same observation can be extended, however, to other patterns of ownership besides the conventional view of the private market. I referred earlier to mutual housing finance. Another example is mutual insurance, which works by people pooling risk in order to reduce their vulnerability. Private, or commercial, insurance consisted largely of an insurer, or underwriters, offering protection in return for payment. Commercial insurance was condemned in its day for undermining the traditional patterns of community support.443 But there was also mutual insurance, where a non-profit-making society offered similar terms. Forms of mutual insurance existed in classical times, and the systems developed in the Middle Ages.444 Benjamin Franklin famously established a mutual in Philadelphia in the mid-18th century, and there is still a substantial mutual sector in the US. The UK has again suffered heavily through deregulation, and well-established mutual insurers such as Prudential, Friends Provident and Standard Life 440 441 442 443

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H Thoreau, 1854, Walden, in The portable Thoreau, New York:Viking, 1947. D Green, 2009, Individualists who cooperate, London: Civitas. A Smith, 1776, The wealth of nations, London: Everyman, 1910. S Marglin, 2008, The dismal science, Cambridge, MA: Harvard University Press, p 15. J van Niekerk, 1998, The development of the principles of insurance law in the Netherlands from 1500 to 1800, Kenwyn: Juta, p 633.

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have moved into the private sector. The failure of specific elements does not show that the arrangements are impossible, any more than the failure of private banks would show that banking cannot survive. The development of mutuals over hundreds of years argues, on the contrary, that the arrangement is sustainable and likely to be seen as beneficial to its members. The kinds of concern that would lead self-interested individuals to join mutual insurers shape decisions on other kinds of mutual scheme, including health insurance. In some of the right-wing literature, especially from the US, there is an implicit assumption that people will join health schemes only if they are compelled to do so, so it is interesting to see what happens in those developed countries where such schemes are not compulsory. In France, there is compulsion to join a basic scheme, but the supplementary schemes operated by the mutualités cover possibly half the population. The unemployment insurance schemes in Denmark, Finland and Sweden are still substantially voluntary, and countries that introduced unemployment insurance after the Second World War are likely to be replacing voluntary schemes.445 These schemes have in common that they are offering something to attract members; people join trades unions or mutuals because of the benefits they bring, and the benefits tend to be generous. The main effect of the compulsion is to require employers to make provision for their employees, and what compulsion effectively does is to extend coverage to populations who could not previously afford to be included. This is the process which the US has now undertaken to introduce in health care. Appealing to experience does not, in itself, imply that there is any logical fault in the conclusions of methodological individualists about self-interested action. There is every reason to think, however, that mutuals of this sort are simultaneously collectively organised, nonprofit making and potentially attractive to self-interested individuals. The idea that collective social protection can only operate through compulsion or the negation of individual welfare is the sixth impossible thing that some individualists ask us to accept. Denying the possibility of cooperation begins to look like the position of scientists who assert that bumblebees should not be able to fly, when any child knows that they can. There may be tensions between conflicting interests, which

445

J Clasen, E Viebrock, 2008, Voluntary unemployment insurance and trade union membership, Journal of Social Policy 37 (3) pp 433-52. 159

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Olson identifies,446 but nothing about the arrangements is intrinsically contradictory, unstable or impractical.

Social protection The examples I have just given of collective action are all examples of social protection. For the United Nations, ‘Social protection refers to policies designed to reduce people’s exposure to risks, enhancing their capacity to protect themselves against hazards and loss of income. Social protection policies include social insurance and social assistance’.447 For the World Bank, ‘social protection interventions assist individuals, households, and communities to better manage the risks that leave people vulnerable’.448 The term that they use to describe this is ‘social risk management’. As presented by Beck, ‘risk’ is mainly concerned with unpredictable events and uncertainty.449 That does not explain many of the activities that are undertaken in the name of social protection, because many of the issues covered, like dependency in old age, maternity or the need for routine medical care, are highly predictable. On the other hand, it would be possible for public providers to do much more for some risks than happens now: for example, compensating people for having property destroyed by fire or flood. Social protection is not concerned so much with ‘risk’, in Beck’s sense, as with vulnerability. People are at risk if there is the possibility of something happening to them. They are vulnerable if, when something does happen, they are liable to suffer harm as a result. Entrepreneurs are generally at risk, but they might not be vulnerable – they have resources and means of protection, which will avoid harm if the risk becomes reality. Many low-paid workers in secure occupations are at relatively low risk, but are vulnerable nevertheless; if something happens to jeopardise their position, they do not have alternative resources to make adjustment possible.The potential harm – to people on low incomes, to people who become homeless, to those who have disabling accidents – seems to be a stronger and more important element than the risk. 446 447

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Olson, 1971. I Ortiz, 2007, Social policy, NewYork, NY: United Nations Department for Economic and Social Affairs, http://esa.un.org/techcoop/documents/PN_SocialPolicyNote. pdf World Bank, http://go.worldbank.org/R8ABRRLKX0; and see World Bank, 2001, Social Protection sector strategy: From safety net to springboard, New York, NY: World Bank. U Beck, 1992, Risk society, London: Sage Publications.

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Vulnerability in this sense is badly dealt with by individualised approaches, and that is not only because those who are vulnerable have the least resources with which to protect themselves. Part of the problem is that rational individuals discount the future; as the future is uncertain, it cannot be attributed the same value as a current choice. Part of the problem is that people are likely to take greater risks in just the situations where prospects are worst, and accepting risks on that base is likely to aggravate the consequences.450 But a substantial part of the problem happens because people do accept a degree of risk at an individual level. People accept some risk if they undergo pregnancy, an operation under general anaesthetic or use road transport. It follows that reasonable individual decisions in aggregate will lead cumulatively to some individuals suffering. The implication is that it is in the long-term interests of individuals to join schemes which allow management of risk, and the reduction of vulnerability. And that, for the most part, is what has happened in much of Europe. Although in many places voluntary schemes for unemployment insurance have been replaced by compulsory ones, the fact is that such schemes developed on a voluntary basis, and they grew because, over time, individuals are rational enough to know that reliance on personal resources in the face of uncertainty does not work.

Redistribution and solidarity Social protection is redistributive, in the sense that those who benefit are not necessarily those who pay, but the pattern of redistribution that is implied is limited. It has been argued that often it amounts to ‘income smoothing’, or redistribution of an individual’s income between different stages of the life cycle.451 The pattern of redistribution implied in pensions arrangements or health insurance is generally progressive, because people receive the benefits at times when their income is likely to be interrupted or lower than others, but it is neither primarily nor exclusively a means of redressing the balance between rich and poor. It is perhaps surprising, then, to realise that redistribution between rich and poor has the status of being almost a default position in social arrangements. Noblesse oblige. There is generally some mechanism which leads rich people to transfer resources to poor people. Sahlins 450

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G Quattrone, A Tversky, 1988, Contrasting rational and psychological analyses of political choice, American Political Science Review 82 (3) pp 719-36. N Barr, 1991,The objectives of old age pensions, in T Wilson, D Wilson (eds) The state and social welfare, London: Longman. 161

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records a surprisingly wide range of such mechanisms in tribal societies.452 He suggests that the reason it happens so generally is, simply enough, that the societies where it does not happen have ceased to exist. If there is no mechanism binding the poor to the rich, they usually either die or have to go away somewhere else. However, redistribution between rich and poor is rarely egalitarian, in the sense of eliminating disadvantage. Often it is mean, and mean-spirited; Sahlins refers to the binding mechanism as ‘negative reciprocity’, a form of solidarity where obligations are recognised, but resented. At the same time, where there has been retrenchment in public services, the systems which seem best to survive are not the generalised, universal systems of social protection to which people have contributed, and to which they have established rights; it is often the limited, more parsimonious means-tested social assistance.453 As analysis of the impact of public expenditure has become more sophisticated, it has become possible to identify other forms of redistribution – points at which people who pay are not the same as those who receive benefits or services. Assessments of the distribution of benefits, services and liabilities tend to show that while cash benefits are still a significant element in redistribution, other services, including health care, education, leisure facilities and transport, all have a distributive impact. The pattern of redistribution is sometimes unpredictable: Bramley suggests, for example, that while primary schooling has a progressive effect, distributing greater resources to poorer families, waste tips or swimming pools tends to favour the better off.454 The central point here is that redistribution is an intrinsic element in the provision of any public service, and that the very existence of such services, whether by government action or public subscription, implies that there will be some element of redistribution. I opened this part of the book by considering the relationship of individuals to groups. However, a group is not, as Olson seems to imply, just a collection of cooperating individuals. The people in a social group are linked by identity, relationships and mutual responsibility. Some groups, notably families and communities, are established before 452 453

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M Sahlins, 1974, Stone Age economics, London: Tavistock. M Andries, 1996,The politics of targeting, Journal of European Social Policy 6 (3) pp 209-23. G Bramley, G Smart, 1993, Who benefits from local services?, London: Suntory and Toyota International Centres for Economics and Related Disciplines, London School of Economics and Political Science; G Bramley, 1998, Where does public spending go?, London: Department of the Environment.

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any notion of independent individual action is even possible; they are part of the world we are born into. This is basic to communitarian thought. Macintyre writes: we all approach our own circumstances as bearers of a particular social identity. I am someone’s son or daughter, someone else’s cousin or uncle; I am a citizen of this or that city, a member of this or that guild or profession; I belong to this clan, that tribe, this nation.455 The Catholic idea of solidarity456 can be taken in two main senses. On the one hand, it refers to the networks of reciprocity and mutual support that exist within and between social groups. On the other, it refers to collective action. If people act together, it is not just because they have individual interests in common, but also because they are bound by a network of relationships and obligations, and accept a common social identity as a collective group. Methodological individualism begins from the premise that none of this matters. There are good reasons for that, and bad ones. The good reasons lie in moral individualism, which was developed not least as a critique of a world where there was too much solidarity, and too little individuality. Ideas like human dignity, self-determination and equality of opportunity challenged societies where people were born into a fixed set of roles and network of obligations. But, by the same token, individualism that is taken without reference to the structure of obligation, duty and identity begins to look like a charter for sociopaths – self-interested individuals who have no sense of social identity or moral obligation.

5.4 Public services All organisations are collective: they rely on the formation of a group with an identity, a structure of internal relationships and a membership. That is as true of commercial companies as it is of socially oriented organisations. Many collective organisations exist, however, in order to benefit third parties – people who are not part of the organisation, members, owners, employees or others in analogous circumstances. This is generally true of the public sector, which is the province of government, and the public services. Those terms do not mean quite 455 456

A MacIntyre, 1981, After virtue, London: Duckworth, pp 204-5. N Coote, 1989, Catholic social teaching, Social Policy and Administration 23 (2) pp 150-60. 163

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the same thing. The public sector includes the organs of government – legislative bodies, courts, the civil service, the armed forces and so forth – and areas owned and controlled by government, such as nationalised industries, regulators and subsidiary bodies. The public services may include not only government activity in areas like health, education and social security, but also a variety of ‘third sector’ organisations – voluntary, charitable and solidaristic agencies with public aims. The public services have four defining characteristics.457 One is that they are services – unlike the public sector more generally, they exist to serve members of the public. (I am not trying in this book to review every form of collective action, but only those which relate most directly to individuals, so focusing on services – as opposed to collective institutions with collective purposes, like the Bank of England or the Defence Procurement Agency – makes sense.) Second, they are ‘public’. That is true not because they are subject to public authority – that much would be true of regulated private industry – but because they exist for reasons of policy. This includes government organisations, but it also includes voluntary organisations, such as the Royal National Lifeboat Institution, which ‘as we all understand, effectively perform a public role and a public duty’.458 Third, they are redistributive – the people who pay are not the same as people who benefit. Fourth (and this is implicit in the redistributive process), they are operated as a trust: the funder relies on trustees to act for the benefit of third parties. Trustees are not agents of the funder; they are independent decision makers who fulfil their role by following established principles for the management of the trust. Public services do not act in the same way as commercial firms. They are not seeking to maximise profits, or even to make profits; they are not in competition; they are not trying to do things the same way. Direct comparisons with private sector firms – and many theoretical analyses – miss the point. The objectives of public services are defined as a matter of policy. It follows that they are not free to bring down costs in the most obvious way, by doing more or less of something. Many public services – including social assistance agencies, postal services, emergency services or the courts – do not get to choose who they serve, so they cannot exclude those people they can only serve at higher costs.Their outputs are set as a matter of policy, so they cannot 457

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P Spicker, 2009, The nature of a public service, International Journal of Public Administration 32 (11) pp 970-91. UK Parliament, 2007, Hansard, 5 February, column 568, at www.publications. parliament.uk/pa/ld200607/ldhansrd/text/70205-0014.htm

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adjust the level of output down or up so as to maximise their internal productivity. Public services are not usually ‘efficient’ in the economic sense, because they are not meant to be. They have to aim, instead, to be cost-effective, meeting policy objectives at the lowest cost. This means, inevitably, that the outcomes, and the balance of provision, differ from the balance of provision delivered in a commercial market. It also means that the emphasis on ‘competition’ as a spur to efficiency is misconceived, because public services cannot take the obvious steps to lower their costs in response – on the contrary, the effect of duplicating services, and the implications of losing economies of scale, may be to increase costs overall. One of the unexpected consequences of this situation is that whereas private firms can mainly bring down their costs through selection, public services can bring down average costs through expansion of their remit. Almost all non-market provision is targeted in some sense – there are exceptions, open-access, non-geographical services, but they are rare. As a general proposition, the greater a problem is, the more expensive it is to deal with. Stricter targeting, which confines attention to the more serious problems, consequently has the effect of increasing the average unit cost for a service – Michael Keen calls this the ‘paradox of targeting’.459 The more restrictive a service is, then, the more expensive it will seem; and the main way to make it less expensive for each unit, or more ‘productive’, is to expand the service. Because most public services cannot control the extent of their operations directly, this can only be done if they obtain the authority (and resources) to widen their scope.

