Adam Smith Lives!

Freakonomics and Adam Smith?

I'd never have guessed it -- but then again, I'm not surprised -- but an interview by Diane Sawyer of Steven Levitt and Stephen Dubner ends with what sounds very much like a stripped down version of Smith's sympathy.  The discussion turns to honesty.   Diane Sawyer points out that we're less likely to steal from someone we know.  ok. Hume's sensible knave comes to mind.  Then the discussion moves to those dishonest acts, and the "social incentives" that affect them.  Levitt says we can "work on" the 10 % of our actions that might be dishonest:  "It's not wanting to appear ... to others and to yourself to be greedy" that influences these actions. 

Why don't we want to appear to others and to ourselves as dishonest?  That's precisely the role played by Smith's partial and then the impartial spectator, by Smith's imaginative process that makes us moral. 

Why the past matters -- deja vu

Does the past matter? It does indeed. A heartbreaking instance follows. I reproduce some terrible texts below to show just what’s at stake when we talk about a major theme from the classical period of economics: whether we’re the same, or not. If we’re the same, then since depravity is pretty much unimaginable behaviour for me, I can’t imagine it of you. If we’re not, perhaps I will believe unsubstantiated reports to the contrary about you.

In 1865 the Governor Eyre controversy occurred in Jamaica when violence broke out between former slaves and the authorities. Governor Eyre installed martial law; wire whips were used to restore order; the dead and mutilated were greatly disproportional to the initial uprising. (David Levy and I have more on the controversy here.)

What follows are two contemporary reports of the controversy, the first from Punch and the second from James Hunt’s Popular Magazine of Anthropology:

"Last Case of Colour-Blindness":

There has been fearful business in Jamaica. Blacks rioted, were fired upon, and the riot became madness. The blacks slew many whites, and the massacre was attended by incidents too revolting to be described in pages usually devoted to pleasantness. It must, however, be stated that a young clergyman was hewn in pieces, and the blacks enacted hideous orgies, devouring the brains of their victims. (2 December 1865, p. 216)

"The Baptists and the Jamaica Massacre":

... the nation will not permit even a small white population like that of Jamaica to be left at the mercy of the bloodthirsty black ruffians, of whom Mr. Radcliffe well says "we have been petting panthers," and whose celebration of their massacre consisted in the withdrawal to a Baptist chapel and the drinking of the brains of their victims mixed with gunpowder and rum! (1866, p. 23).

Notwithstanding the total lack of evidence in support of these reports, they were widely believed.

Compare this, if you can stomach it, to the reports of violence, rape, and even cannibalism that came out of New Orleans in recent weeks. Some of these have now been retracted or corrected. See, for instance the report from Times-Picayune (26 September):

As the fog of warlike conditions in Hurricane Katrina's aftermath has cleared, the vast majority of reported atrocities committed by evacuees have turned out to be false, or at least unsupported by any evidence, according to key military, law enforcement, medical and civilian officials in positions to know.

More retractions are here and here.

The strange parallel is disheartening. It's a great failing of imaginative estimation – of sympathy based on a supposition that we are essentially alike – that we believed such unsubstantiated reports.

Economists' "Perverse" S&D curves, mod 2

Plenty more posts about this on the HES list today.  Including one from Sam Bostaph on Fleeming Jenkin's S&D diagram.  I was waiting for someone to pick that up.  I'll come back to it when I re-post what I think is his more interesting exchange diagram.  This note from Jim Henderson on the King-Davenant Law is interesting:

This traces back to Charles Davenant and Gregory King's early formulation on the effect on corn prices of a "defect in the supply of corn."  Their little table showed that
A defect in the supply of 1/10 (caused) an increase in the price of 3/10
A defect in the supply of 2/10 (caused) an increase in the price of 8/10
A defect in the supply of 3/10 (caused) an increase in the price of 16/10
etc.
    This table shows up in any number of early sources -- especially Thomas Took's *High and Low Prices* etc.

W. S. Jevons worked with the K-D data in his Theory of Political Economy; interested readers should check Stephen Stiger's Statistics on the Table.

Economists' "perverse" S&D diagrams

Avi Cohen recently posted this message to the HES list:

A math student in my introductory economics course wanted to know why
economists perversely insisted on putting price, the independent
variable, on the y-axis.

Can someone suggest the most suitable articles for a freshman on the
subject?

