===================== HES POSTING ===================
[NOTE: The following messages were originally posted on RESECON in
response to the original posting regarding self-interest. Michael L.
Robison <[log in to unmask], who forwarded the original message to HES,
also forwarded these responses. I have edited them (with Michael's
permission) to remove extraneous aspects of the original messages, and to
remove messages with little relevance to history of economics. A
line of plus signs divides the various messages. Those who have kept up
with the various recent coversation threads on HES will see several
overlaping issues emerge. -- RBE]
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[25 August]
(Robert Davis)
In addition to looking at Boulding's writings on the grants economy (C.
Howe's suggestion) you should look at Jane Jacob's Systems of Survival"
published a few years ago. Jacobs and Boulding deal with the same
subject: how we manage to allocate resources outside the market. In
Jacobs we have two systems or "moral syndromes" for managing to get what
we want. The market falls under the "commercial moral syndrome" and
nonmarket activities fall under the "guardian moral syndrome." Feudalism,
military dictatorships, much government activity fall under the guardian
syndrome. I much prefer to think in Jacobs' terms on issues of morality,
altruism, selfish individualism. It helps to start with the premise that
commercial or market activity is based on a system of moral values and
proceed to discover the rules of that moral system. To a very great
extent I think it is incumbent upon economists to understand and teach the
moral basis of the economic system. After all, Adam Smith was proudest of
his The Theory of Moral Sentiments.
Robert K. Davis
Institute of Behavioral Science
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[25 August or later]
(Michael Travis)
Robert - Good suggestions and I agree with practically everything
you've said, particularly that Smith was most proud of his work in "Moral
Sentiments" as opposed to "Wealth of Nations." However, I have a few
questions whose purpose is to either clarify or probe deeper.
Specifically, are the moral values upon which the market system is
based, and the rules which govern activity therein, immutable over time?
Under the right circumstances, is it not possible for these values and/or
rules to change? Second, and relatedly, do we teach the moral basis of
the system as that which we believe it originally was, that which it is,
or both? And does that necessarily mean that we teach that which is as
that which should be? My answer to the first question would be both,
which impresses upon us the job of explaining how and why it has changed
(assuming it has). My answer to the second is a definitive nay! . . .
In my mind, the moral system precedes (should?) the political and
economic, though it did so more in the past than in the present. That is,
the moral system served as the starting point for the system as a whole,
much like how the so-called "initial" distribution of rights and resources
functions within neoclassical economics. In Smith's time, moral values
and the distribution of rights/resources were in general congruous, or at
least I believe he thought so. Smith could have never dreamt in his worst
nightmares of the corporate system we now have in place. As time has gone
by, the political and particularly the economic components of the system
have appropriated the high ground once held by the moral component. That
is, the economic and political powers that be have altered (or at least
continue in the attempt to alter) the system of moral values and the rules
which govern behavior (i.e. that which is and is not acceptable). Once
you defeat your market opponents, you take on your non-market opponents.
And I fear that economists, particularly of the NC persuasion,
have abetted the criminals. Why? Mainly because of the issues discussed
in the recent postings. If you continue to teach people that they always
behave in their self-interest, and that such behavior is perfectly
acceptable because "that's just the way people are," they're eventually
going to believe you and act accordingly. "Is" becomes equated with
"should." And if one follows the example of those like Becker,
practically every action can be deemed economic in nature, whether it be
the desire to have children, to play music, or to engage in the use of
drugs.
The situation is at its worst when the "narrow" version of
self-interest is being taught (i.e. that which does not distinguish
self-interest from selfishness). But even when the broader version is
taught, it still boils down to the notion that people will only do that
which makes them better off (e.g. they give money to charities because it
makes them feel better). And of course, the notion that society is
necessarily better off when economic welfare (in the various, biased ways
it is measured - like GDP/GNP) is improved fits right in with this. It
severely agitates me that numerous economists refuse to admit to the
moral/normative aspect of their work and take responsibility for it.