Non-market failure Problems in the delivery and organisation of public services are sometimes put down to ‘government failure’, a concept chosen to mirror the idea of ‘market failure’. However, it should be clear from the previous discussion that this is not just a question for government; Wolf, who laid out some of the principles, used the term ‘non-market failure’. For Wolf, ‘Non market remedies “fail” to the extent that they, too, result in outcomes that depart from the efficiency or distributional goals by which market outcomes are judged to fail’.460 The list of

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M Keen, 1991, Needs and targeting, London: Institute for Fiscal Studies. C Wolf, 1978, A theory of non-market failure, Santa Monica, CA: Rand Corporation, p 15. 165

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‘failures’ in the subsequent literature largely consists of generic criticism of the supposed inadequacies of government – that: • political processes interfere with economic mechanisms;461 • political processes lead to negotiation, bargaining and compromise;462 • the process of government does not lead to Pareto-optimal outcomes;463 • government suffers from a principal-agent problem, where selfinterested officials or service providers can undermine public objectives;464 • governments can be slow to respond to change;465 • non-market allocations lead to ‘derived externalities’ or unanticipated side-effects;466 • the distribution of power leads to problems in equity.467 The first three objections in this list say little more than the view that political processes arrive at different dispositions from market allocation. If that were not true, there would be no point in using non-market mechanisms; doing something different from the market is not in itself a sign of failure. The next four are making criticisms that may well apply, but much the same accusations could be levied at markets. (The main difference relates to responsiveness. Some markets are responsive; some are excessively volatile; others, notably those relating to land use, have failed to respond to demographic and social change, in the worst cases for decades or centuries.) For the idea of ‘non-market failure’ to have any specific meaning, it seems to me that the critics need to identify some intrinsic flaw in the process of allocation. That is what the idea of ‘market failure’ refers to in private markets – not to markets doing things badly, which also happens, but to situations where markets cannot respond to circumstances effectively. I think there are analogous problems in the public services, but the indiscriminate salvo of complaints I have J Le Grand, 1992,The theory of government failure, British Journal of Political Science 21 (4) pp 423-42. 462 G Tullock, 2002, The theory of public choice, in G Tullock, A Seldon, G Brady (eds) Government failure: A primer of public choice, Washington, DC: Cato Institute. 463 C Winston, 2006, Government failure versus market failure,Washington, DC: Brookings, pp 2-3. 464 Le Grand, 1992; Tullock, 2002. 465 A Seldon, in Tullock, Seldon, Brady, 2002, p ix. 466 Wolf, 1978. 467 Wolf, 1978. 461

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just listed does not begin to identify them. If there are any general tendencies, they should be attributable in principle to the very nature of public services – their realisation of public policy, service, redistribution or operation as a trust. Generalisations about public services have to be treated with some caution, partly because the range of activity is so wide, partly because the literature describing the work of public services does not always distinguish public sector work more generally and partly because the way they work depends on culture and context. Christopher Hood identifies three recognisable constellations of administrative culture in public organisations: • ‘sigma type values’, emphasising frugality and the reduction of waste; • ‘theta type values’, emphasising rectitude, fairness and legitimacy; • ‘lambda-type values’, emphasising resilience, robustness and security.468 Those different sets of values do seem to me to reflect the common characteristics of public services. The first, I would argue, relates to the emphasis on cost-effectiveness; the second stems from the stress on meeting the objectives of public policy; and the third, the duties of a trust. Each pattern of service, Hood suggests, implies its own test of failure. In the case of sigma values, failure is represented by waste; for theta values, it is unfairness or bias; for lambda values, it is risk or breakdown. But Hood points out that these dispositions and patterns of behaviour, while they may seem to be compatible, do create tensions, and they suggest different prescriptions for administration and service. For example, frugality may imply ‘leaner’ procedures, while robustness may depend on more slack or redundancy in a process to allow for spare capacity. Frugal procedures tend to be outcome oriented, whereas theta-type administration puts much more emphasis on process and striking a balance between multiple objectives. A strict emphasis on rectitude and accountability may impede resilience. Beyond those issues, there is one further, crucial test. Every public service is intended to meet the aims of some policy; every service has objectives. The purposes of policy – aims such as coverage, outcomes, adequacy, quality or anything else the services have been set up to do – have to be reconciled with the values Hood identifies, values such as frugality, rectitude, security and so on. Non-market-failure may occur, 468

C Hood, 1991, A public management for all seasons?, Public Administration 69 (1) pp 3-19. 167

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then, when some of the core values and objectives of public service are impeded or frustrated by the operation of others – when services cannot meet their aims because of the way they operate. When that happens, public services fail, not by the standard of the market, but by their own criteria.

Public services and the individual Because the objectives of public services are collective, there is always going to be the potential for some conflict between those objectives and responsiveness to the wishes or circumstances of individuals. A service which has as its priorities coverage or adequacy may not give the same priority to diversity, flexibility or the promotion of choice. That is even more true when decisions have to be made under the constraints of austerity or strict accountability. The more factors that have to be taken into account, the more problematic and unwieldy the management of the issues becomes. Much of my recent work has focused on social security and income maintenance, where multiple objectives – such as social protection, economic management, distributive equity, the promotion of employment, the relief of poverty, moral norms about behaviour, compensation for disadvantage and income smoothing – have to be reconciled with the diversity, complexity and instability of people’s circumstances.469 The most effective way of managing those dilemmas is usually not to respond flexibly and individually, because that is beyond the capacity of any system, public or private. It is to offer a range of provision, and a degree of security, stability and predictability that can be maintained regardless of changes in circumstances. In Part Four I outlined a range of circumstances where markets cannot be expected to provide – non-commodifiable issues, general rights and inclusion. Markets do reasonably well – not perfectly – with individual, physical commodities that are distributed according to individual choice, such as food, clothing, household equipment and leisure goods. Public services do reasonably well – not perfectly – with issues requiring general coverage, stability and predictability, such as pensions, social protection, transport infrastructure and waste disposal. Public services should not be expected to do what markets do – providing a wide variety of things to diverse individuals. And markets should not be expected to provide inclusive coverage, consistency or unconditional guarantees, because they are structured to do something different. 469

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I should also note that from the perspective of individuals there are some things which neither markets nor existing public services do at all well. One example is the case of ‘looked-after’ children (that is, the provision of long-term child care): For those children who come into care, it will always be a distant second best to growing up happily and safely in their own family. Time in care is generally seen by professionals and the wider public as something to be avoided at all costs. Despite the dedication and perseverance of social workers and carers, the outcomes and experiences of young people who have been ‘looked after’ remain poor. Far from compensating for their often extremely difficult pre-care experiences, certain features of the care system itself in fact make it harder for young people to succeed: they are moved frequently and often suddenly, miss too much schooling, and are left to fend for themselves at too early an age.470 Another is the field of dementia care, where, Kitwood writes: We have better methods of assessment, positive care planning, a rich and varied range of activities, a commitment to the needs of people rather than institutional regimes, purpose built physical environments, and many other huge improvements ... [However, ] In many of the settings where the quality of care is very high, as judged by former standards, improvement seems to be reaching a ceiling. ... positive interactions ... last for less than two minutes, and a substantial proportion consist of very stereotyped interactions. ... Even where malignant social psychology has been almost totally eliminated, it is rare to find that the space has been filled by a social psychology that is thoroughly empowering and sustaining.471 If individualism is concerned with rights, self-realisation and respect for persons, then these are the sorts of circumstances that individualists ought to be concerned about. They describe situations that need to 470

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UK Parliament: House of Commons Children, Schools and Families Committee, 2009, Looked after children, HC 111, London: The Stationery Office, p 15. T Kitwood, 1997, Dementia reconsidered, Buckingham: Open University Press, pp 86-7. 169

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be treated personally, responsively and sensitively – where individual respect and value are the norm. The critiques I have been considering do not begin to engage with the issues, and while aspects of the performance of public services in these fields are troubling, I see no reason to imagine that economic markets or quasi-markets are capable of making any adequate response in these circumstances either.

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Government and public policy Summary Although some critics claim that only a limited or minimal government is legitimate, the scope of legitimate action in a democracy is determined by legitimate processes, and that scope can be wide. Liberal democracy is committed to protection and development of the rights of individuals. Once a government accepts that responsibility, it commits itself to expanding its role in the field of social protection; every democratic government has moved to develop a welfare state. Individualist principles commit governments to an extensive role in protecting individual rights, ensuring basic security and empowerment. Wherever there are shared objectives, universal standards, common interests or protection of excluded individuals, there will be a commitment to welfare.

6.1 The individual versus the state For many individualists, government action is considered implicitly to restrict the freedom of individuals, and so to violate the rights of individuals. The individualist critique of the state has been dominated by arguments from the neo-liberals of the New Right, represented by Hayek, Friedman and the work of free-market think tanks. This work has been characterised by a deep suspicion of the actions of government. The arguments of contemporary libertarians begin with the view that state action is illegitimate; government is at best a necessary evil. The origins of this model can be found in the arguments of Thomas Hobbes. Individuals trade the liberty they experience naturally for the security and protection of government, but they do it at a price.472 It does not have to be true, however, that freedom of action is simply surrendered. It is redistributed – government secures liberty as best it can by restraining the excesses of some people and by enhancing the freedom of others.473 Rights are conditional. Some people are

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T Hobbes, 1651, Leviathan, Harmondsworth: Penguin, 1968. I Berlin, 1969, Four essays on liberty, Oxford: Oxford University Press, pp xlviii-xlix. 171

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imprisoned, losing their rights, to protect the rights of others; but imprisonment cannot be justified if it is disproportionate or arbitrary. It is true that part of the role of the state is to restrain and control the actions of individuals. Many of the justifications for imposing restraints on people are collectivist – the literature in social policy tends to refer to compulsion as ‘social control’, and its methods include the imposition of norm and values, pressures for conformity, paternalism and the imposition of sanctions on behaviour.474 Other arguments for control, however, are individualist in principle: they are there to serve individuals, not to hobble them. The first is the establishment of a framework of law: not just the criminal law, but a whole series of rules and norms which govern relationships between people, such as family law, contracts and tort or delict (the last two cover issues like negligence and externalities). Green sees this as fundamental to the operation of a market – and argues that Adam Smith, Hayek and even Margaret Thatcher were of a similar mind.475 Second, there is security: most formulations of individual liberty come with the proviso that people’s actions should not infringe the rights and liberties of other people. Part of the maintenance of property rights is the establishment of conditions where people can have quiet enjoyment of the use of their property – which means that other people cannot. The protection of the person depends in part on criminal sanctions. Third, there is ethical individualism – the belief that people should bear the moral consequences of their actions, and that in some cases the consequences will include punishment. Fourth, some restraints of individuals are done in the interests of empowerment: examples are the compulsory education of children or restraining people with mental illness from self-harm.The primary reservation about such compromises is that they can be justified only in so far as they increase liberty overall. (There is also a fifth argument, though it is not unequivocally individualistic: there are measures used to promote markets and ensure conformity to liberal norms, such as laws restricting the scope of unfair contracts, or restrictions on actions in restraint of trade or competition.) These are not all the restraints placed on individuals in contemporary societies – they are only the restraints that are immediately justifiable in terms of individualism. Among other restraints, there are two that present particular dilemmas for individualists. The first concerns ‘paternalist’ actions, where some people want to change or alter the 474

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J Higgins, 1980, Social control theories of social policy, Journal of Social Policy 9 (1) pp 1-23. D Green, 2010, Prosperity with principles, London: Civitas.

