Thursday, July 11, 2013

Brad Delong Replies to Jeff Weintraub and Myself (with my comments)

Brad writes:
Let me first agree with Jeff and against Gavin that, to my knowledge at least, packs of canids do cooperate and they do so by establishing what Ariel Rubenstein calls a Jungle Equilibrium. They establish a dominance hierarchy, and the highest-status members eat first until they are full, with the lowest-status members facing the options of (a) challenging in order to move up in the hierarchy and so eat sooner, (b) striking out on their own and hoping to find another pack or survive alone, or (c ) hanging on and hoping not to starve. Humans do this too, and in fact extend it--this is Domination, Weber's Herrschaft, Parsons's Imperative Coordination.
But humans also engage in gift-exchange networks, with pure charity--transfer of resources in exchange for recognition of status--at one end of the spectrum and with arms'-length market exchange at the other.
And, Adam Smith would say, humans also feel each other's pain: we do engage in pure acts of benevolence.
And, Adam Smith would say, humans are also educated to want to become the people they want to be--to please the Impartial Spectator in their breasts. On this, the appropriate passage comes from the Theory of Moral Sentiments:
“Let us suppose that the great empire of China, with all its myriads of inhabitants, was suddenly swallowed up by an earthquake, and let us consider how a man of humanity in Europe, who had no sort of connexion with that part of the world, would be affected upon receiving intelligence of this dreadful calamity. He would, I imagine, first of all, express very strongly his sorrow for the misfortune of that unhappy people, he would make many melancholy reflections upon the precariousness of human life, and the vanity of all the labours of man, which could thus be annihilated in a moment. He would too, perhaps, if he was a man of speculation, enter into many reasonings concerning the effects which this disaster might produce upon the commerce of Europe, and the trade and business of the world in general.
And when all this fine philosophy was over, when all these humane sentiments had been once fairly expressed, he would pursue his business or his pleasure, take his repose or his diversion, with the same ease and tranquillity, as if no such accident had happened.
The most frivolous disaster which could befal himself would occasion a more real disturbance. If he was to lose his little finger to-morrow, he would not sleep to-night; but, provided he never saw them, he will snore with the most profound security over the ruin of a hundred millions of his brethren, and the destruction of that immense multitude seems plainly an object less interesting to him, than this paltry misfortune of his own.
To prevent, therefore, this paltry misfortune to himself, would a man of humanity be willing to sacrifice the lives of a hundred millions of his brethren, provided he had never seen them? Human nature startles with horror at the thought, 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” [TMS III.3.4: 136-7].
In Books I and II of WN, Smith definitely does write as if self-interest mediated by exchange is at the foundation of the social order. But Adam Smith the moral philosopher (as opposed to Adam Smith the proto-economist attempting to disrupt the 18th century discipline of "political oeconomy") does not believe that. And it is not true.
As I wrote back in 2012, your average economist is not a "Hobbesian" believing that humans are motivated by self-interest, but rather a "Lockeian", respecting others and their spheres of autonomy and eager to enter into reciprocal gift-exchange relationships, both one-offs mediated by cash alone and longer-run ones as well:
First, your standard economist is not "Hobbesian". He does not enter a butcher's shop only when armed cap-a-pie and only with armed guards, fearing--as a Hobbesian would--that the butcher will not sell him meat for money but will rather:
*knock him unconscious, * take his money, * slaughter him, * smoke him, and * sell him as long pig.
A Hobbesian does not buy and sell goods and services in mutually-beneficial Pareto-improving exchange relationships. A Hobbesian finds the biggest bad-ass in the neighborhood, and swears liege homage to that bad-ass in return for that bad-ass's promising not to kill him.
Your standard economist is, rather, a "Lockeian"--presumes that there is an underlying order of property and ownership that is largely self-enforcing, that requires only a "night watchman" to keep it stable and secure.
Now it is true that your standard economist is a largely-unreflective Lockeian: does not inquire why one trades rather than takes, affects the tough-guy pose that it is only the repeated-game nature of economic interactions that keep us from always winding up in the bad cell of the prisoner's dilemma, and adopts the reductio that humans are narrowly self-interested only in material acquisition (in order to strengthen the case that the social apparatus of voluntary market exchange produces good outcomes--to make the point that even private vices produce public benefits if they are constrained by the market). But that the standard economist is a largely-unreflective Lockeian does not mean that they are a Hobbesian.
