Spinoza and the Twilight of Stoic Rationalism

This post is prompted most immediately by teaching, though it also fits in with other things I am contemplating. Spinoza’s Ethics is a continuation of the kind of Stoic virtue theory I referred to in my last post. The Stoics turned the earlier virtue theory in a direction which gave maximum emphasis to the idea of the domination of desires by the will, which was already in Platonic and Aristotelian ethics. It was that understanding which dominated Early Modern ethics, and cultural assumptions about ethics well into the 18th Century, and certainly influenced Kant at the end of the century.

So the influence of Stocism continued well after Spinoza who died in 1677. Nevertheless there was a twilight in which Spinoza looks like the last stand of Neo-Stoic Rationalism. What is emerging, at that time or soon after, will not fit in the Neo-Stoic Rationalist paradigm. The discussion of the origin of moral ideas in the sensations that we find in Hobbes, Locke and Hume does not belong in the older ethics. If we turn away from theoretical philosophical ethics to the broader cultural context, we can think about the Maxims of La Rochefoucauld in the 17th century. They had a power to shock in the 18th century, as can be seen in the reactions of David Hume and Adam Smith, even if they were themselves investigating non-moral psychological sources of morality.

What La Rochefoucal emphasises in his aphorisms is the non-moral, and egocentric, motivations behinds apparently moral actions and phrases. He emphasises the passionate aspect of human nature, its desire for passionate love, and the difficulties of achieving the kind of communication desired by love. He does a lot to set up the concerns and style of French literature from Laclos to Proust. We can go back earlier than that to two literary works where he may have had and influence, and certainly connections with their authors, The Princess de Clèves by Madame de Lafayette and The Letters of Madame de Sévigné. Of course this is an extremely abrupt way of summing of literary history, but it is as good as such an abrupt summary can be, and this is not the place for more complexity.

My point here is the contrast and congruence, between Spiniza’s Rationalist Neo-Stoic ethics and the new emphasis on the labyrinth of the passions in literature and thought. The contrast is between La Rochefoucauld and Spinoza’s denigration of emotions in relation to reason. The congruence is the labyrinth Spiniza himself recognises in which the least bad emotions have to be used against the worst emotions in order to lead individuals towards reason. There is a far far greater sense in Sponoza than in his predecessors of the complexity and interaction of the emotions, and of irrational motives. This also reflects the complex interactions of nature, even on a mechanical model, in Early Modern science and the very noticeable rise of commercial society in the 17th Century Dutch Republic, already producing treatises that anticipate aspects of Smith’s economic treatise.

Laclos’ Dangerous Liaisons and Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations compared with Spinoza: Spinoza looks like the last Rationalist Neo-Stoic. An oversimplification, but not a terrible one.

Virtue, Economy and the Self: 5 Links

My thoughts for this post came about in the most immediate sense from Will Wilkinson: a post at his blog Will Wilkinson, entitled Now Let us Praise Results-Facilitating Virtue, dated 20th November 2009. Wilkinson is an economics and public policy commentator, with a background in philosophy. He is responding to an blog post where the George Mason economist Tyler Cowen praises one of his colleagues, Robin Hanson, who responds in his own blog by arguing for the importance of praising consequences of individual actions, rather than the individual concerned. Links to all of that in Wilkinson’s post. What Wilkinson gives in reaction to all that is a beautiful little essay on character, virtue, and advantages to the economy. As he explains, ‘virtue’ as an idea in ethical though refers to the character traits which the good individual forms and which benefit society. What Wilkinson emphasises is the collective economic benefits of individuals in the society with virtue.

Since for non-philosophers ‘virtue’ amy seem like something to do with abstract moralising, it is worth explaining that ‘virtue ethics’ refer mores to a cultivation of individual excellence which serves the ‘virtuous’ individuals and society as a whole. Virtue on this account is really more to do with strength and constancy of character, rather than giving priority to the demands of external moral obligations. The Antique tradition of virtue was taken up in Medieval Christian philosophy, most notably in the thought of Thomas Aquinas; and at that point it maybe acquires a sense of moral imposition, though that is something of a brutal generalisation. That antique sense of virtue has been increasingly discussed in philosophy since the 1950s, along with an increasing recognition that it was still very present in 18th and 19th Century philosophy.

For a very handy summary of Aristotle’s ethics by a leading commentator, Roger Crisp, go this podcast posted at the Faculty of Philosophy, Oxford University. For an equally admirable summary of some later developments in Antique ethics, around Seneca and Stoicism, click here for a link to a recent podcast of am interview of Rick Benitez conducted by Alan Saunders for his PhilosophyZone radio show.

