Adam Smith Lives!

Ethics and Economics at the Eastern Economic Journal

For some time, David Levy and I have been skirting around 2 big projects, on ethics and economics (or economists), and the nature and role of expertise in social science (and society). Both interests emerged from our earlier work on paternalism and then eugenics. They’re hard topics so perhaps it’s not surprising that we’ve made piecemeal progress on them. We brought the topic of ethics to the 2003 Summer Institute for the History of Economics, at which my friend and former colleague, Marty Zelder, David Levy’s colleague, Dan Houser, Deirdre McCloskey and (of course) we presented papers. Two of these were revised and presented at the Joint Statistical Meetings in San Francisco.As we say in the introduction to the short symposium on the topic that will appear in the Eastern Economic Journal, those facts alone suggest a certain eclectic flavor.

Our original goal was to explore the nature of ethics and ethical constraints within economics. We have argued that an important check on such policy recommendations, such as eugenic proposals, follows from the acceptance of a form of what we have called “analytical egalitarianism” – the presumption that we are equally competent. If we are equally competent, or must treat people as if they are, then it follows that policy makers, economists and other experts on social matters, are equally able to be ethical and to be unethical. We are all tempted to the unethical, by whatever tempts any amongst us. The trick is to recognize this and to put into place constraints which attenuate the temptations that experts, those whose advice is sought, face.

      While we do not hold that “efficient” is (quite) the same as “ethical”, we see enough overlap to at least begin to tackle the ethics problems using the machinery associated with efficiency. So we develop the statistical equivalent of a prisoner’s dilemma in the economic account of expert witnesses. The motivating mechanism for this is the Smithian device of sympathy or the desire for approbation. In our account sympathy is truncated – partial – since it consists of the statisticians’ sympathy for the client’s desired outcome. The outcome is that we recommend a change in the incentives facing expert witnesses.  A (somewhat old!) pre-print of the paper is posted here (with permission from the EEJ). In his column this week, David Warsh picks up on the incentives questions we ask here, in relation to recent developments on Wall Street.

transparency_eej_final.pdf

The Self, the Group and Leadership: Frank Knight on Discussion

After a long hiatus, Adam Smith Lives! is back! As the school year ramps up, it’s time to think again about how intellectual history informs our lives today. A good deal has happened in the history of ideas since the ASSAs in January. But rather than promote the Summer Institute and the HES Annual conference (both terrific) in this returning post, I’ll begin to connect my new position in The Jepson School of Leadership Studies with economics.

Economists today typically conceptualize what we do in terms of individuals. Self interest is, after all, about the self. Choices are made by individuals. But many of the interesting problems we tackle actually have to do with how a bunch of ‘selves’ come together and interact as a unit, a group or a polity. Public choice economics has done the very important service of reminding all that policy is made by individuals motivated like the rest of us to look after the self. With David Levy, I’m now working on experts and expertise. One of our key themes is that experts and leaders are self motivated. They’re also, and this not surprisingly comes from Adam Smith, sympathetic. Sympathetic with each other, the group that matters to them most, first. Sympathetic with clients, as well.

But how do we move from the self to the group? To the extent that economists study this problem, one insight has emerged over and over again. Conversation, discussion, language – whatever we call the means by which we interact – is a key to facilitating exchange and other cooperative behavior. Frank Knight, the last great economist to think and write about the value of conversation for leadership, wrote in the Ethics of Competition that “The problem of social action is almost wholly a problem of leadership.” (p. 349). He insisted on the value of discussion amongst equals: “The idea of free society is that social problems should be settled in their large outlines by discussion in which all normal adults participate equally, and in further detail by leadership intelligently chosen by all through public discussion and leading with the moral consent and co-operation of the masses.” (p. 352) 

Leadership might be regarded as a facilitating mechanism, a way to help the discussion take place -- the leader talks?  the leader talks first?  the leader enforces rules of collegiality and respect throughout the conversation?  Interesting experimental possibilities abound.   

 Here’s a picture of Knight’s Ethics, with underscoring by a famous philosopher, John Rawls.