That seemingly simple question has generated a wide variety of answers, some quite lengthy (see the HES archives).  I'm pasting 3 responses below:

Marshall did not reverse the axes.  For Marshall demand price and supply price were dependent variable, depending on quantity.  We now use Walras' explanations, with price as independent, but with Marshall's diagrams. (Malcolm Rutherford)    

The German proto-neoclassicals were doing it that way as early as 1841, and Marshall drew off of them, although without attribution.  Also, in the English language tradition Fleeming Jenkin did it before him. My understanding is that Marshall was very much focused on explaining the market for bread, the most important commodity in the average person's consumption basked in England even still in the late 1800s.  For that market, quantity as driven by weather, is the more exogenous factor, with price responding.
      It was the French, starting with Cournot and continuing with Walras, who put price on the horizontal axis.  With the relative decline of agriculture our discussions have looked more like the Walrasian one with price exogenous to quantity rather than in the  German/ Marshallian perspective. (Barkley Rosser)

With the reference to Marshall, the subject header seems an odd way to pose the question of putting price on the vertical axis.
Rau did it, and published it in 1841.
Mangoldt did it, and published it in 1863.
Cournot (1838) and Dupuit (1844) put price on the horizontal axis.  So why did Rau reverse Cournot's axes?  And why did Mangoldt reverse Cournot's and Dupuit's axes, following Rau instead?

You could direct the student to the very detailed paper by Thomas Humphrey, "Marshallian cross diagrams and their uses before Alfred Marshall:  The origins of supply and and demand geometry," Economic Review (Federal Reserve Bank of Richmond), March-April 1992, Volume 78, Issue 2, pp. 2-23. (Torsten Schmidt)

The Coal Question, then and now

Last Saturday my family and I attended a wedding in Port Dalhousie (pronounced "daloosie"), Ontario.  Our drive there elicited comments about the price of gasoline.  Someone remarked that Canada needs a national energy policy.  All the Canadian residents agreed.  There was a hint of national feeling as well, as they looked at the US resident (me) and seemed to imply that whatever might happen in America, Canadians might chart a distinct energy path.

Energy has long held a special place in the minds of the public, as well as economists.  And energy and national pride have been linked from the beginning.  William Stanley Jevons' 1865 The Coal Question:  An Inquiry Concerning the Progress of the Nation, and the Probable Exhaustion of Our Coal Mines captured the imaginations of the British public and parliamentarians alike.  J. S. Mill discussed it at some length in Parliament.  W. E. Gladstone used it to support a reduction of the National Debt. 

The book is a terrific read.

Jevons' conclusion was that British manufacturing supremacy would be shortlived because relative extraction costs would rise there, compared to the US.  Did Jevons propose a national energy policy in response?  Nope.  This is not to say Jevons didn't have policy recommendations in mind -- including the one that Gladstone propounded, of reducing the national debt.  But though he advocated widespread education to reduce the "ignorance, improvidence, and brutish drunkenness of our lower classes," Jevons repudiated a national policy designed to alter the course of energy consumption.  Britain, he argued, was faced with a "momentous choice" between the "brief but true greatness" associated with the free development of trade patterns and innovation, and the "longer continued mediocrity" that would follow a policy to restrict the rate of coal consumption.

Sympathy for the Irish

One example of many 19th century images of the Irish in Punch.  The open question is how successful these were in changing sympathy via perceptions of blameworthiness.

Sympathy, praiseworthiness, and Smith

Sue Anne Pressley's Sept. 16 article in the Post brings the element of blame or, what Adam Smith calls praise worthiness to the fore:

The element of worthiness -- or lack of it -- is also at work.

"Certainly a piece of this is the attribution of blame, that Katrina victims are unlucky, they were living in the wrong place at the wrong time," said Sam Marullo, chairman of the Department of Sociology and Anthropology at Georgetown University. "The institutional poor we have here in D.C. and every other city around the country, there is a sense that they are at fault . . . they didn't do something right, they didn't get an education, they didn't follow the rules."

The article contrasts the treatment of Katrina victims by Americans with that of our homeless.  Some of the contrast is attributed to ideas about blameworthiness:  any of us might be victims of weather; the homeless, so the argument goes, are more blame worthy than Katrina's victims. 