The virtue ethics tradition, as mediated by the Antique Stoics, was a major influence on Adam Smith in An Inquiry into the Nature and Causes of the Wealth of Nations, as well as in his ethical treatise, The Theory of the Moral Sentiments. For a great discussion of this click here for a pdf of Deirdre McCloskey’s paper ‘Adam Smith, the Last of the Former Virtue Ethicists’. McCloskey is a professor of economics, history, English and communications at the University of Illinois, Chicago, which gives an idea of the way that she integrates different areas of the humanities and social sciences. McCloskey points out that Smith’s philosophy and economic thought are shaped by Stoicism and theories of the virtues, and not just the virtue of prudence. She also has a very good sketch of how economists, and the culture in general, lost sight of this kind of integration until philosophers revived Antique virtue theory.

One possible fault with McCloskey’s analysis is in the title, in its suggestion that Smith was the last of the virtue theorists. This has some justification if we think of how Smith’s thought is distinguished from what was then the emergent moral school of Utilitarianism which very definitely looks at ethics from the point of view of the consequences of actions, and not quality of character. However, there is at least one major candidate amongst late 19th Century philosophers for the label of virtue ethicist, Friedrich Nietzsche. We can see his philosophy as a return from theories of external moral excellence to a theories of individual excellence. That’s a rather large question I can’t deal with here, but an excellent brief summary of why Nietzsche might be considered a virtue theorist can be found in Lester Hunt’s paper ‘The Eternal Recurrence and Nietzsche’s Theory of Virtue’, click for the pdf.

I expect to return to these issues very soon in relation to Benedict de Spinoza and Michel Foucault.

Me on Adam Smith, Wealth of Nations in LiberalVision

Primary version of this post, with visual content, at Barry Stocker's Weblog.

‘Adam Smith’s Wealth of Nations’ Liberal Vision, 10th September, 2009. A summary direct towards Smith’s relevance to liberal political thought.

Philosophical Beginnings of Early Modern Literature

Primary version of this post, with visual content, at Barry Stocker's Weblog.

If we look at the emergence of modern literature in France and Britain, we could just as much talk about its origins in works of philosophy, and moral commentary, as in the historical development of literary genres.

Does any ‘purely’ literary figure contribute more to the emergence of French literature than Montaigne, Descartes, Pascal, La Rochefoucauld, La Bruyère? A case could be put for Rabelais, but in any case we cannot talk about French literature without talking about these philosophers and moralists. In the case of la Rochefoucauld, we could even see the relations between moral reflections and literature through his private relationship with Madame de La Fayette and his friendship with Madame de Sévigné. The most significant thing is that we can see a big contribution in La Rochefoucauld’s Maxims towards literary style and towards an informal theory of the passions which establishes the themes of French literature.

Literature and philosophy seem less obviously entwined in Britain, if critics put Shakespeare in a philosophical context, they tend to bring in Montaigne. But let us consider the following.

The contribution made to English style by Francis Bacon, Thomas Hobbes, David Hume, Adam Smith and Edmund Burke.

The sense in Bacon and Hobbes the existence of the arts depends on the existence of sovereignty, law and the state.

Bacon’s use of utopian fiction in New Atlantis. Bacon’s emphasis on an orientation of the self towards the truth in nature and away from distracting idols. That seems to lead in the direction of an anti-rhetorical abstract philosophical language, but it is also the story of a dramatic struggle of the self with distraction. There is a historical and personal account of the orientation necessary for nature to reveal itself. That account includes the supremacy of law, instituted by a state.

For Hobbes, the existence of the arts depends on the existence of the covenant and the artificial man of the state. He believes in the truth of pure reasoning, but finds it necessary to resort to rhetoric to communicate his truths (as Quentin Skinner has pointed out at considerable length). The covenant and the artificial man is explain in the picture of the giant man made up of smaller people, and discussion of personation in drama and law.

In Hume, Smith and Burke we get theories of taste which incorporate permanent physiological sensation and changeable sociable agreement. Burke’s A Philosophical Inquiry into the Origin of Our Ideas of the Sublime and the Beautiful, has a rhythm governed by the moves from sensation to sociability and back again. Hume offers a theory of the mind as passions, and a theory of taste in which passions are understood as physiological and as formed by the evolution of social agreement. These ambiguities about sensation and sociability enter into Smith’s discussion of taste, of moral sentiments and his discussion of natural and non-natural order in the development of different forms of wealth (as I discussed in a post of 16th August 2009). These are ambiguities about the sentiments, how they affect each other and how they are affected by the external social and natural worlds. Al very germane to the literature of the time.