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actions of others. An action is said to be paternalistic if it is intended to benefit the person affected, regardless of whether that person chooses it. Mill wrote that ‘the only purpose for which power can rightfully be exercised over any member of a civilised community, against his will, is to prevent harm to others. His own good, either physical or moral, is not a sufficient warrant’.476 There is a tension here. The whole point of moral individualism is that it depends on an evaluation about what is good. Individualists believe, in general, that freedom is good, choice is good and rights are good. Paternalism reflects a widely held sentiment: if something is good in general, it is good for other people. Many actions are paternalistic: • attempts to protect people from harm – limiting the use of drugs or the speed at which people can drive; • attempts to protect people whose capacity to decide is limited, such as children or people with mental illness; • attempts to ensure that people are protected from exploitation in unequal bargains, such as consumer protection or a minimum wage. In any of these cases, paternalism can increase freedom, and the autonomy of the person who benefits from it. It ceases to be justifiable when it limits freedom, or undermines the rights of the individual. The other main point of tension lies in collective activities, such as the defence of national security. For Rothbard, war is mass murder and conscription is slavery.477 Voluntary military service can at least be defended in terms of individual choice, but even that is problematic; people cannot legitimately choose either to kill or to be killed, and that is a situation that soldiers may well find themselves in. There have been attempts to justify this in individualist terms, but they are not particularly convincing. Locke suggested that there was an implicit contract between the government and the citizen;478 but an implicit contract, one in which the individual citizen has no say, looks like coercion under another name. It is hardly possible to view the actions of millions of soldiers in the Great War as the product of individual decisions and social emergence. The core argument for national defence is a collective one, not an individual one. The same kind of argument can be made for taxation by the government; government 476 477 478

Mill, 1859, p 135. Rothbard, 1978, p 29. J Locke, 1690, Two treatises of civil government, P Laslett (ed), New York, NY: Mentor, 1965. 173

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has to be paid for, and that is a collective argument, not an individual one. I argued before that there was no major problem about accepting individualist and collectivist perspectives at the same time; that is part of the human condition. Saying that something is not self-evidently justified in terms of individual interests is not the same as saying it cannot be justified at all. I should also explain the oblique reservation I made, that these issues present problems ‘among other restraints’. Some rules and practices instituted and enforced by government are intrusive, limiting and fundamentally arbitrary, but convenient nevertheless. Examples might include driving on the left or right of the road, the calendar of public holidays, rules regulating the solemnisation of marriage, postal addresses and time zones. There are complex sociological explanations of codes and norms of this type,479 but I am not sure that any of these patterns is justifiable satisfactorily in terms of collective interests, any more than it is in individualistic terms. These things could be done differently, and in different countries they are; what matters is that there should be a common rule, because the existence of such rules and norms makes it easier to plan actions and to co-exist with others. The controversies in these fields tend to be about what the rule should be, not whether there should be a rule at all.

The minimal state Some neo-liberal critics believe that government should not be concerned with anything much beyond security and defence. Nozick argues that: a minimal state, limited to the narrow functions of protection against force, theft, fraud, enforcement of contracts, and so on, is justified; that any more extensive state will violate persons’ rights not to be forced to do certain things, and is unjustified; and that the minimal state is inspiring as well as right.480 This overlaps with a related conservative argument. Gray has little time for the libertarian case, but he does still think that the role of the state should be heavily limited, and asserts the value of ‘reaffirming

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e.g. C Lévi-Strauss, 1968, L’origine de manières de table, Paris: Plon. R Nozick, 1974, Anarchy, state and utopia, Oxford: Blackwell, p 25.

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the conception of government … as first and foremost protector of the peace and guardian of civil society’.481 The case for the minimal or nightwatchman state begins, as Nozick suggests, from the principle that a state can only do a very limited number of things. That is questionable, but the selection of things that Nozick considers states can do is more questionable still. It is probably fair to say that the states of the early modern world were concerned with issues of order and subjection. The ideas put forward by Hobbes or Locke were responses to governments that proposed and demanded obligations from their citizens; both attempted to counterbalance that by exploring the extent to which citizens could act in defiance of the state. Weber, writing at the close of the First World War, claimed that the state is ‘a human community that (successfully) claims the monopoly of the legitimate use of physical force within a given territory’.482 Weber’s definition is still much cited, but it was and is misconceived. Given the period when he was writing, his concern with physical force was understandable, but as a description of the nature and role of government or the state, he was wrong even then. The US Constitution explicitly reserves to its citizens the right to bear arms as a protection against tyranny. Force is reserved both to militias and to individuals. This is a clear and direct contradiction of Weber’s statement. Constitutional states do not, in general, claim a monopoly of force. The nature of a constitution is that a state can claim only the powers which are granted to it. The idea that the state’s primary role is security bears little direct relationship to the role of government in contemporary societies. Many states in today’s world are new. They have proliferated as the old blocs have fragmented, nations have gained independence from imperial powers and understandings of the relationship between government and citizen have changed. It is not at all clear that security and defence figure very high in their priorities. Governments are mainly concerned with the maintenance of a framework of laws, economic management and the welfare of citizens. Some would add collective concerns like culture and national identity, and managing relations with other states, to that core. The consistent driving factor behind the growth of the new states, however, has been a concern to achieve prosperity, in the same way as the industrial West. A state that wishes to promote prosperity, Green argues, has to create the conditions for 481 482

J Gray, 1993, Beyond the New Right, London: Routledge, p 2. M Weber, Politics as a vocation, in H Gerth, C Wright Mills (eds), 1946, From Max Weber, Oxford: Oxford University Press. 175

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economic exchange to flourish: ‘much of what makes for success by individuals or companies depends on the conditions created by the government’.483 The general acceptance of that argument is one of the key reasons why international organisations have distanced themselves from neo-liberal economic policies; the laissez-faire aspects of the Washington Consensus have fallen from favour; the ‘Monterrey Consensus’ supplements market liberalisation with an emphasis on key social issues like health and education, and a much greater stress on effective governance.484

The liberal state Hayek argued that the effect of state intervention was always likely, regardless of its intentions, to be pernicious: expanding the role of the state inevitably reduced the freedom of action available to individuals. He argued for the ‘fundamental principle that in the ordering of our affairs we should make as much use as possible, of the spontaneous forces of society, and resort as little as possible to coercion’.485 In his later work, he laced his criticism with borrowings from earlier liberal and conservative writers – Burke’s belief that society was too complex to be tampered with,486 Spencer’s claims that intervention led to perverse or undesired effects487 and von Mises’ condemnation of any form of intervention, regardless of its presumed benefits.488 The New Right argued that there was an alternative to government intervention, and that the market alternative was intrinsically superior in its moral stance and its practical outcomes. Much of this criticism is exaggerated, even when it is well founded; state action may have unanticipated consequences, and it may be liable to abuse, but so can market provision. Markets cannot operate effectively without a framework of rules, and those rules are substantially provided by government. Markets can generate problems, and state intervention is often precipitated by those problems: the history of Victorian laissez-faire saw progressive intervention in fields such as 483 484

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D Green, 2010, Prosperity with principles, London: Civitas, p 39. United Nations, 2003, Monterrey Consensus on financing for development, at www. un.org/esa/ffd/monterrey/MonterreyConsensus.pdf F Hayek, 1944, The road to serfdom, London: Routledge, p 13. E Burke, 1790, Reflections on the revolution in France, New York, NY: Holt, Rinehart and Winston, 1959. e.g. Spencer, 1851. L von Mises, 1929, A critique of interventionism, Irvington-on-Hudson, NY: Foundation for Economic Education, 1996.

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poor relief, public health, education, road building, water supplies and housing, precisely because these areas could not be dealt with adequately otherwise. And yet those measures were adopted, in the main, by individualists. The idea of the ‘liberal state’ depends on a compromise between market forces and regulatory authority. It has been described as a state where ‘the proper sphere of state behavior is circumscribed by the functioning of market forces ... (and) the instruments of state intervention are designed to compensate for market imperfections while remaining compatible with the basic principles of market organisation’.489 John Stuart Mill – a leading advocate of individual liberty and the principle of laissez-faire – had no difficulty with the idea that governments could facilitate, offer services or increase opportunities: ‘When a government provides means of fulfilling a certain end, leaving individuals free to avail themselves of different means if in their opinion preferable, there is no infringement of liberty, no irksome or degrading restraint’.490 Mill did have concerns about government intervention. His main objections to government action were: first, that the finance of government activity rested on compulsory taxation; second, that expansion of the role of government led to it having too much influence; and third, that governments that charged themselves with too many duties were liable to do them badly. Against that, however, he balanced a range of circumstances – ‘exceptions’ – where intervention might be justified. They included the protection of people whose autonomy was limited; actions of public charity, like support for the poor; and, interestingly, circumstances where individuals might have to make decisions about the distant future. Mill thought it wise to treat the exceptions flexibly: the intervention of government cannot always practically stop short at the limit which defines the cases intrinsically suitable for it. ... At some times and places there will be no roads, docks, harbours, canals, works of irrigation, hospitals, schools, colleges, printing-presses, unless the government establishes them; the public being either too poor to command the necessary resources, or too little advanced

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M Ruggie, 1984, The state and working women, Princeton, NJ: Princeton University Press, p 13. J S Mill, 1848, The principles of political economy, book 5, ch 11. 177

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in intelligence to appreciate the ends, or not sufficiently practised in joint action to be capable of the means.491 This goes a little further than a similar argument from Adam Smith,492 but it is still recognisably from the same mould. (Mill’s reference to ‘intelligence’ here is about information, not mental capacity.) A further exception Mill makes is possibly the most interesting to a contemporary reader, because it is not an argument one hears from pro-marketeers nowadays. He thought that government intervention could be justified in spheres where actions would otherwise be taken by complex, remote private organisations. Whatever, if left to spontaneous agency, can only be done by joint-stock associations, will often be as well, and sometimes better done, as far as the actual work is concerned, by the state. Government management is, indeed, proverbially jobbing, careless, and ineffective, but so likewise has generally been joint-stock management.493 Hayek had mixed feelings about Mill’s work.494 De Jasay writes, critically: Mill, despite his ringing phrases in On Liberty, his mistrust of universal franchise and his dislike of the invasion of liberty by popular government, had no doctrine of restraint upon the state. His pragmatism strongly pulled him the other way. For him, state intervention involving the violation of personal liberties and (to the extent that these are distinct) property rights, was always bad except when it was good. True to his broad utilitarian streak, he was content to judge the actions of the state ‘on their merits, case by case’.495 That is true enough, from a certain perspective. Mill’s great sin, the reason why he must be cast out of heaven, is that he sees other sides to the arguments. Contemporary libertarians work from a presumption against government, and believe that government works against the 491 492 493 494 495

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Mill, 1848, book 5, ch 11. A Smith, 1776, The wealth of nations, book 5, ch 1, part 3. Mill, 1848, book 5, ch 11. B Caldwell, 2008, Hayek on Mill, History of Political Economy 40 (4) pp 689-704. A de Jasay, 1985, The state, Oxford: Blackwell, pp 88-9.

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liberty of the individual. The libertarian, pro-market argument has become so familiar that it may be difficult to decouple it from the principles of individualism. Mill is no less concerned than Friedman or Nozick with the liberty of the individual, but he interprets it differently. His individualism is based in the benefit to the individual, not dogmatic ideology, and he sees a role for government in enabling and facilitating the actions of individuals. A similar position has been argued more recently by David Green: ‘there is more than one liberal path to prosperity’.496 The liberal model of the state begins not from the proposition that government action is unjustified – as so many writers seem to suppose – but that it must be justifiable, which is a different kind of test altogether.

6.2 The role of government Government, Edmund Burke once wrote, ‘is a contrivance of human wisdom to provide for human wants’.497 That does not imply that government does whatever is necessary, or that what it does must be good. The actions of governments – like the actions of many other organisations – are liable to be partisan, adversarial, subject to capture, misjudged or inept. Wherever there are political disputes, conflicts, disagreements and factions, those differences are as likely to be reflected in a modern government as they are to be resolved by it.498 Burke’s point is a different one, about the role and function of government. The institutions of government are instruments, which can be called into play in many ways. They are set up to do things, and to have an effect. If governments depend on legitimate authority, they might do whatever they have authority to do. At several points in the argument of this book, I have begun by considering methodological or substantive arguments, which claim to show that resolutions can be achieved spontaneously; but as problems, gaps and contradictions emerged, I have moved on to consider how the process can be adapted, altered or qualified by government action. That is one of the most basic functions of government – to do, or at least to try to do, what can be done. The idea that states ‘intervene’ in society or the economy, however, begs certain questions. It seems to assume that there is a natural or prior 496 497

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D Green, 2010, Prosperity with principles, London: Civitas, p xi. E Burke, 1790, Reflections on the revolution in France, New York, NY: Holt, Rinehart and Winston, 1959. D Stone, 1997, Policy paradox, New York, NY: Norton; de Jasay, 1985; N Poulantzas, 1978, State, power, socialism, London: NLB. 179

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position, and that the role of government is to change that position. It implies that the government comes from outside. The conditions under which economic activity develops, the pattern of relationships established in society and the terms on which action takes place are all developed within the framework of an established system: governments are a part of that system. Indeed, it is not certain that there could be an effective system or structure without them. The fracturing of established alliances in recent years has seen rapid developments in the number and range of constitutional governments. Increasingly we have come to talk about governance rather than government. There has been a growing recognition that power is structured at many levels; that government is an association, which has some powers but no monopoly; and so that those powers have to be placed in a context where many different actors may engage in policy. Many developed countries have become part of international frameworks, such as the European Union or the North American Free Trade Agreement (NAFTA). Developing countries – nearly seventy of them – have been submitting plans to the International Monetary Fund and the World Bank, typically outlining procedures for partnership with international organisations, non-governmental organisations and independent companies.499 Governments have had to accept that even if they see themselves as leading or managing change, they cannot do the work alone. The picture that emerges of government is very different from the traditional idea of a commanding, sovereign entity. Part of what governments do is concerned with regulation, the establishment of a framework of laws and procedures; part is about forming policy, planning, negotiating or brokering relationships; and part may be about delivering services.   If people want governments to do something, and grant governments the authority to do it, it is very difficult to see why it should not be done. Milton Friedman – perhaps an unlikely supporter of this position – argues: ‘To some extent government is a form of voluntary cooperation, a way in which people choose to achieve some of their objectives through governmental entities because they believe that is the most effective means of achieving them’.500 If there is a problem in a government deciding to organise musical events, 499

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International Monetary Fund, 2002, Review of the Poverty Reduction Strategy Paper (PRSP) approach: Early experience with interim PRSPs and full PRSPs, Paris: International Monetary Fund; R Driscoll, A Evans, 2005, Second-generation poverty reduction strategies, Development Policy Review 23 (1) pp 5-25. M Friedman, R Friedman, 1980, Free to choose, Harmondsworth: Penguin, p 27.

