Monday, March 29, 2010

High Quality Letter in the FT

Raymond S. Franklin,
Queens College,
City University of New York writes to the Financial Times (29 March) HERE

"Self-interest motive has won the war"

“There has been a running debate over the years about the relationship between Adam Smith's Moral Sentiments and his Wealth of Nations , the former published before the latter. The debate has been identified as the “Smith Problem”. My conclusion related to this debate – empathy derived from Moral Sentiments versus self-interest derived from the Wealth of Nations – is as follows: Pure empathy, the ability to identify with the “other” – even at the expense of self – is rooted in family, friendship and community, that is, in the social sphere that is outside the commodification of relations that define the market. The economy, cut loose from the social and moral sphere, involves individuals producing, buying and selling for material gain without seeking to imagine the consequences of the individual’s self-interested actions. Such actions may end up being virtuous to the whole society, but the virtue was unintended.

It is possible to hope that the two spheres of Smith, the moral (empathic) and economic (self-interest driven) could co-exist in some form of equilibrium. But, in my view, this was never demonstrated adequately and constitutes the “Smith Problem”.
Jumping forward to the present, it is clear in my judgment that the economic self-interest motive, dominant in the economic sphere of life, won the war. The institutions of the market have overwhelmed and penetrated the social spheres of life. Even the nuclear family, via, is viewed as a production unit with a division of labour and implicit prices in the way husbands, wives and children relate to each other.

Although I wish Mr Rifkin success, the idea of establishing an “empathic civilisation” at this juncture in history is singularly utopian”.

Raymond Franklin’s short letter is of remarkably high quality. The separation of the social from the economic sphere was well stated elsewhere by Karl Polanyi (1944: The Great Transformation), who rooted the separation in ‘capitalism’ and ‘markets’.

Smith did not separate them in this manner. In both sectors (in so far as for the sake of argument, I accept this distinction) the immediate awareness of individuals of others follows a similar pattern. We are closest to our immediate household kin (‘family, friendship and community’ – though Smith put it as family, friends and acquaintances, and the rest as strangers), whereas in markets we are directly involved in direct transactions with sellers/buyers and then with untold numbers of anonymous people in demand-and-supply linked chains. In both cases, we are dependent in many ways with the anonymous strangers, whom we know not, nor need to do so, and because of society we walk amidst strangers without flinching.

Franklin asserts that our social relationships are “outside the commodification of relations that define the market” (a Polanyi-type expression, hinting at a Marxist vocabulary), yet they share similar degrees of anonymity. We do not know nor need to know, from whom our daily, monthly, annual sustenance – material or emotional – comes from, yet each is equally important. Where family, friendly and acquaintances, and economic relationships break down they cause similar crises in personal circumstances.

We are sustained by normality in relationships in 'both' spheres, including the fact that in both the anonymity of distant participants is an essential (and productive) contributory factor in normal life (without it we would back in the wood-age). The market has not changed essentially the empathetic part of personal life – it has existed as long as humans lived in social groupings (in common with other primates). The elevation of the market to a separate entity is an invention of the imagination. It is not unique in history (see Morris Silver’s 1995 rebuttal of Polanyi’s thesis in ‘Economic Structures in Antiquity’).

There were anonymous ‘strangers’ even in a small tribe; more so in nearby tribes, and extremely so when unhappy events unfold from anonymous invading strangers from unknown lands, few of whom sought "to imagine the consequences of the individual’s self-interested actions’ upon those they visited with their ‘rapine and violence’.

The fact that “Nobel Prize-winning Gary Becker” advanced views about the “nuclear family”, while interesting as a scholarly exercise, does not in itself mean that the ‘market’ has in fact invaded the relationships between a husband and wife, and others.

There is no “Adam Smith problem” in English or German.

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