We might look at early modern British philosophy, as more than the establishment of an epistemological tradition, theories about how ideas of things relate to sensations of things and those things themselves, in which Locke on knowledge of physical is the defining discussion. There’s nothing wrong with that approach, but there is a lot to be said for considering other frames, and placing Locke himself in that frame.

The Relevance of Adam Smith

Primary version of this post, with visual content, at Barry Stocker's Weblog

I’m retuning to the issue of interpreting Adam Smith, which I referred to when posting in the Manchester Metropolitan University Workshops in Political Theory two days ago, I had hoped to post on Adam Smith yesterday. As I indicated two days ago, there was a paper on Adam Smith I found very unsatisfying. I made some comments on the paper but was only able to mention a few of the problems I found with the paper, and as far as I can see it other people in the workshop made the same criticisms after I spoke, but in less direct ways. I found the paper disappointing, but useful, in making a standard series of errors about Adam Smith which are typical of one kind of left-inclined commentators. I am going to summarise this as briefly as possible, and referring as much as possible to the very obvious mistakes, rather than the more subtle problems that will arise in any interpretative work. At the bottom I refer to what I think was good in that paper.

Mistake One

Adam Smith was not an original thinker, because a lot of what he said had been said by other people before.

Reply.

All great thinkers are preceded by various people who express parts of what appear’s in that thinker’s work. The achievement of major original thinkers, like Smith, is to integrate a wide range of previous work on the topic, adding some new thoughts along with grasping links and contradictions which appear when integrating everything. Just about everyone agrees that Smith produced a great original classic: An Inquiry into the Nature and Causes of the Wealth of Nations.

Mistake Two

Adam Smith is not relevant to current economics, and we know this because Mil refers to Smith’s work as partly obsolete and imperfect everywhere (in The Principles of Political Economy). Another supporting argument was that An Inquiry into the Nature and Causes of the Wealth of Nations covers a wider range of material than current economics and is therefore irrelevant to current economics.

Reply.

Most economists continue to refer to Smith as the founder of the discipline and refer to his ideas.

Miill’s comments are a statement of the obvious: any book on economics becomes increasingly obsolete over time because of new developments in the discipline and changing economic circumstances. However, economists continue to use use ideas from Smith and his earlier successors, particularly David Ricardo and Karl Marx. Smith’s relevance compared with Marx has clearly increased in most people’s minds since the 1970s.

Recent economists, most notably the Nobel Prize winner, Gary Beck, have been very interested in taking economics into the territory of psychology, anthropology and sociology. This means that recent economists have written about things like the history of religion, and the development of social ethics, discussed by Smith in Wealth of Nations.

Mistake Three

Adam Smith regards value and wealth as essentially the produce of agricultural labour, and regards industrial production and trade as less valuable.

Reply.

As others pointed out in the workshop, Smith thought that agriculture was more productive only in the sense that it requires less capital (though of course this has changed over time).

There is a confusion in what the speaker said between Smith and the Physiocrats the French economic school which included Turgot, Quesnay, and Mirabeau the Elder. The Physiocrats opposed Mercantilist restrictions on trade and thought all economic value comes from land. Smith clearly rejects their emphasis on land, even if by later standards, he exaggerates the role of agriculture. The slightly more subtle mistake the speaker was making here, was to confuse Smith’s emphasis on natural stages of development with a critique of wealth from industrial production and trade. As I suggested in a post on August 16th, Smith was tied to a teleological way of thinking in which nature and society unfold in necessary steps, a way of thinking which was not throughly challenged until the late 19th Century. The result of this is that he is disturbed when agricultural wealth is stimulated by towns, though even this is ambiguous since in some passages he refers approvingly to the ways in which urban wealth increases agricultural wealth.

Mistake Four

Smith was a left-wing, therefore anti-free market thinker because he opposed Mercantilism.

Reply.

Im extrapolating a bit here, but that seems to be the only way of understanding the way the speaker framed criticisms of Mercantilism. Mercantilism refers to the belief that the world contains a finite amount of wealth, particularly in god, and that trade between states is a way in which one country takes wealth from another. Imports are to be discouraged because paying for them causes wealth to leave the country, and exports are to be discouraged where it means that objects of value are leaving the country. Mercantilist policies were tied to the aristocratic and monarchic states of the time, and Smith criticises those states. The speaker used a slippage between criticising those states and criticising capitalism.