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street parties or a garden festival, it is not self-evident why that should be true. Governments might be said to use other people’s money to do it, but the same can be said of private firms: banks sponsor sporting events, oil producers sponsor cultural events and so on, passing the costs on to their customers. Ultimately, both kinds of organisation are accountable for their actions, at several removes. Libertarians tend to represent the actions of government as an imposition on individuals. They argue that someone, somewhere, has to pay for government; actions which favour some individuals are done by imposing on others; and government is largely based in compulsion. But the last of these points does not follow from the others. The belief that provision of pensions, health care or social protection must be based in compulsion is belied by the extensive voluntary engagement of some populations in such schemes. There are, however, limits to the scope of legitimate action, and the idea of constitutional government is built around them. The role of government is potentially very wide, and a lack of restraint can be dangerous; a constitution implies that government can only do what it has the expressed authority to do. Constitutional limits emphasise that the powers of government cannot be assumed, and that they will only be exercised within the context of a framework of law. Requiring a solid foundation of authority is not equivalent to saying that action cannot be taken: where constitutions allow government agencies to act for the benefit of the population – as communes are able to do in France – governments are able to do what any voluntary organisation might. The UK is fairly unusual among Western governments in its lack of formal constitutional restrictions, but even here there have been examples – for example, limits on the powers of local government, which have meant that local government could not provide services simply because local people would benefit from them. (The rules have recently changed to allow councils a wider scope of action, but the combination of established ways of working, lack of resources and central government controls means that the new discretion has been little used.) The central principle is that government activity must always rest on established authority and the rule of law.

Democracy Most contemporary governments claim to be ‘democratic’ in one sense or another, and introducing the idea of democracy without some qualification will not always add anything clear or distinctive to an understanding of the role of government. At the same time, there 181

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are strong links between individualism and particular understandings of democratic government. Although democracy has a huge range of meanings, the most important can be presented heuristically in three main conceptual categories. Democracy can be understood as a normative concept, standing for a principle or ideal – for example, that government is accountable to the people, that it represents their wishes or that it is ‘of the people, by the people and for the people’. Second, there are prescriptive understandings of democracy, which identify elements in the system of government: examples are Dahl’s idea of ‘procedural democracy’, based on equality, participation, education, control of the agenda and universal application,501 or Joshua Cohen’s ‘deliberative democracy’, which emphasises discussion, cooperation, equality and social inclusion.502 Third, there are institutional models of democracy, based on sets of rules, systems of voting or political representation. The link between individualism and democracy is sometimes made through a prescriptive understanding. The distinctive pattern of government that protects the position of individuals is not just a system which elects a government, but also a constellation of procedures for government and law. The idea of ‘liberal democracy’ brings together concern with the process of law, institutional accountability, civil liberties and a system of individual rights, sometimes identified with citizenship. Sen suggests that principles like a free press are part of the process of empowerment.503 The restraints on majority rule are that there must be limits to authority, respect for minorities and the rule of law. Liberal democracy, in this sense, is the dominant form of government in the industrialised countries. Liberal democracy has also been linked, by the American republican tradition, to specific systems of government, such as the system of majority voting. The key to understanding liberal democracy is not that it expresses the will of a majority, but rather that it reflects the rights and wishes of minorities and of individuals. In the Federalist papers, majority rule is based in the combination of diverse interests, and it is justified if, and only if, there is no consistent majority. Madison wrote:

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R Dahl, 1979, Procedural democracy, in P Laslett, J Fishkin (eds) Philosophy, politics and society: Fifth series, Oxford: Blackwell. J Cohen, 1997, Deliberation and democratic legitimacy, in R Goodin, P Pettit (eds) Contemporary political philosophy, Oxford: Blackwell. A Sen, 2001, Development as freedom, Oxford: Oxford University Press.

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It is of great importance in a republic not only to guard the society against the oppression of its rulers, but to guard one part of the society against the injustice of the other part. Different interests necessarily exist in different classes of citizens. If a majority be united by a common interest, the rights of the minority will be insecure. There are but two methods of providing against this evil: the one by creating a will in the community independent of the majority – that is, of the society itself; the other, by comprehending in the society so many separate descriptions of citizens as will render an unjust combination of a majority on the whole very improbable, if not impracticable.504 Because democracy is so commonly identified in procedural terms, the procedures have come to stand for the things about democracy which people actually value.Voting is a symbol, not the thing itself.The right to vote is procedural, but it is not just procedural; it is also about the ability to have a say, to hold governments accountable and to assert the rights of citizenship. Democracy has promoted prosperity, and that is not coincidental: Sen argues that it is fundamental to the establishment of entitlements in the population,505 and economic entitlements are a major part of what matters to people. Democracy is valued, not because its procedures are valued, but because it makes it possible to achieve things which do not happen without those procedures. In other words, the things which matter about democracy are the substantive elements, not the procedural ones.506 Economic development and social protection – the conditions associated with ‘welfare states’ – do not define a democracy, any more than certain electoral procedures do. The establishment of welfare systems, elected government and economic development are integral to the process we understand as democracy, but none of them is sufficient for democratic government. There have been undemocratic countries which have developed welfare systems, even as there are undemocratic countries with developed electoral systems. At the

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The Federalist papers, 1788, New York, NY: New American Library, 1961, paper 51, p 311. A Sen, 1999, The value of democracy, Development Outreach, at www1.worldbank. org/devoutreach/summer99/article.asp?id=3 P Spicker, 2008, Government for the people: the substantive elements of democracy, International Journal of Social Welfare 17 pp 251-9. 183

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same time, democracy, economic development and social protection are intimately linked. The common thread is entitlement. Economic development depends on integration in economic processes, which both stems from entitlement and promotes it. Social protection develops entitlements and basic security. Democracy is a system of government which guarantees such entitlements. The model of ‘liberal democracy’ has it nearly right, but it under-emphasises economic and social rights. If entitlement is the foundation of democracy and welfare, democracy and welfare are inseparable. The relationship between liberal democracy and individualist thought is sometimes uncomfortable. On one hand, the ‘liberal’ element seems to emphasise individual rights and entitlements. On the other, the same rights and entitlements may come into conflict with the assumptions of some kinds of methodological or substantive individualism. Friedman suggests that markets are better than voting: What the market does is to reduce greatly the range of issues that must be decided through political means, and thereby to minimize the extent to which government need participate directly in the game. The characteristic feature of action through political channels is that it tends to require or enforce substantial conformity. The great advantage of the market, on the other hand, is that it permits wide diversity. It is, in political terms, a system of proportional representation. Each man can vote, as it were, for the color of tie he wants and get it; he does not have to see what color the majority wants and then, if he is in the minority, submit.507 Petracca argues that the methodological individualism of rational choice, and the powerful policy prescriptions that are drawn from it, are inconsistent with democratic self-realisation.508 I think that is right. A methodology that relies solely on a theoretical economic market, where individuals make decisions in isolation, is something less than a model of democracy based on rights including assembly, association and solidarity, and depending on the establishment of a democratic discourse. The principle of getting people to make decisions in 507

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M Friedman, 1962, Capitalism and freedom, Chicago, IL: University of Chicago Press, p 15. M Petracca, 1991, The rational actor approach to politics, in K Monroe (ed) The economic approach to politics, New York, NY: HarperCollins.

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isolation, and approximating their views in terms of a central norm, is how Rousseau describes the process of identifying the General Will509 – more often seen as an instrument of totalitarian governments than a form of individualism.510 From the perspective of moral individualism, the qualification or abandonment of long-established individual rights, such as freedom of speech or assembly, vitiates any claim of so-called libertarians or theorists of the market or to represent the individualist tradition.

The welfare state Once a government accepts responsibility for the welfare of its people – as any democracy must – it commits itself to expanding its range, role and involvement in the field of social protection. In principle, it should be able to ensure that a degree of welfare is delivered by and through private markets, but the limitations of the market invariably mean that this cannot be a complete answer. Some services are ‘residual’, intended solely to deal with the circumstances that the private sector will not touch.511 In Part Four, I identified various reasons why the private sector might not wish to be engaged. Expense is one. Another is ‘moral hazard’; commercial relationships, like medical insurance, are vulnerable in circumstances where the behaviour (or misbehaviour) of the purchaser increases the liability of the provider.512 Governments may not have much choice about providing where there is moral hazard – indeed, some public services, such as criminal justice, face greater demands when people behave badly. Any government, and any welfare regime, needs to have some residual provision. This cannot work, however, for every circumstance, and the general experience of most Western governments has been that services cannot only be residual. Part of the problem has been the difficulty of defining and maintaining the boundaries between those who are served and those who will not be; there are typically problems of definition, equity and enforcement. But there is also an imperative to reduce costs, and if the residue consists of services to people who are more expensive or difficult to provide for, expanding the range of activities will bring down the average cost. There are often economies of scale, too, most obviously in issues like 509 510 511

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J-J Rousseau, 1762, Du contrat social, Paris: Garnier Flammarion, 1966. J Talmon, 1961, The origins of totalitarian democracy, London: Secker and Warburg. P Spicker, 2005,Targeting, residual welfare and related concepts: modes of operation in public policy, Public Administration 2005 83 (2) pp 345-65. N Barr, 2004, The economics of the welfare state, Oxford: Oxford University Press. 185

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health care, where governments are able to use their purchasing power to bring down costs. There is no government that has held the line, reserving public services to a narrowly defined residuum. In every case, in every developed country, there has been an expansion of services over time. In the US, for example, before the implementation of the Obama reforms, half the expenditure on health care was provided by government – federal provision, military health cover, occupational cover for public employees, quasi-autonomous programmes like the service for native Americans and state governments.513 By contrast with the rhetoric of the market, the reality is that every developed country has gradually expanded its commitment to welfare, moving from ‘residual’ to ‘institutional’ models of welfare.514 The idea of the ‘welfare state’ leads to considerable confusion. Richard Titmuss, probably the most celebrated commentator in the field, dismissed the idea as an ‘indefinable abstraction’ and expressed concern about the potential for misunderstanding and complacency.515 For some, it is an ideal social model, in which citizens receive welfare as of right.516 In other views, it is the provision of benefits and services by the government, regardless of the quality or level of that provision. In most European countries, however, the term means something very different – the provision of benefits and services throughout society, regardless of who is responsible for the provision. Political discourse on the ‘welfare state’ has been driven by a series of misconceptions, particularly those coming from the perspective of American commentators.517 The most obvious misconception is the assumption that the ‘welfare state’ is designed, developed and delivered by government. Services like pensions, unemployment benefits and health care are delivered through a wide variety of mechanisms, and around the world many are not delivered by the state at all. They are provided by independent funds, employers, trades unions, mutuals or non-profit organisations – mechanisms of ‘solidarity’ rather than state

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A Kovner, J Knickman, 2008, Jonas and Kovner’s health care delivery in the United States, New York, NY: Springer. H Wilensky, C Lebeaux, 1965, Industrial society and social welfare, New York, NY: Free Press. R Titmuss, 1968,Welfare state and welfare society, in Commitment to welfare, London: Allen & Unwin. A Briggs, 1961, The welfare state in historical perspective, European Journal of Sociology 2 pp 221-58. e.g. C Murray, 1984, Losing ground, New York, NY: Basic Books; L Mead, 1986, Beyond entitlement, New York, NY: Free Press.

