Adam Smith Lives!

Vanity at Economic Principals

David Warsh has a wonderful commentary on The "Vanity of the Philosopher" at Economic Principals.  He ends the review with important remarks about homogeneity vs. difference: 

Peart and Levy are perhaps a little optimistic about the capacity of the doctrine of equal competence to survive without modification in the twenty-first century. Previous attacks on consumer sovereignty were fought off handily enough -- Maurice Dobb by Abba Lerner, John Kenneth Galbraith by Hayek. But much more powerful forces are being marshaled for an assault from within technical economics -- the analysis of the effects of monopolistic competition, the insights of behavioral economics and evolutionary psychology, not to mention the discoveries of molecular biology. Cavalier assumptions about race and hierarchy are being supplanted by more narrowly-framed hypotheses about cognitive capacity.

The argument is terrifically important and it may be that there will eventually be a time when the evidence for difference is unequivocal and carefully framed.  For now, as Warsh rightly points out, Peart and Levy rely on Robbins' 1938 as if equality position:

I have always felt that, as a first approximation in handling questions relating to the lives and actions of larges masses of people, the approach which counts one man as one, and, on that assumption, asks which way lies the greatest happiness, is less likely to lead one astray than any of the absolute systems. I do not believe, and I never have believed, that in fact men are necessarily equal or should always be judged as such.  But I do believe that, in most cases, political calculations which do not treat them as if they were equal are morally revolting.

Every Man a Knave? The Mill-Macaulay Debate

This week end I joined a group of economists, philosophers and political scientist interested in constitutional political economy.  Though I know many 19th century texts, I was unfamiliar with some of the readings for this one from the Edinburgh Review:  a series of papers by James Mill (father of John Stuart) and T. B. Macaulay.  Though Mill and Macaulay were allies on some issues (both opposed slavery) and James Mill apparently recommended Macaulay for a position at the India Company, Macaulay tore into Mill's Theory of Government. Mill, Macaulay argued, chose "to look only at one-half of human nature" [the knavish half], and reasoned "on the motives which impel men to oppress and despoil others, as if they were the only motives by which men could possibly be influenced."  This matters for constitutional political economy because, if we are all knaves always, we may wish to design the constitutional structure accordingly.  Mill had, however, failed to take any step towards checks and balances, arguing instead that the interests of the governed and governing would be best aligned if the franchise were extended (but not to women), and election terms were brief.  Consensus has it that Macaulay won the debate hands down. 

Some photos at the conference:  (the conversation generally takes place before, during and after the sessions!)

Mill and the Ladies, or a historical look at the "feminist critique"

One of the liveliest debates I've seen continues to rage on the HES list.  For the most part, the focus is "Feminist critique" -- it began as a result of a post about anniversaries in which Becker's Economics of the Family was mentioned.  The issue, initially, was whether and how Becker's innovations then generated the Feminist Critique. But it's since moved on to encompass just what, precisely, the critique entails, as well such as less apparently related questions as whether economics is by-and-large characterized by utilitarian presumptions. 

Here's a post by Sumitra Shah, who began the "thorny thread":

Having started this thorny thread, I would like to send one last post on the subject: Becker did not design his economics for men or women. The criticism is not that it is ideological banter. He rigorously developed it based on the concept of the neoclassical economic agent, who is devoid of any socio-cultural characteristics. Hence his work misses the important dimensions that must be examined to come up with a meaningful theory of an institution such as the family. And he is an important economist, so the consequences of his work do matter. For feminist economists, the economic status of women is always a pressing concern; I am simply awed by their commitment.

Here's part of a posting by Nicholas J. Theocarakis: 

What is perhaps the most important aspect of the Beckerian project is the claim that the most important part of the different treatment of females in our economy and society is the result of rational decisions and that social norms and discriminatory perceptions do not matter.  ...  If social norms do not matter it is the objective characteristics of sex (e.g., fertility) that bring about different outcomes. Considerations of gender, i.e., the social construction of sex, according to this view, are irrelevant.  But perceptions of traits as "feminine" or "masculine" *are* important and this affects the acquisition of productivity-related traits during socialization and the assessment of individual productivity in the workplace.