Adam Smith certainly recognized the power of praiseworthiness in the imaginative process that generates sympathy for our fellow human beings (see TMS, part III).  The Bleak House images from the 19th century reinforce that people bring presuppositions about praiseworthiness or lack thereof to an event like Katrina or homelessness.  One of the lessons we've seen in the last few weeks is that the presumption of lack of praiseworthiness can lead to tragic results:  indifference and inaction.  We've also seen that the presuppositions are starting points:  large numbers of Americans who initially were inclined to blame those who stayed behind have, thankfully, come to revise their judgements concerning blame worthiness of the victims.  Those who advocate on the behalf of the homeless have had a much more difficult time changing perceptions.  The National Coalition for the Homeless tries; read this.

Resources for Researchers in the History of Economics

From time to time it's worth thinking about practical matters -- what books to buy, what editions, etc.?  I'll begin with pointers for young scholars to help them obtain support of archival research. 

The first source of money that comes to mind is the NEH summer grants.  You must be nominated by your institution. US citizens and foreigners who have resided for at least 3 yrs before the application may apply.  Lots of prestige (so you get approbation plus the $5,000!).  Make sure the application explains how the project is a humanities one.  Find out more here.  In Canada, the counterpart is the SSHRC.  For more information, see here.  Oct. 3 deadlines for NEH.

Second, think about the wonderful Duke Economists' Papers Project (EPP), linked on the right.  30 economists' papers.  Funding to conduct research is sometimes available.

Third, think about the Summer Institute.  We support young scholars and since expenses at the institute are minimal, it's possible to do some cross subsidization.  Scholars have used their participation to subsidize research at the EPP, the Library of Congress and the HES.  (Think Young Scholars Sessions at the HES.  These are financially supported.  If your institution pays your way and you tie this to the SI you may have enough money left over to pay for research nearabouts).

Private foundations also fund archival research.  David Levy and I have been greatly fortunate to have our work funded by the Earhart and the Pierre and Enid Goodrich Foundations.  My sense is that this type of support depends on networks and may tend to be for more established scholars.  We're old!  Just kidding.  Neither of us is young.  ;-) 

Sympathy -- the debate in visual terms

Here's the picture that in my mind best illustrates the opposition to unrestrained sympathy.  Suppose we all felt great sympathy for those in New Orleans and Biloxi, but someone had another idea in mind for how we should spend our resources.  They might spend time telling us -- and showing us -- how those folks didn't deserve our charity. They might say "charity begins at home" and criticize us for spending time and energy on folks who couldn't be civilized anyway, folks who perhaps couldn't adequately appreciate the subtleties of religion or art. 

Unbelievable as it may sound today, this line of argument was used in the nineteenth century.  Then, it was argued that it was a waste of time to send resources to Africans with whom people like Mrs. Jellyby in Dickens' Bleak House might sympathize.  Mrs. Jellyby is the object of Dickens' criticism.  In the picture above, the cover of Bleak House, she's got two African children in her care.  The nearby sign -- Exeter Hall -- is the center of the Anti Slavery movement. (For more on Dickens and illustrators, see this.)

Sympathy, Katrina and doing something

When I first started thinking about Adam Smith, sympathy and Katrina, I had in mind the idea that the act of changing positions imaginatively one with another -- putting ourselves in the place of someone trying to decide, as the weather predictions were coming in, whether to leave a lifetime behind and flee -- makes us realize how similar we all are.  At any point in time outcomes differ, but those in large measure are determined by luck and history.  Abstract from luck and history and you've got similarity.  The act of stripping away luck and history isn't easy.  Hard to imagine that you might actually function on some level pretty much the same way as does a person without a car, family, or much of anything.  Watching, reading, listening to those who stayed behind makes it easier to imagine and, as Smith argued, we come to realize the essential similarity.

David Levy and I made that point in a recent paper in Economics and Philosophy.  We argued that people trade not only "stuff" or goods but also "approbation" -- a measure of our sympathetic standing one with another.  If so, we argued, people will refrain from taking advantage of weaker sorts even when there are no present or future (monetary) rewards to be had for doing the "right thing".  Thinking of the flipside of this, Smith may also have found an explanation for the outpouring of help now occurring for Katrina's victims.  We help the victims because we come to realize they're like us and so we can imagine how they would regard our actions.  We earn approbation by doing what we imagine they'd want us to do (and, since they're like us, that imagining is what we'd want someone to do to us).  We might get approbation directly from them, but we also earn self-approval, the knowledge that we're doing the "right thing" that comes from our own self imagining what they will think of us when we offer help to them.  And we're horrified -- as Smith's European is -- by the thought of doing nothing.