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intervention.518 The role of government has often been to support, complement and supplement these activities. Governments may also claim to be planning and coordinating these activities, but the truth is that most European governments came to this rather late in the day, and the activities are still far from coordinated. An associated misunderstanding lies in the assumption that government has imposed welfare provision on the population. Some solidaristic arrangements have been voluntary, some (particularly pensions) have been required by employers and unions as part of employment contracts. The insurance systems in the Nordic countries generally developed independently;519 where compulsion has been introduced by states, it has usually been done to complete the process by compelling employers to extend coverage to the lowest-paid workers.520 A second myth is that welfare provision has been introduced as part of an egalitarian project. All welfare provision is redistributive, in the sense that people who pay are not the same as those who benefit; the same is true of insurance, and of any mechanism which pools risk. There are certainly those who think that welfare can be used to achieve greater equality in society. Tawney argued that expenditure on public services would lead to greater access to the conditions of civilisation for all;521 for many years, this was basic to the strategy of equality pursued by the Labour Party in Britain.522 It is also true that some welfare benefits do redistribute resources towards the poor – though intriguingly, those are the benefits which are favoured by those on the political right, not the left. However, redistribution does not have to be egalitarian. Common patterns include social protection, where people on higher incomes receive higher benefits, and ‘income smoothing’, effectively transferring money across stages in a person’s life-cycle. The Swedish system is one of the most redistributive in Europe, but levels of benefit are highly geared to previous earnings: its structure has been described as being ‘selective by occupational experience’.523 The third misconception is that welfare has changed the people’s character or culture, leading them into long-term dependency and 518

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P Baldwin, 1990, The politics of social solidarity, Cambridge: Cambridge University Press. J Clasen, E Viebrock, 2008, Voluntary unemployment insurance and trade union membership, Journal of Social Policy 37 (3) pp 433-52. A de Swaan, 1988, In the care of the state, Cambridge: Polity Press; P Spicker, 2000, The welfare state: A general theory, London: Sage Publications. R Tawney, 1930, Equality, London: Allen & Unwin. J Le Grand, 1982, The strategy of equality, London: Allen & Unwin S Ringen, 1989, The possibility of politics, Oxford: Clarendon Press, p 13. 187

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undesirable patterns of behaviour. The idea of ‘dependency’ tends to be used in a pejorative sense. We do not call people dependent because they use a publicly funded university, a fire brigade, a municipal car park or a public library; it is not clear, then, why we should call people dependent because they use a public system for crisis loans, or rent public housing. There are certainly some people who rely on social welfare provision in the long term for their income and sustenance. The most important, and the largest group of people of whom that is true, are pensioners: two thirds of the benefits paid out by the UK Department for Work and Pensions go to people over retirement age.524 When commentators write about ‘long-term dependency’, however, they have something quite different in mind: the generations of poor people who grow up poor, remain in poverty and have children who become poor in their turn. There is no good evidence to support this view. The issue of transmitted deprivation, or inter-generational continuity, has been extensively, repeatedly researched in developed countries, including the work of a major long-term research programme in the UK;525 it is not what happens. People move through dependency;526 most dependency is short term;527 and with the main exception of pensioners and those with severe disabilities, poor people rarely remain poor for very long periods of time. There is a much more serious problem of instability and insecurity – incomes and job security are radically unstable, and most of the UK population has experienced periods of low income of a year or more.528 The libertarian critique tends to see the welfare state as an imposition on individuals, an example of state interference infringing the rights of individuals, limiting freedom by arrogating other people’s property, suppressing choice and supplanting market mechanisms that could do 524

525

526

527

528

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UK Department for Work and Pensions, 2010, Benefit expenditure tables, London: Department for Work and Pensions, http://statistics.dwp.gov.uk/asd/asd4/ alltables_budget2010.xls I Kolvin, F J W Miller, D M Scott, S R M Gatzanis, M Fleeting, 1990, Continuities of deprivation? The Newcastle 1000 family study, Aldershot: Avebury; M Brown, N Madge, 1982, Despite the welfare state, London: Heinemann. See e.g. C Heady, 1998, Labour market transitions and social exclusion, Journal of European Social Policy 7 (2) pp 119-28; L Leisering, R Walker (eds), 1998, The dynamics of modern society, Bristol: The Policy Press. UK Department for Work and Pensions, 2011, Households below average incomes, London: Department for Work and Pensions. UK Department for Work and Pensions, 2006, Low income dynamics 1991-2004, London: Department for Work and Pensions, www.dwp.gov.uk/asd/hbai/ low_income/paper_M.pdf, table 5.

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things much better. This misses the mark in every major particular. When it engages in the provisions of social welfare, government can enhance freedom, or destroy it; create opportunities, or restrict them; empower individuals, or suppress them. The critics have wasted so much time challenging the legitimacy of the welfare state that they have failed to address the far more important question: how can we distinguish the elements of provision which are legitimate from those which are not?

6.3 The moral agenda The legitimacy of policy processes depends partly on the way that things are done – the extent to which they can be said to be based in authority invested by the people affected – and partly on the moral character of the government’s actions – its intentions, the principles it follows, its aims and the outcomes it achieves. The first condition is not difficult to satisfy, because despite the protestations of the methodologists, there is in contemporary democracies a very broad consensus about both desirable outcomes and the methods by which political programmes can be pursued. The second is more complex, partly because morality itself is complex, partly because the motivations of governments are difficult to identify. For some policy analysts, ‘policy’ is an umbrella term for a seething mass of conflicts and negotiations.529 That can make it difficult to attribute either motives or responsibility. It is true, nevertheless, that the governments have to be understood as moral actors, in the sense both that their decisions and actions are informed by moral considerations, and that they carry moral responsibility for the decisions they make. Moral norms shape the pattern of government intervention, not just because governments are chosen by electors to do things that are right, but also because those involved in the process of government have moral opinions, which they bring to their decision making. The reluctance of some legislatures to permit divorce or abortion, the penal treatment of homosexuality or the severity of punishments for convicted offenders, are illustrative. The sociology of ‘moral panics’530 has been dismissive of the irrational, often punitive character of interventions like this – leading to rapidly formed, often ill-considered legislation governing (for example) dangerous dogs, social security fraud or drug abuse. David Selbourne objects that this terminology dismisses a legitimate source of 529 530

e.g. Stone, 1997. S Cohen, 1972, Folk devils and moral panics, London: MacGibbon and Kee. 189

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concern and action; people are entitled to expect that their governments should act morally.531 If government is an instrument of policy, moral intervention is part of what governments are commissioned to do. Governments are moral actors, too, in another sense. A government is an institution, not just an instrument, and institutions as well as individuals can incur moral responsibilities. Governments are bound by contract and treaty obligations, and by principles of reciprocity. An example of a reciprocal obligation is the concept of the ‘military covenant’: a government does not ask soldiers to suffer hardship, disability or death just for cash, and if soldiers are bound by duty, governments have no less a duty to the care and support of those who they have exposed to danger. Because it is so difficult to disentangle moral motivations from pragmatism, self-interest or economic arguments, it can be hard to demonstrate that any policies are genuinely founded in moral principle. I think it can at least be said that some policies make very little sense if they are not looked at in moral terms. Examples include: • humanitarian action, including overseas aid; • many disciplinary actions, in the form of punishment or rules governing personal conduct; • the regulation of relationships, such as rules affecting families and households; • action to achieve social justice, including redistribution, compensatory measures or equality. An example of moral interventionism might be found in social policies to protect children from abuse. The care of children is principally governed by moral norms that make child care the responsibility of the parents. Laws to protect children from their parents developed gradually in the course of the last century; that development has been marked not so much by resistance to intervention, though there has been some, as disbelief. Child abuse had to be ‘discovered’, like the Dark Continent, because the testimony of the people who lived there was not enough for them to be believed. In the US, the discovery was made in the 1950s by radiographers, who identified fractures that were not consistent with accidental damage.532 In the UK, the only remedy that was available before 1933 was criminal prosecution of the parent. 531 532

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D Selbourne, 1998, Moral evasion, London: Centre for Policy Studies. S Pfohl, 2003,The ‘discovery’ of child abuse, in P Conrad,V Leiter (eds) Health and health care as social problems, Lanham, MD: Rowman & Littlefield.

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The Children and Young Person’s Act 1933 provided for the removal of children to a place of safety. In the 1950s, local authorities gained the responsibility to investigate neglect or abuse; in the 1960s, their duty was extended to include action to prevent it. The story is bound up with the development of professional social work, and inevitably there are elements in it of self-interest and empire-building. The core of the issue, however, rests in a belief that some children need to be protected; some need to be removed from the charge of their parents; and ultimately government has to do it. Child abuse is a paradigmatic example of policy where it was felt that ‘something must be done’. This is a very different kind of argument from the abstract analyses that have taken up the bulk of this book. Methodological individualism has largely proceeded by setting issues of morality aside, considering them to be part of a different discourse, to the point where the legitimacy of engagement with moral issues seems under question. That position may be helpful for some kinds of analysis, but it does not address, or even begin to understand, the business of government.

Translating moral purposes into practice The agendas that any government follows are complex. The nature of government is not that it picks a particular issue – economic development, security, justice – and then does that and nothing else. There have been governments which have had single-minded agendas, making everything else subordinate to those agendas – Stalin’s approach to economic development is an example533 – but they tend not to be good governments. It is not really feasible, either, to suggest that a government should pursue only specific categories of action, such as humanitarian, or disciplinary, or compensatory, or regulatory measures, or measures to avoid market failure; these are all possibilities, from a wide range of options, which different governments will pursue according to the circumstances. Any democratic government should expect to have many agendas, and each of those agendas in turn has to take account of a host of considerations. By way of illustration, consider a relatively simple question: what does it mean for governments to attempt to ensure that their citizens live longer? As moral objectives go, this is neither particularly controversial nor a difficult aim to defend. Individualism implies, among other things, that each and every person has a value. From an individualist perspective, part of the purpose of public policy is to ensure that this 533

A Nove, 1964, Was Stalin really necessary?, London: George Allen & Unwin. 191

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value is protected and nurtured. Taking steps to keep people from dying prematurely is one of the most basic tasks a government can be asked to do. The United Nations Development Programme publishes every year a Human Development Index, in which average life expectancy plays a major part.534 The importance of life expectancy in its own right is obvious enough, but the indicator carries a lot more information. Life expectancy and mortality ratios are average indicators, based on the experience of the population in aggregate; they do not show individual experience or expectations, but they say something that helps to understand that experience. Infant mortality is critical because it has a major effect on average life expectancy – though the converse is also true, because poor adult and maternal health affects prospects for children. Life expectancy is conditioned by many factors, but as a rough general proposition, countries where people live longer tend to be happier, healthier, more prosperous and more secure than countries where they do not. There is still some way to go, but the striking recent falls in infant mortality in Africa are unequivocally a good thing.535 The incidence of disease can be reduced. Preventative health care is concerned with reducing the incidence and consequences of disease.536 A distinction can be made between primary prevention (preventing illness from happening) and secondary prevention (ensuring early detection and response to illness so that the problems do not spread). Part of secondary prevention is the response to life-threatening illness, sometimes called tertiary prevention; appropriate responses and the system of health care make a marginal but significant difference to mortality rates by curing in some cases, and postponing death in others. Public health refers partly to the collective factors affecting people, such as water supply and sanitation, partly to externalities such as parasitic infection, environmental pollution and exposure to risk because of the poor health of others, and partly to the impact on personal health of such issues as nutrition, smoking and accidents.537 Most of the arguments about public and preventative health focus on 534

535

536 537

192

United Nations Development Programme, Human development reports, at http:// hdr.undp.org/en/ G Demombynes, S Trommlerova, 2012, What has driven the decline of infant mortality in Kenya?, Kenya: World Bank Africa Region. G Rose, 1992, The strategy of preventive medicine, Oxford: Oxford University Press. See e.g. D Leon, G Walt, 2001, Poverty, inequality and health, Oxford: Oxford University Press; H Lambert, K McPherson, 1993, Disease prevention and health promotion, in B Davey, J Popay (eds) Dilemmas in health care, Buckingham: Open University; M Marmot, R Wilkinson (eds), 1999, Social determinants of health, Oxford: Oxford University Press

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the methods used – what governments can do, what works and how effective different approaches are. There may be conflicts between the interests of different individuals. Immunisation offers people protection overall, but sometimes the consequence of immunisation for isolated individuals can be detrimental to them. There are continuing controversies about the merits of preventative screening. The control of tobacco and alcohol has largely been done through a combination of restrictions on sale, taxation and education – prohibition does not work, though that has been the route followed in relation to other dangerous drugs. Arguments about the health of the population have not been immune from the ideological turn that has attempted to individualise policy responses. Drinking water can be supplied by a supply to households, a supply to communities and as a commodity in bottles. If people are being infected because of mosquito bites, it may be appropriate to provide mosquito nets,538 but it may equally be appropriate to drain the surface water where parasites breed.539 The point at issue in all these examples is not the legitimacy of the general objective, but the best way to realise it. As the argument is reviewed in more detail, however, it becomes more difficult to determine where the limits fall. The potential agenda for government is very wide indeed, but that breadth is not just a reflection of the technicalities of what works.When governments take action to protect health, they are not trying to do just one thing; they are doing many. Their objectives may be, for example: • • • • • •

to increase freedom of action; to respond to needs; to protect the vulnerable; to shield the population from risk; to reduce harm; to alter the distribution of outcomes (inequalities in health have been a continuing concern for UK governments);540 • to compensate people for disadvantage; • to promote moral conduct (an active consideration in relation to issues like drug dependency and teenage pregnancy); 538

539

540

United Nations Millennium Project, 2005, Investing in development: Overview, New York, NY: United Nations Development Programme, p 26. S Cairncross, E Ouano, 1990, Surface water drainage in urban areas, in J Hardoy, S Cairncross, D Satterthwaite (eds) The poor die young, London: Earthscan. See G Smith, D Dorling, M Shaw (eds), 2001, Poverty, inequality and health in Britain 1800-2000, Bristol: The Policy Press. 193

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• to support economic producers (the promotion of certain foodstuffs as health-giving is not necessarily about health); • to acknowledge moral responsibility (as happens when government compensates people for injuries suffered through government action). This is still a very selective list, because it leaves out a wide range of collectivist objectives – such as changing social relationships, maintaining a healthy workforce or ensuring the continuation of a society. The main point of putting it here is to emphasise, even when the moral focus of policy is wholly individualistic, how complex and diverse the moral purposes of public action actually are.