When it comes to what the standard economist thinks, I think that the example of Hal Varian cuts the other way than Cosma thinks it does--or at least cuts ambiguously. Varian's graduate micro textbook is the formalism: people don't just take stuff because taking stuff is not in the strategy space. Varian's lectures and seminars are considerably more nuanced. Varian and Shapiro's Information Rules is intended for a business-school audience, and the object is to create barriers to entry so that your firm can profit. When he teaches not in the business school but in the economics department, Hal says, he still assigns Information Rules in his antitrust, regulation, and industrial organization courses, but--in the immortal words of Frederick von Frankenstein, he "changes plus to minus, and minus to plus": not the creation but the destruction of barriers to entry (as long as appropriate incentives are left for innovation) is the object.
Second, I do agree that I do--and other economic historians do, and Bowles and Gintis do, and McCloskey and Blaug do, and a bunch of the rest of us do--something somewhat different than what your standard economist does. But I view what I do as making the preconscious or the unconscious in "standard economics" conscious. And I would appeal not to the formal theory of the graduate textbooks, but to the actual practice of the economists I know as the test of what "standard economics" is.
It is true that back in my senior year of college it seemed to me that I was too shy to be anything other than a professor and should become one. I looked around, and discovered that the people applying for jobs as assistant professors of history and social studies were 40-year-olds who had written two books while the people applying for jobs as assistant professors of economics and social studies were 26-year-olds who had one half-written article. So it seemed a no-brainer to me to go for a Ph.D. in economics. But the fact that I made that decision demonstrates that I am a real economist after all: I regarded (and regard) responsiveness to market forces as a moral virtue, while if I were really a historian in disguise I would regard responsiveness to market forces as a moral vice.
Third, it seems to me that your standard political scientist's conception of the standard economist as "Hobbesian" is an exercise not in interpretive understanding but rather in disciplinary line-drawing--and, perhaps, attempted disciplinary imperialism: if the core of economics can be defined to be as small as possible, that leaves more space for political scientists to play.
Remember: there are real Hobbesians about. They are the international-relations realists in political science departments--not the economists in economics departments.
J. Bradford DeLong on July 10,  2013 
Mainly in response to Brad but also slightly to Jeff (I received from Jeff a private message that he is travelling en route to a family vacation and will respond publicly to my criticism of his contribution later).
First, I should clear up the “pack-hunting” issue common to both Brad and Jeff.  There is no real fundamental difference between us; I just think that Brad And Jeff leave something out. I wrote:
The essence of the pack chase is mutual co-operation, but it is not intentional. If a dog sees a desirable target it will set off and chase it; others nearby see the target, or are alerted to it by dogs joining a chase; they too join the chase. A melee commences as soon as one dog catches the target. The co-operation is limited to the chase; then its down to every dog for itself.”
For deception, Smith would have had to deliberately know differently and suppress the truth because if he knew it so did others. I suggested that a) he did not have the fuller information about primates now known widely that we have today (dominance hierarchies, primate behaviours, pack hunting in the wild, etc.,), and b) he did comment on reports of how packs of monkeys raiding an orchard for fruit in concert, and then falling out over the non-peaceful division of the spoils, with some getting killed in the melee. 
Whereas hunting with dogs in fox hunts was more of an English than a Scottish experience, he may have witnessed them in his time at Oxford, where the concert of the chase ends in the no-concert of melee at the kill.  Today, those hunting with hounds and the disorder of final hunt melees are shown regularly on TV (hunting foxes with dogs is now illegal).
Brad reminds us of modern knowledge (not necessarily known in systematic detail to Smith), to which Brad writes ‘”to my knowledge at least”,  “packs of canids do cooperate and they do so by establishing what Ariel Rubenstein calls a Jungle Equilibrium. They establish a dominance hierarchy, and the highest-status members eat first until they are full, with the lowest-status members facing the options of (a) challenging in order to move up in the hierarchy and so eat sooner, (b) striking out on their own and hoping to find another pack or survive alone, or (c ) hanging on and hoping not to starve. Humans do this too, and in fact extend it--this is Domination, Weber's Herrschaft, Parsons's Imperative Coordination.”  This is an example of Brad’s (and Jeff’s) impressive erudition, but misses Smith’s point that the behaviour of domesticated dogs around their human masters is largely “an appeal to their "benevolence" by begging and "fawning”. 
