Review of Promising New Book: "Reckoning with Markets: Moral Reflection in Economics"

James Halteman and Edd Noell, Reckoning with Markets: Moral Reflection in Economics. New York: Oxford University Press, 2012. xvi + 218 pp. $35 (hardcover), ISBN: 978-0-19-976370-2.

Review published by EH.Net (July 2012) [Copyright]

Reviewed for EH.Net by J. Daniel Hammond, Department of Economics, Wake Forest University.

“In chapter 4 we come to “Adam Smith and the Prospects for Moral Reflection in Enlightenment Thinking.” This is the turning point in the story. Although the chapter title is without a question mark, I take it to be something of a question, for the authors understand Smith as conflicted. This conflict is not the “Adam Smith problem,” i.e., reconciling the moral philosopher of The Theory of Moral Sentiments with the economist of The Wealth of Nations, but rather the conflict between the natural law of Smith’s teacher Francis Hutcheson and the skepticism of his friend David Hume. The chapter gives more attention to Theory of Moral Sentiments than to Wealth of Nations. Halteman and Noell see Smith as a transitional figure between the ancient and medieval vision of the natural world and human life fraught with meaning and purpose and the mechanistic vision of modern science. Smith sought to maintain a concern with the virtues and moral life, but to do so largely outside the framework of Christian doctrine, relying instead on Stoic philosophy. In this manner Smith was typical of the Enlightenment desire to strip Christian doctrine away from classical Greek and Roman philosophy, discarding the doctrine and retaining the philosophy, thus undoing much of what the Scholastics had done.”….

In chapter 5, “The Secularization of Political Economy,” we encounter other classical and early neo-classical economists. Some, unlike Smith, had no moral philosophy counterpart for their economics. They tended to perceive the economy as naturalistic and deterministic. In Marx’s scientific materialism, as with Bentham, Mill, and Jevons’s utilitarianism, we encounter new types of moral reflection but on the whole less of it than with the Scholastics and Smith….

The authors are moderately optimistic about the prospects for moral reflection in some of the newer research programs discussed in chapter 8 such as the New Institutionalism and economic psychology. And on the whole their reading of Adam Smith is positive with respect to the potential for moderns to use Smith as a source for reflection on morals and markets. I am afraid that I do not fully share their optimism. My reading of their historical survey is that there has been a longer and steeper decline in moral reflection in economics than they detect. The decline may have begun with Adam Smith. It appears to me that a substantial portion of what they present as moral reflection in economics from Smith on is not in any deep sense moral reflection. Moreover, the new research programs in which they find potential for moral reflection may depart from rational choice methods, but they do not escape the bonds of value-free science. For example work on the economics of cooperation and economic psychology may account for the fact that people make decisions that are morally constrained. But this is not the same as reflection and evaluation of the moral standards themselves. Neuroeconomics and evolutionary psychology are materialistically reductionist, hardly rich soil for moral reflection. The seeds of materialistic reductionism can be seen in Adam Smith. Halteman and Noell interpret Smith as “downplaying anything that looks like religious moral restraint” on behavior (p. 58). Regarding what Smith considered the springs of human behavior they quote Joseph Cropsey. "[N]ature provides man with imperfect perceptions of the tangible world, with the inevitable result that he can reason only imperfectly concerning the nature of things or what they really are. The faculty of reason leans upon an aid which was prepared by nature to assist not reason but appetite, specifically the appetite for life as such; and as a result, useful knowledge but not real knowledge is the most that man can aspire to" (p. 59).

The view here is that behavior is motivated by the appetites and passions. Moral restraint is provided by three behavior screens: sympathy, the impartial spectator, and the all-seeing judge. Smith sees sympathy as not being rational, but built-in and involuntary. The back-stop for sympathy is the impartial spectator. This ability to step outside of oneself into an impartial and well-informed spectator is something humans have as part of their nature, but Smith is agnostic about whether the spectator is real or imagined. The third screen, the all-seeing judge, is the highest. There is mention by Smith of the common belief in an afterlife, and therefore in eternal happiness or damnation. But the important matter is not the veracity of this belief, but its effects on behavior. That is, Christian theism contributes to the common good, whether the Christian God exists or not. Moreover, in place of Christian doctrine Smith drew on Stoic pantheism. Halteman and Noell summarize the grounds of Smith’s moral philosophy thusly:

"Smith’s ability to connect the developmental organic qualities of the Stoic view of the world with the mechanistic ordered approach of the eighteenth-century Enlightenment era provided a broad base on which he built his views. The notion of moral progress in Stoicism, when blended with the Enlightenment ideas of moral precepts, led Smith to his three-level approach to the moral socializing of behavior. The ability to exercise sympathy and appropriate the impartial spectator and, if need be, the final judge of our conduct can be seen as a marriage of Stoic moral development and the secular virtue concepts of David Hume" (pp. 74-75).

What is missing from here on through the utilitarians, behaviorists, to the economic psychologists and neuroeconomists, and the other human studies in the modern academy? In two words: Imago Dei. If not created in the image of God, man is left as nothing more than a clever animal. Clever animals do not engage in moral reflection.

J. Daniel Hammond is Hultquist Family Professor, Department of Economics, Wake Forest University (hammond@wfu.edu). He is coeditor with Steven G. Medema and John D. Singleton of Chicago Price Theory, Edward Elgar Publishing, forthcoming.

Comment

This review and the book reviewed are timely contributions to an emerging new debate on morality and markets, albeit in tune with the long-existing debate that occurred outside the domain of economic theory, as it turned from political economy to ‘scientism’ in the 1870s, under the ambitious spell of the pursuit of mathematical abstraction.

As mathematisation progressed towards the full-blown neoclassical world, divorced from the reality of how market processes operated, the discipline lost its relevance.  Scholars looked to predicting the future without understanding the past; reversing Adam Smith’s approach of understanding how the present is a consequence of the past, and the future is unknowable.