I don't wish to comment on feminist economics.  Nor have I read the entire set of posts carefully.  You can find them here. But I do want to add that there is a broader historical dimension that has yet to be considered.  The treatment of "masculinity" and "feminity" -- from which Becker and others abstracted in this century -- has a rather dark side.  In the nineteenth century, political economists of such stature as J. S. Mill were "diminished" intellectually, by the claim that they were overly sentimental and "feminine", and therefore less-than-fully rational.  Their ideas were consequently also diminished in stature.  And when Mill defended the right of women to vote, he was criticized.  Two examples from the press are pasted in below. 

The point that sometimes gets lost as we think about cultural determinants of this and that is that, historically, the idea of difference was about "nature".  And, as David Levy and I have argued in The "Vanity of the Philosopher", "natural difference", historically, has meant "inferiority" (of gender, race, religion), with the awful policy results that followed -- paternalistic looking-after and denial of suffrage, direction, eugenics, slavery.  The return to homogeneity in this century denied these possibilities.

 

I used the Logic cartoon, by the way, for last year's Summer Institute t-shirt!  Am taking suggestions for this year's...!

I should add, as well, that a Judy cartoon -- reproduced in Mill's CW -- has Mill as a lady.  I don't have a scan of that one but will post it when I do.

Smith's Man of System

A recent post at a Canadian Econoview suggests that policy makers may sometimes consider their "their ethical standards are far superior to those of the rest of us" and invokes Adam Smith's "man of system".  You can read it here.  At Adam Smith's Lost Legacy, Gavin Kennedy has a wonderful follow up. 

One small addition.  This is the one -- perhaps the last -- heterogeneity that still underscores the economic analysis of some "experts".  Now that public choice has become somewhat mainstream, we routinely allow that policy makers are self interested like the rest of us.  But we still sometimes allow that experts are somehow more public spirited or better than the rest of us at seeing the "truth".  And it's not just specialization but rather a "superior" knowledge of what's good for the rest of us.  In the case of Econoview's post, it's the experts' claim to know (better than the people who would do the transacting) what should and shouldn't be sold at any price and then the  use of legislation to prevent exchange.  David Levy and I have called this the last "vanity of the philosopher".  We've noticed that there's no code of ethics for economists or econometricians, though statisticians have a well-developed code of ethics.  And we argue that, absent a division of labour that may give the expert access to technical details inaccessible to regular people, this vanity is no more credible than the pre-public choice idea that policy makers are to be trusted because they are more public spirited than regular folks.  We now know better when it comes to policy makers.  We should know better when it comes to "experts".      

Homogeneity in Fleeming Jenkin's Exchange Diagram

Time for another picture.  I've posted examples of how homo economicus was attacked visually.  Classical economists recognized the attacks and responded in print.  Supposing they knew of the visual attacks, racial or gendered caricatures of inferiority, was there a visual counter-response as well?  How do we show similarity visually anyway?  Our friend, Dan Hammond, asked that good question years ago when he hosted the HES annual meeting at Wake Forest University. 

Fleeming Jenkin came up with the diagram that answers Dan's question. It's from an explicit attempt to defend economists' theory of exchange from the critics, notably John Ruskin.  Here it is.  It's a drawing of barter exchange.  The participants are the same, there's no hierarchy, no one tells anyone what to consume or what to trade.  Very graceful.  David Levy and I like it so much we had Michigan use it on the cover of Vanity.

   

(From: Fleeming Jenkin, Papers, literary, scientific, &c., London, New York, Longmans, Green, and Co., 1887, volume 2, p. 150.)

Terrific, isn't it? 

Smith's little finger example -- how selfish are we?

There are competing interpretations of Smith on just about everything, including self interest and selfishness.  Though mine may still be a minority view of the earthquake passage, I'd like to revisit it.  First, here is an example of an interpretation that runs counter to mine.  In The Blank State, Steven Pinker quotes the passage from TMS, ending with the famous sentence:  "If he were to lose his little finger tomorrow, he would not sleep tonight; but provided he never saw them, he would snore with the most profound security over the ruin of a hundred million of his brethren." (Pinker, p. 288).