The objections to government action I have already reviewed the main objections to policies of this sort, so at this stage of the argument they can be dismissed fairly quickly. The first objection is that actions to reduce mortality are the province of individual autonomy and choice, and that governments cannot act within this sphere without violating the rights of individuals. That argument is based on an arbitrarily restrictive interpretation of the rights of individuals, and it is difficult to see any moral force in the restriction. The conditions where life expectancy is increased are also conditions where people have more freedom and more autonomy, not less. The second objection is that, regardless of how worthy the objective may be, pursuing it is not the proper province of government. If government is intended in any way to serve people, to respect their rights, to act in their interests, then it is their proper province. Government has to have authority for its actions, true, but the authority is rarely denied – on the contrary, it is usually demanded. Almost every government in the developed world has taken on these responsibilities to some degree, and as democratic processes have slowly taken root, the same position has been gaining ground in the developing world.541 The third objection is the most substantial: that the objectives are better achieved in different ways – through the promotion of prosperity in the economic market, facilitation and enabling, and letting people choose for themselves. There are arguments to support this position, but they are dependent on circumstances and context. The question is how the objective is best achieved, not whether it should be. Markets 541

194

See S Radelet, 2010, Emerging Africa?, Baltimore, MD: Center for Global Development.

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can achieve a great deal, but they cannot do it all. Governments need to establish a framework, set standards and ensure that coverage is adequate in practice. The arguments about mortality and health are so basic, and so strong, that it may seem odd that I have not begun the argument of this book with the issues. The problem with starting at that point is that moral arguments tend to be waved aside. Where people have objected to the moral offence given by the free-marketeers – and it is not too strong to say that affecting indifference to millions of people dying prematurely is offensive – they are liable to be over-ridden or dismissed. Moral stances are met either by irrelevance – and what happens in economic markets is, in this case, largely irrelevant – or by a patronising assurance that the proponents would think differently, if only they understood the technicalities of the arguments better. Well, I have considered those arguments in some detail. They are selective, muddled and ultimately self-contradictory. If an argument does not hold water on close examination, it seems fairly obvious that it is not going to withstand the battering of a moral tsunami. The time has come to reject this kind of argument more vigorously. Set against the value of human life and dignity, the lives of children or the position of hundreds of millions of people blighted by malnutrition and avoidable disease, the issues dealt with in the dominant discourse of methodological individualism are, frankly, piffling. They do not engage in any meaningful way with the things that actually matter. They have been treated with a respect that is far greater than they merit. It is time to leave them behind.

6.4 Social policy and the individual Moral individualism argues for placing a value on each and every individual. No-one should be disregarded, and no-one should be left behind. Substantive individualism implies that each person’s experience should be considered, because that is everything that matters. Only methodological individualism, because it is dealing with notional individuals who are never excluded and never die, can ignore the uncomfortable truth that everything is not always for the best. There is more scope for public action in an individualist approach than many individualist analyses seem to allow. A government that is concerned with the position of individuals might reasonably be expected to promote policy values in three essential spheres. The first is the existence of individual rights – that is, rules that can be enforced at the individual level, and for which the individual has the capacity to have redress. I discussed some classes of rights early on 195

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in the book. There are general rights: human rights include both rules to protect the individual and prescriptions for the rule of law. This is a useful start, but it is not everything. The rights of citizenship include both negative rights – freedoms and immunities – and positive rights, making actions available to the citizen. Marshall describes citizenship as ‘a status bestowed on those who are full members of a community. All those who possess the status are equal with respect to the rights and duties with which the status is endowed’.542 Citizenship rights are broader than human rights – if they were not, they would not add very much. They commonly include: • legal rights – legal status, due process and the right of redress, including access to law; • political rights, such as rights of assembly and free speech, and openings for participation in decision making, such as the right to vote; • economic rights, including rights to property and to contracts; • social rights, including rights to social protection and to protection against exploitation and rights for vulnerable people. Some lists of rights tend to downplay the final category, that of social rights; for Marshall, those rights came into play only belatedly, after the establishment of political and economic rights. That was not the experience in every European country, or even in most; where social rights often preceded political rights.543 They are no less important, and no less fundamental, than the others. The second sphere is basic security. For some writers, security is interpreted almost wholly in terms of protection against violence – that is behind the arguments for a minimal state confined largely to policing and defence, and Nozick suggests that the state might legitimately begin as a ‘dominant protection agency’.544 Personal security requires rather more – for example, nutrition, health and protection against disasters. Poverty has been described in terms of a lack of basic security: Aide à Toute Détresse argues that ‘chronic poverty results when the lack of basic security simultaneously affects several aspects of people’s lives, when it is prolonged, and when it seriously compromises people’s chances of regaining their rights and of resuming their responsibilities

542 543 544

196

T H Marshall, 1963, Sociology at the crossroads, London: Heinemann, p 87. See Baldwin, 1990. R Nozick, 1974, Anarchy, state and utopia, Oxford: Blackwell.

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in the foreseeable future’.545 ‘Poverty’ is being identified here with the preconditions for individuals to live, to function in society and to achieve their personal ends. It is – or should be – a major concern for individualists, because wherever there is poverty, there are constraints on personal action, limits on freedom and problems of self-realisation and personal development. Third, there is empowerment – ‘the mechanism by which people, organisations and communities gain mastery over their lives’.546 ‘A good government,’ Mill argues, ‘will give all its aid in such a shape as to encourage and nurture any rudiments it may find of a spirit of individual exertion.’547 Empowerment can be seen as part of the rights of citizenship; Amartya Sen suggests that it is more fundamental. Without voice and political power, people do not have some of the most basic forms of redress. Sen makes a powerful claim, which even if it is disputable, has to be taken into account: that there has never been a famine in a democracy.548 Famine, he argues, comes not from shortage or resources, but from lack of entitlements; and empowerment in a democratic society is fundamental to those entitlements. The principles here – rights, basic security and empowerment – offer an important counterbalance to communitarianism. The key weakness of communitarian perspectives is that, in elevating the particular over the universal, they can undermine the role of key values like this. Communitarianism can be moral, supportive and grounded in real relationships, but it also has a dark side: it can be exclusive, hidebound and oppressive. It is important, beyond the limits of collectivism, also to assert universal values, and the power of individualism is that it offers a focus for that assertion.549

545

546

547 548 549

Wresinski Report of the Economic and Social Council of France 1987, cited in K Duffy, 1995, Social exclusion and human dignity in Europe, Council of Europe CDPS (95) 1 Rev, Strasbourg, France: Council of Europe, p 36. Rappaport, 1984, cited in L Holdsworth, 1991, Empowerment social work with physically disabled people, Norwich: University of East Anglia Social Work Monographs, p 3. J S Mill, 1848, The principles of political economy, book 5, ch 11, J Drèze, A Sen, 1989, Hunger and public action, Oxford: Clarendon Press. D Rasmussen, 1990, Universalism v communitarianism, Cambridge, MA: MIT Press; P Spicker, 1994, Understanding particularism, Critical Social Policy 13 (3) pp 5-20; P Spicker, A de-Shalit (eds), 1992, Communitarianism and liberalism, Oxford: Oxford University Press. 197

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Reclaiming individualism: individualist public policies The policies that governments follow reflect a wide range of interests, choices and purposes. The aims associated with public policy are inevitably complex and subject to different interpretations. Superficially, a concept of a society, a community or a commonwealth that is based on the actions of independent individuals may not seem to allow for common purposes or policies. The very idea of public policy tends, however, to presuppose that it is possible to resolve the conflicts and determine some kind of path – to make choices. An individualist position is compatible with several possible conceptions of what those choices might be. The first is a set of shared objectives – that is, objectives which each individual arrives at separately. I referred earlier to some common patterns in consumption – for example the widespread conventional belief in the UK that single adults and children need their own beds. The degree of consensus and conformity is striking. I have also asked why it should be illegitimate for a government to undertake the realisation of shared objectives when it is legitimate for a voluntary association. There are differences in the scope of different agencies, and part of the answer to that question relates to constitutional limits placed on government, but at root it is difficult to see any rational ground for the objections. If a government or local authority determines to provide public transport, swimming pools, libraries, play facilities or anything else, that is a matter for them and their electorate. Sen’s vital argument about democracy is that these things depend on processes of accountability to the public, and abuses of power are made possible when people lack the entitlement to alter or influence the direction.550 A government where such things cannot ever be done is not a sign of a more legitimate society, but of a less legitimate one. Second, there are universal standards – standards that we apply not just to our selves, but also to others. Ideas like human rights have as good a claim to be part of the individualist tradition as the possessive individualism that dominates academic writing. If we want to make sure that every child has an education – a very common objective in liberal democracies – there needs to be both the facilities to make education possible and a programme to make sure that no child is excluded. One of the most remarkable programmes of any government in recent years has been the creation of universal basic education in Uganda. It involved the expansion of elementary education from providing for 550

198

A Sen, 1999, Development as freedom, Oxford: Clarendon Press.

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less than three million children in 1996 to over seven million 10 years later – much of the increase happening in one year, 1997. That involved finding places to study, teachers, equipment and facilities for four and a half million more children.551 The programme was unrealistic, quixotic, absurd, ludicrously impractical – and quite magnificent. Third, individuals may recognise a common interest – indeed, the discussion of solidarity and social protection in Part Five implies that it would be irrational for them to do otherwise. Minimum standards are not just about the imposition of arbitrary norms; they are also a guarantee for each and every individual. If there is a minimum income, a safety net for health care, protection in the event of unemployment or a basic pension, then the protection is available to anyone. The British National Health Service has the same effect as mutual health insurance. People need to safeguard themselves and their families against possible events. Fourth, there is the perspective of the individual who is isolated, marginalised, excluded or devalued. It is too easy for the position of individuals and minorities to disappear under the weight of other people with other preferences. Moral individualism stresses the unique value, worth and dignity of each and every person; beyond that, liberal individualism protects the position of minority groups, because as individuals any of us might find ourselves in the minority. Individualism means – or should mean – that people’s needs, limitations of freedom and denials of rights should not be brushed aside. These four approaches – shared objectives, universal standards, common interests and considering the implications for every person – begin with principles that place a primary value on individuals. None of them is directly inconsistent either with the moral core of individualism or with each other. Even if a government does not define its role in terms of individuals, protecting and valuing each person is accepted as basic to liberal democracies. I explained at the outset of this book that part of my intention was to save individualism from some of the interpretations it has been subject to. The idea that individualism implies minimal government 551

See e.g. B Essama-Nssah, 2010, Achieving universal primary education through school fee abolition: Some policy lessons from Uganda, Washington, DC: World Bank, http:// siteresources.worldbank.org/AFRICAEXT/Resources/258643-1271798012256/ UGANDA_UPE-june-2010.pdf; Netherlands Ministry of Foreign Affairs, IOB Impact Evaluation, 2008, Primary education in Uganda,The Hague, the Netherlands: NL Ministry of Foreign Affairs, www.lcdinternational.org/files/IOB%20 Impact%20Evalution%20.pdf 199

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activity is untenable; its main effect is to undermine the position of the very individuals that individualism is supposed to defend. Taking the issues in this section together with the values identified in the previous one, the range of policies implied by an individualist stance begins to add up to a formidable agenda for government. A set of principles that seems to some to imply minimal government does anything but. Health care protects people’s common interest in basic security; social care provides individuals with protection of rights in circumstances that could have a serious individual impact; education empowers people to meet shared objectives; minimum income standards and pensions offer universal standards in basic security; and housing provision addresses shared objectives for essential living standards. Those terms are wide, and if anything this understates the diversity and range of measures that individualism sanctions. There is some arbitrariness about where fields of action are placed in Table 6.1, because some forms of provision like medical care can be justified in several ways, but the table does show how easy it is to make an individualist case for social protection and the welfare state. Table 6.1: Social policy on individualist principles Rights

Basic security

Empowerment

Universal standards

Citizenship

Minimum income standards

Voting

Common interests

Community safety – e.g. fire services, coastguard

Medical care

Access to information

Shared objectives

Housing standards and provision; minimum income standards

Securing economic prosperity; public health

Education

Protecting individuals

Social care

Child protection; employment protection

Redress

It is much more difficult, paradoxically, for individualists to justify some of the traditional functions associated with minimal or restricted views of the state – issues like defence (which Adam Smith described as ‘the first duty of the sovereign’552), foreign relations or cultural development. Those have more to do with a sense of a country as a collective unit or nation, and the fundamental justifications for such activities are not individualist.

552

200

A Smith, 1776, The wealth of nations, book V, ch 1, obtained at http://econlib.org/ library/Smith/smWN20.html.