Brad asks rhetorically: “Is that second option the only way dogs ever do it?” To which, within the example that Smith gives and, having excluded the possibility that they “bargain” like or with humans, and because they do not bargain with each other, it is the only option he can give.  Nobody surely is deceived.
Brad and Jeff draw upon some long periods of research in the 20th century in which more details have been observed and systemized into coherent accounts, beyond, I submit, Smith’s knowledge.
But even here, if Smith’s, and everybody else’s knowledge at the time was limited, nobody was deceived.  Smith visited no ‘jungles’ to observe their ‘equilibria’ nor read about it a century or more later in ‘Weber’s Herrschaft’ or ‘Parson’s Imperative Co-ordination’. 
On this basis, I object to Jeff’s charge of Smith’s ‘conscious deception’, though obviously I could accept that he was “wrong”, especially if he was writing (and teaching) his students a comprehensive and fully exhaustive account of all the possible means available to humans to ‘co-ordinate’ their behaviours and the resulting actions.  He did not
In this respect, I return to the example of canids hunting in packs.  I think Brad is looking at melees of dogs, primates, and even human in behaviour sets as somewhat too neat and tidy for the real world.  He quotes Ariel Rubenstein on a “Jungle Equilibrium:
“They establish a dominance hierarchy, and the highest-status members eat first until they are full, with the lowest-status members facing the options of (a) challenging in order to move up in the hierarchy and so eat sooner, (b) striking out on their own and hoping to find another pack or survive alone, or (c ) hanging on and hoping not to starve.”
If Brad can quote from studies a couple of centuries later, I feel able to suggest additional evidence of what also happens. (I did not discuss the literature on “dominance hierarchies”, not considering it relevant to Smith’s alleged “deception” in the 18th century).
Goodall, and others, discuss primate behaviours within their dominance hierarchies in the wild.   When a chimpanzee pack is aroused, of course the dominant alpha males grab the main shares, but there is no question of the middle or lowest ranks awaiting until the alphas have eaten their fill, like well behaved, polite subordinates. They are roughly forced away by alpha violence. Suborinates too are excited by the kill and try to sneak snatches of the kill, including blood drops where they can.  There is much pushing and shoving from injuries inflicted and sustained by the alphas hitting out.  Dominance lasts as long as its behaviours succeed in intimidating the submission of the lower-ranks.  Females in estrus try sexual temptation by presenting themselves to alpha males and to any other males that snatch meat dropped from the melee.  Some ambitious males take advantage of the melee to take 12 second opportunities for sex, including I might add using deception too.  In short, it is an opportunity for subordinate disorder, not orderly queuing. 
Humans in the most disciplined armies could sack a city and prudent officers would leave them to go with their blood-lust until order was restored by officers using punitive field punishments – mainly random executions of rioters.
But Smith’s focus was on how domesticated dogs, not undomesticated wild animals (such as Scottish Wild Cats), persuade their masters to feed them. Sturdy Beggars likewise use similar methods appealing to benevolence to get food and old cast-off clothes from regular citizens.  The King used various forms of compulsory taxation to fill his treasuries – still do, as immoderate Libertarians remind us.
In the cases that Smith considered of the viable alternatives in a two-options world, exchange by bargaining in WN, and exchange by persuasion in TMS, was presented by Adam Smith without intentional deception (the only form that meets the meaning of deception).
Lastly, I would suggest that Brad’s statement that
“Smith definitely does write as if self-interest mediated by exchange is at the foundation of the social order” should be carefully unpicked because many modern economists read that assertion in the belief that “self-interest” is pure and unrelenting in it application.  I have commented on Lost Legacy many times that such an extreme, even brutal, position does not represent Smith’s more nuanced meaning. In so far as Brad wisely differentiates between what he labels the "Hobbesian" versus the “Lockean” meanings of self-interest, I think I agree with Brad.  But I reserve my position until I understand the significance of the implications he draws from this. 
[I ceased lecturing in economic theory (micro-and macro) in Strathclyde University in Glasgow 1987 and moved to Heriot-Watt University in Edinburgh, somewhat disillusioned with neo-classical economics (the Max U model), and gravitated from my research professorship in defence finance at Heriot-Watt to the foundation of Edinburgh Business School in 1995, where I taught Negotiation to MBA students, using my development of Adam Smith’s conditional bargaining insights until 2005 when I retired and now research on Adam Smith's Work and life.  Hence, my interest in these aspects of his work, traceable in both TMS and WN, though ignored by most modern economists using coercion-conflict models (Zeuthen, Hicks, Pen, etc.,) because its two-dimensional mindset fits Max U thinking, though not the experience of the real world].