Mistake Five.

Smith did not approve of capitalism because there was less of it in his time and the word did not exist.

Reply.

The fact he word ‘capitalism’ did not exist is irrelevant and it is a feeble rhetorical trick to suggest it is relevant. Clearly Smith wanted to see more and more of what we now call capitalism.

Mistake six

Smith did not opposed socialism because the word did not exist.

Reply.

Again a feeble rhetorical manipulation. Smith opposed what we now call socialism, when he supported the sanctity of private property and opposed most forms of intervention in the economy.

Mistake Seven

Smith was like left-wingers now because his ideas were taken up by late 18th and early 19th century radicals and labour movements, including many French revolutionaries, so by people opposed to monarchical and aristocratic privilege.

Reply.

Left used to refer to people who though allocation of resources was better done by markets than by the state, this has nothing to do with the current socialist left, or even social democrats. Labour representative were concerned with forms of state intervention which held down wages, prevent labour from organising, and pushed up the price of basic items in the budget of labourers. Again these are different from the major aims of the current left. Left wing people in power, or even conservative states trying to accommodate working class demands, moved the issue away from cutting down that state to expanding the state as a means of regulating the economy and redistributing wealth.

Mistake Eight

Free marketers now support state interventionism and therefore contradict Smith’s demands for a less statism.

Reply.

This contradicts other comments the speaker made. It is simply not true that current free marketeers accept existing state interventionism. I drew the attention of the speaker to libertarian thinkers who oppose the privileged relations between corporations and the state. The speaker started stonewalling and trying to change the subject to how libertarianism used to refer to left wing positions, an obvious sign that he could not back up his argument. I insisted on pointing out that free market thinkers like Hayek, Mises and Friedman, and organisations using their views, are extremely critical of links between corporations and the state, including the use of war in promoting sectional economic interests.

Mistake Nine

The speaker clearly though the Thatcher and Reagan governments, and other ‘free market’ governments since represent the most radical forms of free market thinking.

Reply

Reagan and Thatcher get some support from free market thinkers for some of their economic policies. They are also strongly criticised for leaving the essence of the interventionist state in place, and for continuing state support for favoured economic enterprises.

Mistake Ten

The speaker claimed that books IV and V of An Inquiry into the Nature and Causes of the Wealth of Nations justify levels of state interventionism and social welfarism in contradiction with current free marketeers.

Reply.

This is true in reference to anarcho-capitalists like Murray Rothbard and Hans-Hermann Hoppe, or minarchists (night watchman state) like Ludwig von Mises and Robert Nozick. It is not true with reference to Friedrich Hayek or Milton Friedman who are considerably more influential than the minarchists and anarcho-capitalists. The speaker clearly thought Friedman was less interventionist and welfarist than Smith. So what is the interventionism that the speaker alluded to in Smith. Books IV and V of The Wealth of Nations are concerned with: reducing ways in which states have limited trade and taken private property from subjects; expanding education, which should be mostly provided privately with the state supporting the poorest; raising revenue from taxes on consumption; protecting trade outposts fro violence through state military support. This is definitely a very limited role for the state, and certainly goes no further in that direction than Hayek or Friedman.

Mistake Eleven

The speaker said that Smith would be against free markets now because he takes the side of labourers.

Reply.

Smith takes the side of labourers in preferring low taxes on necessary goods, and in allowing labourers to seek the highest possible wages by removing barriers to competition between labourers and between companies when they are hiring labourers. Clearly this has nothing to do with being against free markets and capitalism.

Mistake Twelve

The speaker appeared to think that the discussion of negative and positive liberty comes from Isaiah Berlin, in his 1969 essay, ‘Two Concepts of Liberty’. That is the distinction between liberty from state compulsion and the liberty that arises from state action to expand human capacities.

Reply

I believe Isaiah Berlin’s essay to be highly overrated, its greatest virtue is to draw readers back to important late 18th and early 19th century discussions of liberty. At this time, Kant referred to negative and positive freedom in ethics; Wilhelm von Humboldt referred to negative and positive welfare; Benjamin Constant referred to the liberty of the moderns and the ancients. These all refer to the negative/positive liberty type distinction, though in Kant it’s a distinction about the relation of reason to action. These discussions are anticipated by what Hobbes and then Montesquieu have to say about the kinds of liberty which exist in different ancient and modern states.

Mistake Thirteen

Takes us back to mistake two. The speaker seemed to think that Smith’ status as a Professor of Moral Philosophy and the broad range of topics he lectured and wrote on undermines his place as an economist and free marketeer.