Pinker concludes that Smith's view is one in which our "moral sentiments" "overlie a deeper bedrock of selfishness."  Nothing to do about it; we're hard-wired to be selfish and we keep our fingers.

If Smith had stopped there, this would all be fine.  But he doesn't.  In fact, Smith goes on to make the opposite case.  While our first impulses are "sordid and selfish", we're compelled to overcome our initial sentiments, our high opinion of ourselves and disregard for others, and to sacrifice our interests to theirs.   We're led, not by sentiment or benevolence but by "reason, principle, conscience", to give up the finger. 

Here is the rest of the paragraph, following directly after the sentence above.  It's long, but I'm including it all here because it's important:

Human nature startles with horror at the thought [of not giving up the finger], and the world, in its greatest depravity and corruption, never produced such a villain as could be capable of entertaining it. But what makes this difference? When our passive feelings are almost always so sordid and so selfish, how comes it that our active principles should often be so generous and so noble? When we are always so much more deeply affected by whatever concerns ourselves, than by whatever concerns other men; what is it which prompts the generous, upon all occasions, and the mean upon many, to sacrifice their own interests to the greater interests of others? It is not the soft power of humanity, it is not that feeble spark of benevolence which Nature has lighted up in the human heart, that is thus capable of counteracting the strongest impulses of self-love. It is a stronger power, a more forcible motive, which exerts itself upon such occasions. It is reason, principle, conscience, the inhabitant of the breast, the man within, the great judge and arbiter of our conduct. It is he who, whenever we are about to act so as to affect the happiness of others, calls to us, with a voice capable of astonishing the most presumptuous of our passions, that we are but one of the multitude, in no respect better than any other in it; and that when we prefer ourselves so shamefully and so blindly to others, we become the proper objects of resentment, abhorrence, and execration. It is from him only that we learn the real littleness of ourselves, and of whatever relates to ourselves, and the natural misrepresentations of self-love can be corrected only by the eye of this impartial spectator. It is he who shows us the propriety of generosity and the deformity of injustice; the propriety of resigning the greatest interests of our own, for the yet greater interests of others, and the deformity of doing the smallest injury to another, in order to obtain the greatest benefit to ourselves. It is not the love of our neighbour, it is not the love of mankind, which upon many occasions prompts us to the practice of those divine virtues. It is a stronger love, a more powerful affection, which generally takes place upon such occasions; the love of what is honourable and noble, of the grandeur, and dignity, and superiority of our own characters.

A considerable amount of misreading is the result of stopping midway through Smith's always-subtle and often-surprising story. 

attacking economic man

Here's one example of the attacks on classical economics along the lines of difference.  In an 1866 article entitled "Race in Legislation and Political Economy", James Hunt, the owner of the Anthropological Review, wrote this about J. S. Mill:

Mr. Mill, who will not admit that the Australian, the Andaman islander, and the Hottentot labour under any inherent incapacity for attaining the highest culture of ancient Greece or modern Europe! (1866, p. 122).

Not surprising, the debate focused in large measure on the capacity to make economic and political choices (to save, to have a family, to educate oneself and one's family, to vote).

IQ, Homogeneity and Classical Economics

A new post on the IQ debate at A Canadian Econoview gets to the heart of the matter, using the wonderful passage from Smith that David Levy and I use for our book title:

Note that bit about the vanity of the philosopher. Smith called 'em like he saw 'em. And as he saw it, most of the observed differences between adults is actually the result of education and training building on small natural differences.

Difference is a matter of the specialization, luck and history.  Less well known than this Smithian perspective on natural homogeneity, is the attack and eventual demise of economic man late in the nineteenth century and well into the 20th.  Our Vanity of the Philosopher tells how social and economic thought came to be infected by notions of racial and other innate differences. 

It wasn't until after WWII that economists like von Mises, Lionel Robbins, and Stigler & Becker returned to the classical economists' argument that economic man is essentially the same.