Blogger Unknown said...

I don't know if I agree that Hobbes can be written off so completely within economic thought -

If the various human relationships stylized by Smith as exchange, charity, and command-and-conrol, can be understood as standing on a sliding scale (and I do think there is evidence for this in Smith's text - e.g., his reference to the collusion of guilds, differential bargaining power between entrepreneurs and workers, corporations, etc., all of which incorporate elements of command-and-control within exchange relationships), then economics then begins to incorporate elements of Hobbes.

I.e., people use the power they find to hand to get what they want. Sometimes all the "power" they have is to convince another an exchange is in their self interest. Sometimes...more is available. Within organized political bodies (unlike Hobbes' state of nature) robbery is not *always* the most rational option. Nevertheless, human beings, with their self interest being what it is, will seek "power after power" using the tools available, making a rational choice about what kind of power can best be used to accomplish their aims. In other words -- if we can understand "power" as including, among other things, our ability to acquire an item that someone else wants and to convince them that exchange is beneficial, then Hobbes slips in quite easily in situations of unequal bargaining power.

I don't think that non (physically) violent exchange enters a realm different from what Hobbes would anticipate. Indeed, Hobbes from the very beginning believed that man was a somewhat rational creature that (and please forgive me the overly simplified, rough terminology) cost-benefit analysis in order to achieve their ends. Indeed, Hobbes postulated the formation of a state based on rationality - the absolute monarch was the product of a kind of cost-benefit analysis: we get more from agreeing to a police state than from battling it out among ourselves. So, there is no reason to expect that, under Hobbes' line of thinking, we wouldn't make the same kind of calculation on a more "micro" scale.

The very problem now with economics is that they fail to recognize just how very Hobbesian they are. If they called a duck a duck, they would recognize that certain "anticompetitive" behavior (such as, for example, the kind vindicated by Schumpeter, i.e., price fixing, long term contracts, buying up of patents, etc) is not just a manifestation of Smithian exchange, but also mixed with social and market power. That is Hobbes.

To say it is not Hobbes, I suspect, may work to prevent an honest discussion about what our world really looks like and whether it is something we really want. We start thinking in terms that presume a background of equal exchange, autonomy, and liberty.

4:45 pm  
Blogger Gavin Kennedy said...

Thank you for your remarks which I read with interest.
However, I said, almost en passant while discussing the issues raised by Brad Delong and Jeff Weintraub:
“In so far as Brad wisely differentiates between what he labels the "Hobbesian" versus the “Lockean” meanings of self-interest, I think I agree with Brad. But I reserve my position until I understand the significance of the implications he draws from this. “
My position stands until Brad, should he choose to do so, responds and elaborates their significance. However, you have raised some issues, common in post-graduate philosophy tutorials and also occasionally at history of economic thought conferences.
I find both sides of the argument between Hobbes and Locke less than satisfactory, though I am less convinced that Hobbes was (broadly) right than I am that Locke was not closer to the truth.
The only central thought running through Smith’s conjectures about the past history of humans was that of the “propensity to truck, barter, and exchange”, accepting that he was too parochial when justifying his extending back into pre-history his selection of the “truck and barter” part along with the more relevant propensity to “exchange” in regard of humans. Smith was a prisoner of his 18th-century view of human society.
Now exchange is a far broader phenomenon than “trade”. It plays a role in his lectures on the origin of language (in both his original article in 1761 and in his Lectures On Rhetoric and Belles Lettres”, 1762), and, of course, in his conjectures about the deep past of the division of labour.
His Lectures on jurisprudence (1762-3) provide insights into his ideas about the early formation of government (for the defence of property ‘against the poor’, missing in my view the even more significant defence of property against other rich and conspiring relatives), the distinctive differences between either Hobbes or Locke.
In this regard, I consider wemay not agree on the issues you raise so eloquently.

8:55 am  

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