Index

Index adverse selection, 108-9, 110 agency, 18, 72, 178 aggregation, principle of, 10-13, 16, 70, 72, 74, 86, 88-9, 92, 124, 143, 161, 192 alienable and inalienable rights, 26-7, 49, 51 autonomy, 8, 23-4, 31-3, 34, 36-7, 52, 56, 60, 63, 73, 101, 173, 177, 194 ‘average’ behaviour, 5, 10-11, 16, 60, 70, 86, 88, 149, 192 behavioural economics, 12, 13, 61, 69, 89 budget line, 75-6, 78-9, 82, 84-5, 151 capabilities, 53-4, 56, 64-5, 84, 93, 107, 153 capacity to decide, 8, 24, 31-7, 54, 56, 67, 173 conation, 34 child care, 81, 114, 169, 190 children, 7, 8, 20, 37-8, 52, 126, 135`, 136, 137, 169, 172, 173, 192, 198, 199 child protection, 112, 132, 148, 169, 190, 191 choice, 2, 8, 12, 15-6, 23, 33-6, 41, 52, 57, 59-62, 63-68, 69, 71, 73, 75-9, 81-2, 84-90, 99-102, 103, 106, 108-9, 120, 122, 126-30, 134-6, 139, 141, 143-4, 146, 150, 161, 168, 173, 184-5, 188, 194, 198 citizenship, 26-7, 30, 175, 182-3, 186, 191, 196-7, 200 coercion, 8, 28, 34, 35, 48, 126, 150, 154, 173 collective action, 20, 92, 139, 147, 14853, 154, 155, 157-61, 163-4, 173 collectivism, 1, 2, 5- 6, 10, 15, 16, 18-22, 43, 91-2, 103, 136, 139, 141, 143, 146-9, 151, 154, 156-7, 159-60, 163, 164, 168, 173-5, 192, 197, 200 commodification, 49, 65-6, 84, 107, 110, 118 commodities, 49, 64-5, 77, 79, 81, 82, 84, 87, 93, 103, 107, 135, 168 communitarianism, 20-21, 163, 197 comparative advantage, 151-3 competition, 104, 106, 109-10, 113, 118, 127, 130, 164, 172 compulsion, 126, 149, 151, 154, 159, 172, 181, 187 conation, 34 conditionality, 43 cooperation, 2, 139, 150-4, 182

Cost-Benefit Analysis, 139, 140 cream-skimming. See adverse selection demand, 10, 11, 37, 69, 80, 93-4, 100, 119, 120-2, 124-6 dementia, 24, 34, 126, 169 democracy, 27, 29, 171, 181-4, 185, 189, 191, 197-8 liberal democracy, 182, 184, 198-9 dependency, 160, 187 dignity, 2, 5, 23-5, 29-31, 48, 50-51, 107, 163, 195, 199 disability, 24, 39, 131, 133, 147, 188 distributive issues, 45, 95, 113, 125, 141, 162, 168 drug use, 39, 64, 128, 173, 189, 193 duties, 7, 20, 25, 43, 167, 177, 196 economic man, 10, 88 economics, 1, 8- 13 passim, 16, 18, 52, 61-2, 65, 68, 70, 74, 79, 88, 93, 102, 106, 113, 119, 141 education, 28, 36, 56, 65, 70, 81, 93-4, 101, 108, 113, 118, 122, 124, 126, 128, 133, 135, 135, 136, 151, 162, 164, 172, 177, 198, 200 efficiency, 89, 91, 93, 95-7, 101-2, 1046, 111-14, 134, 140-41, 165 emergence, 18, 20, 88 empowerment, 36, 37, 45, 107, 171-2, 182, 189, 197 entitlements, 29, 30, 43, 52, 94, 107, 118, 183, 184, 197 equality, 18, 29-31, 55, 163, 182, 187, 190 ethical individualism, 7, 41, 43, 172 exclusion, 30, 43, 54, 75, 93, 94, 107, 171, 195, 198-9 externalities, 95, 110, 113, 129, 135, 166, 172, 192 feudal society, 5, 24, 44-5 freedom. See liberty Fundamental Theorems of Welfare Economics, 104, 112-13 game theory, 11, 95, 150, 153, 157 government, role of, 1, 2, 7- 8, 10, 15, 26, 35, 46, 47, 51-2, 54, 70, 110-12, 123, 162-6, 171-86, 189-200 government as moral actor, 189, 19091, 194 health care, 26, 30, 35, 65, 75, 76, 77, 80, 81, 82, 94, 101, 103, 108, 113, 149, 151, 159, 160, 162, 181, 186, 192, 195, 199, 200 homelessness, 30, 38, 39, 93, 128, 133, 147, 160

201

Reclaiming individualism homo economicus. See economic man housing, 26, 30, 39, 67, 81, 93, 94, 101, 113, 118, 125, 126, 128, 130, 156, 177, 188, 200 rent control, 121 human rights, 7, 26, 46, 49, 196, 198 impossibility theorem, 139, 141-8 incentives, 11, 12, 39-42, 57, 70-73, 101, 108, 155 indifference curves, 75-84, 85-8, 91-22, 95, 97, 102-3, 151 individualisation, 36, 128-9, 132-7 inequality, 30, 93-7, 106, 142 institutional welfare, 186 insurance, 28, 64, 108, 110, 149, 158, 159, 160, 185, 187 interests, 6, 7, 14, 18, 23, 33, 44, 52, 60, 62, 64, 67-9, 74, 89, 101-2, 123, 139, 148, 149, 150, 154, 158, 159, 161, 163, 171, 174, 182-3, 194, 198-200 laissez-faire, 6, 114, 176-7 learning disability, 24, 33, 128, 130, 131 liberalism, 5, 6, 8, 25, 27, 30, 34, 36, 39, 45, 55, 107, 114, 141, 154, 158, 1712, 176-9, 184, 199 libertarianism, 46, 48, 171, 174, 178-9, 181, 185, 188, See New Right liberty, 1, 5-8, 16, 18, 21, 26-8, 30, 32-6, 44-8, 50-51, 53, 55, 107, 114, 134, 155, 171-3, 176-9, 182, 185, 188-9, 193-4, 197, 199 marginal rate of substitution, 76, 79,83, 102 market failure, 106, 110-2, 165-6 marketisation, 115 markets, 2, 12, 16, 30, 59, 61, 67, 82, 95, 99-114, 118-27, 129-30, 135, 157-8, 166, 168-70, 176, 185-6, 188, 195 maximisation of utility, 2, 72-4, 83, 847, 102, 105, 118, 165 mental disorder, 37, 38, 39, 128, 172, 173 methodological individualism, 2, 5-6, 8-13, 14, 16-19, 21-22, 31, 57, 66, 69, 73, 88-9, 99-100, 104, 139-41, 146, 148, 151, 153-4, 157-9, 163, 179, 184, 191, 195 minimal state, 114, 171, 174-6, 196, 199-200 moral hazard, 109, 185 moral individualism, 1, 5, 6-8, 9, 13, 20-23, 25, 27-29, 31, 33, 37-8, 40-4, 46-7, 51, 55, 61, 66-7, 69, 106-7, 109-10, 112, 125, 139, 163, 172-3, 176, 185, 191, 193, 195 mutualism, 28, 89, 92, 147, 149, 156, 158-9, 162-3, 199 202

New Right, 1, 28, 30, 114, 171, 174, 176, 195 non-market failure, 165-8 non-profit organisations, 156, 158, 159, 164, 186 nonsatiation, 12, 79-80, 82 older people, 18, 24, 28, 65, 109, 128, 130, 131, 132, 133, 135, 147, 160 Pareto principle, the, 2, 89-93, 94-7, 104-6, 112, 141, 143-4, 166 paternalism, 52, 172-3 pathological approaches, 38-9 perfectionism, 25 personal responsibility 37-42 personalisation, 99, 126-32 positional goods, 93 possessive individualism, 44-5, 47, 51, 198 poverty, 30, 35, 38, 42, 45, 53-4, 62, 81, 93-94, 107, 168, 188, 196-7 preferences, 6, 12, 52-3, 57-59, 60-63, 64-5, 67-9, 79-80, 82, 83, 85-92, 101-2, 119, 121, 127-8, 131, 139, 141, 143-6, 199 price mechanism, 100, 107, 113, 118-22, 123-6 privacy, 26, 49- 51 property, 1, 6, 21, 23, 27-8, 30, 37, 4450, 54-55, 58, 65, 79, 121, 146, 156, 160, 172, 178, 188, 196 public services, 119, 122-3, 139, 162, 163-70, 185, 187 rational choice, 6, 10, 11, 73-4, 87-9, 96, 150, 155, 157 rationality, 2, 5, 11-2, 16, 40, 57, 68, 735, 84, 86, 87-9, 102, 143, 149, 154, 158, 161, 184, 198 redistribution, 108, 113, 125, 161-2, 164, 167, 187, 190 residual welfare, 185-6 respect for persons, 22-4, 27, 31, 37, 169 revealed preference, 66 right to fail, the, 36, 55, See ethical individualism rights, 1, 5-8, 20-21, 23, 25, 26-29, 3031, 36-7, 41, 43-9, 51, 54-5, 93, 99, 107, 112, 135, 146, 162, 168-9, 1714, 178, 182-4, 188, 194-7, 199-200 general rights, 26, 28, 45, 196 particular rights, 26-7, 45-6 Robinson Crusoe, 9, 16, 79 self-determination, 5, 23, 24, 31, 34, 36, 42, 55, 63, 67, 163 see autonomy self-development 36-7 self-interest, 2, 5, 11, 12, 57, 60, 68-9, 70, 73-4, 84, 87, 89, 139, 148-50, 154, 156, 158-9, 163, 166 self-ownership, 48-50

Index social care, 51, 108, 123, 128, 130, 131, 132, 200 social choice 141-8 social groups 6, `7, 11, 15, 18-21, 25, 38, 41, 49, 70, 74, 86, 88, 93-4, 103, 130-31, 133-6, 139, 142, 147-9, 154, 156, 162-3, 188, 199 social justice, 44, 190 social policy, 195-200 social protection, 51, 151, 159-62, 168, 171, 181, 183-5, 193, 196, 199-200 social security, 42, 106, 128, 132, 134, 161, 164, 168, 189 pensions, 41, 106, 133, 149, 151, 168, 181, 186, 187, 188, 200 socialisation, 20, 31, 52, 135, 145-6 socialism, 7, 18, 43 society, 5, 8-9, 13-7, 20-2, 26, 30, 47, 139, 141, 143, 145, 147, 176, 179, 183, 198 sociology, 13, 14, 15, 18, 36, 96, 132, 174 solidarity, 18, 22, 54, 147, 157-63, 184, 186, 199 structural adjustment, 1, 114-8 structural approaches, 19, 38-9, 109, 153 substantive individualism, 5- 6, 13-18, 21-2, 30-31, 47, 66, 74, 99, 100, 104, 132, 139,

146, 154, 179, 184, 195 supply, 10-1, 16, 62, 67, 69, 82, 100-101, 110, 118-9, 121-2, 124, 130, 135, 192 targeting, 126, 133, 165 tragedy of the commons, 154-7 unemployment, 39, 41, 43, 73, 106, 132, 159, 161, 186, 199 universal domain, 144 utility, 33, 57-60, 65-6, 72-4, 78-9, 81-92, 102, 105, 113, 118, 126, 129, 140, 142 vulnerability, 54, 63, 108, 158, 160-1 Washington Consensus, 1, 115-6, 176 welfare, 1, 2, 10-11, 23, 30, 32-3, 40-1, 51-6, 57, 59-60, 63-8, 72, 88-90, 92, 97, 99, 103, 106, 113, 139, 141, 159, 171, 175, 183-5, 187 welfare economics, 6, 13, 69, 96 welfare state, 1, 33, 171, 185-6, 188, 200 well-being, 26, 51-3, 55, 59, 62-6, 92, 106, 111, 140 women, 7, 10, 18, 27, 45, 54, 133, 148, 153

203

Reclaiming individualism

Index of names Acton H, 109 Adam Smith Institute, 1, 47, 80, 100, 135 Adler M, 42, 63, 64, 140 Albon R, 121 Allen I, 130 Anderson J, 80 Anderton A, 79 Andrews A, 130 Andries M, 162 Arendt H, 30 Argyle M, 150 Ariely D, 69 Arksey H, 130 Armstrong C, 137 Arrow K, 22, 90, 143, 144, 145, 157 Ashton P, 121 Atkinson A, 93 Audit Commission, 67, 68 Auster R, 113 Australian National Health and Medical Research Council, 49 Axelrod G, 153 Babb S, 117 Baldwin P, 28, 187 Barr N, 109, 161, 185 Barry N, 1 Bartels S, 130 Bartlett W, 127 Bayley M, 127 Beardshaw J, 78 Beck U, 36, 160 Becker G, 74 Beerman R, 43 Begg D, 82 Behne T, 146 Bentham J, 14, 28, 39, 57, 58, 59, 139, 148 Berlin I, 32, 35, 46, 171 Bernanke B, 77 Bernheim B, 59, 66 Besley T, 110 Bhalla A, 107 Bhargava R, 15, 17 Bickel W, 125 Blaug M, 76, 104, 113, 151 Bonner S, 72, 73 Booth C, 62 Boulier B, 82 Bowles S, 157 Boyd R, 157 Brady G, 166 Bramley G, 162