Personally, I have no problem admitting to the fact that I will not hand
out policy advice when the goal of the policy runs contrary to my basic
moral values. . . .
Anyway, my main point is this. If you find that the system of
moral values and rules which constrain your behavior does not enhance your
welfare, will you not (in accordance with self-interest) attempt to alter
those values and rules if you have the ability to do so? Unless there
exists some moral meta-rule which forbids attacks on the existing moral
system and everyone believes in it (and I don't believe there is, much as
I might like to), then the possibility of such behavior must be admitted
to. Major corporations certainly have the means politically and
economically and, at the same time, lack a single conscience (if they can
be said to have a conscience at all) that might obey such a moral
meta-rule even if it existed. Thus, the question is this. If the moral
system is not in line with the political/economic system, which will
change to make them consistent with each other (i.e. put them into
equilibrium, if one insists on such terminology)? Given that economics is
the religion of the market system (and economists the priests), I think
the answer is obvious. What do you think?
Dr. Michael D. Travis
Research Economist, JIMAR
University of Hawaii-Manoa
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[August 13]
(Joy Hecht)
Graham Marshall, in his follow-up posting about altruism, said:
> If ... we do acknowledge that a significant proportion of people have
> altruistic motives (or at least that there is potential to develop such
> motives), do we not also have to acknowledge that the 'Invisible Hand'
> alone will not yield Pareto-optimality? And therefore that - in instances
> where there is real potential to appeal to altruistic sentiments - our
> policy advice based on existing precepts of welfare economics will get us
> significantly less close to Pareto-optimality than a normative theory
> accounting for altruistic motives?
>
> To what extent is this blind-spot of mainsteam economics
> the result of its culture of tending to think the best of markets and the
> worst of government interventions? And its general disregard, until
> recently at least, of the longer-run influence of institutions, including
> social norms, on behaviour?
Excuse me if the question is naive, but isn't this precisely why there is
such a subject as environmental or natural resource economics? The
invisible hand, or the model of perfect competition, will give
Pareto-optimal outcomes if the underlying assumptions are correct. That
is, everything of value is marketed, everyone has perfect information,
all markets are perfectly competitive, and so on. But in fact, as
everyone is well aware, those assumptions are incorrect in the real
world. Externalities are not captured in perfectly competitively markets,
nor is the satisfaction that most reasonable human beings get out of the
well-being of others.
So we call for public sector interventions to try to "artificially"
change the "natural" rules of the game - i.e. correct market
imperfections - so that we can make the imperfect world behave as much as
possible like a perfect market, and then all resources -not only those
"naturally" allocated through markets - will be allocated efficiently.
The problem is that those public sector interventions are clumsy and
inefficient, and often we really don't know how to design them. For some
externalities it's theoretically not so difficult - e.g. setting
pollutant emission charges at a level that matches the costs they impose.
But for others - say, internalizing the costs of loss of biodiversity -
it isn't even theoretically clear how to make markets work well, much
less practically clear how to implement such schemes. So we keep using
the model of perfect competition to describe the world, because it is
simple and elegant. I think some people believe that, despite its
obvious flaws, the model of perfect competition is still a sufficiently
good approximation of the real world that we can use it to make policy
decisions. Other people really don't believe that the model is adequate,
so they work on developing much more complex and less elegant models to
describe reality. But because of the complexity of this effort, the
difficulty of designing simple interventions that really solve the
problems, and the politics of enacting them, their policy solutions are
much more difficult to implement than those which rely only on the market
with out a government role.
I wouldn't call this a tendency to think the worst of public
interventions. I distinctly recall, back when I studied public finance,
that my definitely mainstream professors were quite upfront about the
situations in which markets fail and public intervention is needed -
either to try to make the market work better (internalizing
externalities) or to correct unacceptable social outcomes of letting the
market dominate (providing merit goods). Has this line of teaching been
eliminated from the field of economics since the 1970s? I hope not, I've
been using it to justify my work ever since then!
Dr. Joy E. Hecht
Global
Coordinator
Green Accounting Initiative IUCN/US
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