204

Brandeis L, 50, 51 Brandt H, 157 Brennan, 46 Brennan G, 46 Briggs A, 186 Broome J, 58 Brown E, 117 Brown M, 38, 188 Browne J, 119 Bryson A, 11 Buchanan J, 59, 74 Burke E, 176, 179 Butler E, 100 Cairncross S, 193 Caldwell B, 178 Call J, 96, 146 Campaign for Better Transport, 119 Cantillon B, 93 Carlson E, 41 Carmichael S, 19 Cartwright A, 80 Carver V, 80 Cato Institute, 1, 50, 166 Challis D, 130 Chambers R, 53 Changing Lives Service Development Group, 129 Clapson M, 118 Clasen J, 159, 187 Cleary E, 156 Coffield F, 63 Cohen J, 182 Cohen S, 189 Condorcet, Nicolas de, 141, 146 Connolly S, 106 Coote N, 147, 163 Coram A, 113, 150 Coser L, 20 Craig P, 134 Cullis J, 69 Dahl R, 182 Dahrendorf R, 20 Daily Telegraph, 24 Damjanovic T, 92 Dan-Cohen M, 34, 62, 66 Daniels N, 75, 94 Davies C, 134 Davies S, 130 Dawkins R, 19 206 Deaton A, 79 Debreu G, 102 Demombynes G, 192

Index Index of names Dennis N, 43 Dixon J, 109 Dollar D, 45, 109, 117 Donkar K, 1, 117 Dorling D, 193 Dornbusch R, 82 Doucouliagos C, 69 Downie R, 24 Doyal L, 53 Drèze J, 197 Driscoll R, 180 Dunning J, 131 Durkheim E, 18, 22 Dworkin R, 8 Easterlin R, 2 Edgeworth F, 68, 91 Edwards M, 107 Elster J, 9, 61, 74, 154 Esping-Andersen G, 151 Essama-Nssah B, 199 Evans A, 180 Falconer P, 118 Fehr E, 157 Feinberg J, 33, 52, 53, 55 Ferguson H, 36 Ferguson I, 127 Feser E, 48 Festinger L, 72 Fincher R, 130 Fischer S, 82 Fleeting M, 188 Foley J, 119 Fon V, 82 Frank R, 77 Franklin, Benjamin, 158 Freud D, 128 Friedman D, 46 Friedman M, 2, 9, 12, 16, 17, 30, 34, 67, 85, 108, 114, 171, 179, 180, 184 Friedman R, 2 Gatzanis S, 188 Gerrard P, 136 Gintis H, 157 Glendinning C, 130, 131 Glennerster H, 1, 114 Goldfarb R, 82 Gordon D, 145 Gore C, 1, 115, 118 Gorr M, 48 Gough I, 53 Goulden C, 136 Gray J, 15, 16, 174, 175 Green D, 12, 13, 17, 100, 107, 158, 172, 175-6, 179 Green H, 76 Greener I, 101 Gregg P, 128 Griffin J, 2, 93

Griffiths A, 69 Griffiths R, 127 Gruen F, 133 Gurven M, 156 Haksar V, 25 Hamilton C, 19 Handler J, 41 Hardin G, 2, 154-5 Harding A, 133 Hardy B, 130 Harlock J, 128 Hart H, 28, 30 Hasman A, 92 Hauert C, 157 Hayek F, 16-17, 21-2, 28, 34-5, 47, 66-7, 74-5, 171-2, 176, 178 Heady C, 63, 188 Hegel G, 20, 48 Henrich J, Henrich N, 19, 95 Herbert A, 125 Hettige H, 111 Hicks J, 141 Higgins J, 172 Hill M, 42, 137 Hippen B, 50 Hirsch F, 93 Hobbes T, 10, 32, 44, 171, 175 Hobhouse L, 32 Hockey L, 80 Hodgson G, 9 Hogg D, 130 Hohfeld W, 7 Holman R, 38 Hood C, 167 Hudson B, 127 Hughes J, 130 Hunter D, 108, 109 Institute for Economic Affairs, 1, 48, 59, 74, 121 International Monetary Fund, 115, 180 Ison S, 77, 78 Janssen M, 155 Jasay A de, 178, 179 Jensen K, 96 Jones C, 76 Jones P, 69 Jouvenel B de, 109 Kahneman D, 59, 61-2 Kant I, 24, 31, 48 Kaplan H, 156 Kaplow L, 2, 90, 92 Kasparova D, 11 Keen M, 165 Keen S, 86, 88-9, 92 Kelman M, 59, 89 Kempson E, 125 Killick T, 117 Killmister S, 24 205

Reclaiming individualism Kimmel A, 49 King D, 1 Kishore R, 50 Kitwood T, 169 Kleiman M, 112 Knickman J, 186 Knijn T, 132 Kolvin I, 188 Köszegi B, 63 Kovner A, 186 Kraay A, 45, 109 Kreps D, 73 Krugman P, 121 Kymlicka W, 21 Lambert H, 192 Lang T, 125 Lansley S, 122, 145 Lapeyre F, 107 Laver M, 68 Le Grand J, 101, 127, 166, 187 Leadbeater C, 132, 135 Lebeaux C, 186 Lee F, 86, 87 Leisering L, 188 Leon D, 192 Levi Strauss C, 174 Liddiard P, 80 Little I, 10, 58, 96-7, 141, 143 Locke J, 5, 6, 44, 48, 173, 175 Lukes S, 5, 7, 13, 15, 29, 36 Macarov D, 109 MacCallum G, 32 MacCrimmon K, 80 MacIntyre A, 163 Mack J, 145 Macklin R, 24 Macpherson C, 44 Madge N, 188 Madison J, 182 Madrian B, 72 Mankiw N, 77 Manthorpe J, 128 Mantzavinos C, 157 March, 61 March J, 61 Marglin S, 96, 107, 158 Marlier E, 93 Marmot M, 192 Marshall A, 58 Marshall T, 196 Martinoia R, 58 Marx K, 19, 22, 44, 154 Matthews K, 77 McDowell M, 77, 78 McIntyre A, 20 McPherson K, 192 Mead L, 41, 186 Mendoza R, 84 206

Midgley J, 1, 114 Mill J S, 15, 33-4, 51, 55, 173, 177-9, 197 Millar J, 132 Miller F, 188 Milward B, 117 Minford P, 121 Mises, L von, 176 Mishra R, 109 Mitchell D, 133 Mohan G, 117 Moll H, 146 Muellbauer J, 79 Munro A, 106 Murray C, 40, 75, 186 Narayan D, 53 Needham C, 128, 130 Nelson J, 27 Netherlands Ministry of Foreign Affairs, 199 Ng Y, 95, 106 Nickell S, 73 Niekerk J van, 158 Nolan B, 93 Nolan M, 130 Nordenfeldt L, 23, 24 Nove A, 191 Nowak M, 19, 157 Nozick R, 28, 44-5, 47-8, 109, 174-5, 179, 196 Nussbaum M, 53 Ofsted, 132 Olson M, 149, 160, 162 Ortiz I, 160 Osterdal L, 92 Ostner I, 132 Ostrom E, 155 Ouano E, 193 Oxfam International, 116 Packenham R, 19, 153 Pantazis C, 145 Parkin M, 77 Parsons T, 22 Party of European Socialists, 18 Paugam S, 30, 93 Peace S, 130 Peacock W, 130 Peel M, 121 Peraz Solla M, 50 Petesch P, 53 Petracca M, 12, 184 Petry N, 125 Pettit P, 32, 34-5 Pfohl S, 190 Pick D, 41 Pickett K, 94 Pigou A, 58, 96 Popper K, 15

Index Index of names Posner E, 63-4, 140 Poteete A, 155 Poulantzas N, 179 Powell M, 77 Powell, Martin, 101 Przeworski A, 83, 105 Putnam R, 54 Quattrone G, 71-2, 161 Rabin M, 63 Radelet S, 117-8, 194 Radin M, 48 Radner R, 105 Rae D, 31 Rangel A, 59, 66 Rappaport E, 197 Rasmussen D, 20, 197 Rawls J, 10, 56, 75, 94, 142 Ray C, 36 Raz J, 34 Reed H, 120 Reisman D, 108 Ringen S, 187 Ritchie J, 134 Robbins L, 96 Robinson S, 95, 97, 106 Rock P, 20 Rose G, 192 Rose R, 118 Rosenberg B, 20 Rothbard M, 45-6, 47, 48, 87-8, 173 Rousseau J-J, 185 Ruggie M, 177 Runciman W, 96 Ryan A, 13, 48, 96, 97 Sahlins M, 161, 162 Samuel M, 131 SAPRIN, 115, 116, 117 Sarin R, 59 Sarsby J, 63 Saunders P, 145 Savulescu J, 50 Sawyer R, 18, 19, 20, 22 Schatz S, 117 Schumpeter J, 9, 14 Scott D, 188 Scottish Government, 128 Scrivens E, 126 Scruton R, 15 Selbourne D, 189, 190 Seldon A, 2, 100, 101, 108, 166 Sen A, 30, 35, 54, 58, 59, 60, 61, 64, 66, 68, 69, 85, 86, 90, 93, 94, 113, 144, 182, 183, 197, 198 Shavell S, 2, 90, 92 Shaw M, 193 Shea D, 72 Sheppard M, 133 Sigmund K, 157

Silver M, 113 Sippel R, 61, 86 Skinner B, 40 Skinner Q, 32 Smart G, 162 Smith G, 193 Smith, Adam, 57, 68-9, 74, 104, 158, 172, 178, 200 Soyer D, 36, 55 Spencer H, 42, 176 Spicker P, 8, 38, 81, 126, 131, 133, 151, 164, 168, 183, 185, 187, 197 Sprinkle G, 72-3 Stafford D, 121 Starr R, 91, 104-5, 113-4 Stephens M, 128 Stephenson S, 43 Stiglitz J, 105, 106 Stone D, 179, 189 Sugden R, 61, 62, 69, 89, 90, 92, 141 Sunstein C, 70 Svensson J, 117 Swaan A de, 151 Swaan, A de, 187 Talmon J, 185 Tawney R, 30, 56, 114, 187 Teles S, 112 Telfer E, 24 Thaler R, 12, 70, 86 Thatcher M, 14, 115, 148, 172 Thom R, 77 Thoreau H, 158 Titmuss R, 108, 186 Tocqueville A de, 29 Toda M, 80 Tomasello M, 96, 146 Townsend P, 108 Traulsen A, 157 Trommlerova S, 192 Tucker S, 130 Tullock G, 166 Tversky A, 71-2, 161 Twain, Mark, 83 UK Department for Work and Pensions, 43, 188 UK Department of Health, 129 UK Government, 122 UK Office of National Statistics, 145 UK Parliament, 164, 169 UK Parliamentary and Health Service Ombudsman, 136 UK Treasury, 59, 111, 112, 124, 140 UN Declaration of Human Rights, 56 United Nations, 176 United Nations Declaration of Human Rights, 25, 26, 44 United Nations Development Programme, 192, 193 207

Reclaiming individualism Usher D, 79 van Oorschot W, 134 Vickery W, 59 Viebrock E, 159, 187 von Mises L, 42, 176 Wakker P, 59 Waldron J, 35 Walker A, 119 Walker R, 63, 188 Wall S, 69, 77-8 Walt G, 192 Warren S, 50-51 Watkins J, 14, 17 Watson D, 25 Weber M, 175 Wenar L, 27 Whiteford P, 133 Wiesel I, 130 Wilensky H, 186 Wilkinson R, 94, 192 Williams W, 48 Williamson J, 115, 116 Winch D, 2, 84, 85, 86 Winston C, 166 Wistow G, 130 Wittman D, 71 Wolf C, 165, 166 Wolff R, 22, 154 World Bank, 45, 50, 53, 107, 110, 115, 117, 140, 142, 160, 180, 192, 199 Wresinski J, 63, 197 Xie H, 130 Yeager L, 105 Young R, 130 Yunus M, 114 Zack-Williams A, 117

208

from across disciplines, and is the product of some very hard thinking and some provocative analysis.” Professor Michael Moran, University of Manchester

This book is about individualist ideas, and how they shape contemporary approaches to public policy. If we were to believe the existing literature, we might think that only markets can satisfy people's needs, and that any collective concept of welfare compromises individual welfare. The price mechanism is taken to be the best way to allocate resources, and it is assumed that individualised responses to need must be better than general ones. Reclaiming individualism reviews the scope of individualist approaches, and considers how they apply to issues of policy. It argues for a concept of individualism based on rights, human dignity, shared interests and social protection. A valuable resource for those working or studying in social or public policy, this book is a powerful restatement of some of the key values that led to individualism being such a force in the first place.

PAUL SPICKER is Grampian Chair of Public Policy at the Robert Gordon University, Aberdeen. His research has included studies of poverty, need, disadvantage and service delivery. His books on the theory of social policy include Stigma and social welfare, The welfare state: a general theory and Liberty, equality, fraternity.

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Paul Spicker Reclaiming individualism

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Paul Spicker Reclaiming individualism Perspectives on public policy