Reply.

The speaker seems to assume that economics is only about prices, when it is about more general questions of ranking choices in individual and social action, which connect with questions of law, ethics etc that Smith was also concerned with. The speaker claimed that An Inquiry into the Nature and Causes of the Wealth of Nations was a wok of moral inquiry. In some ways it is, which in no way contradicts its status as a work of economics. The speaker appears to be making the absurd assumption that one cannot be simultaneously concerned with ethics and with issues of choice, and preference, which are often expressed in terms of prices within a monetised economy.

Mistake Fourteen

The speaker assumed some contradiction between: Aristotelian elements in Smith like a concern with standards of value, and teleology (the end towards something is moving); and free market capitalist thinking.

Reply.

The speaker exaggerates the Aristotelian elements in Smith. Unlike Aristotle, Smith was not concerned with determining a real value and excluding price variations, and he was certainly not supporting the limits in economic inequality (between citizens) proposed by Aristotle. Smith cannot both be strongly teleological in thinking, therefore seeing natural inevitability in the movement from land to city to trade, and believe that movement away from agricultural wealth is bad. Smith sometimes seems inclined to weak versions of those propositions, making it possible to refer to a tension perhaps, but the speaker referred to both propositions in a very strong way without noting the problem.

Generally Badly Formed Argument

Some of this is covered above, as when the speaker implies that Smith is left wing in the current sense by referring to the links between Smith and non-socialist radicals of the original left.

A really obvious problem is that the speaker claimed that Smith would be against capitalism as it is now and that he is irrelevant.

If Smith is irrelevant, his supposed arguments against capitalism must be irrelevant.

The speaker condemned current free markets while saying there are no free markets.

USEFUL POINTS

As I have already noted, the speaker drew attention to the way early radicals like Mary Wollstonecraft, William Godwin and Jeremy Bentham, used Smith’s ideas. I have already stated what I think is wrong with taking this as a reason for thinking Smith can be connected with socialist though. When they do lean towards a redistribution of wealth they are going beyond Smith.

The speaker referred to liberty in Smith as independence rather than as the ‘negative liberty’ or freedom from external compulsion. We might wander how much difference there is between the two and the speaker did not express this potentially useful thought clearly. If we clarify the thought, the point is that Smith was concerned with more than just leaving people alone but also with promoting the virtue that will enable the best possible use of that liberty in a spirt of general independence of mind. As I suggested in a post of 22nd August, this does bring Smith close to classical republican thinking which values political participation, rather than the more anti-political individualism of a lot of current libertarian thinking. On the other hand, individualistic liberalism and republicanism are widely recognised to have been combined in a variety of thinkers from Locke to Mill. I agree that it is unfortunate that current libertarians tend to ignore this. Gerald Gaus provides an interesting and valuable exception.

Workshops in Political Theory: Hobbes and Smith

Primary version of this post, with visual content, at Barry Stocker's Weblog.

I’m at Manchester Metropolitan University, in the Geoffrey Manton building, taking advantage of a big gap between the end of the conference and my train to London, to post on the event, I would have posted day by day, but despite assurances to the contrary at (the very friendly and helpful) conference reception, wifi was not working in the conference accommodation, a bit of a blot on a mostly very well run event. So a retrospective summary.

The event: Workshops in Political Theory, Sixth Annual Conference, September 2 - 4, 2009

THOMAS HOBBES

Mostly I was participating in a workshop on Thomas Hobbes, except for this morning. As the Hobbes workshop wound up yesterday afternoon, I dropped in on the Adam Smith workshop this morning. The conference was very fragmented, the workshops were discrete events with no plenary session to unify the work being done. This is an annual event and I think it would be worth having a plenary to round things off in future. I guess the problem with that is the way participants alway start disappearing in some number starting with the penultimate session. Not everyone would be at the plenary, but it would be a good way of drawing together the strands for those still present.

Of all the people in the Hobbes workshop, I had the least background. Everyone else was a published academic in Hobbes study, or a graduate student writing a thesis at least partly on Hobbes. Much to my relief I survived largely unscathed. My knowledge of Hobbes’ ‘minor’ texts and the commentaries was weak compared with other participants, but sticking to what I know seemed to work well in my own presentation, and in commenting on other papers.

I’m not going to mention any names, just summarise the themes.

Senses, Passions, Reason and reasoning in Hobbes, and there was a a lot of discussion all round about the rationality of individuals, the rationality of politics, and the appropriate means of persuasion and reasoning in Hobbes. There was some discussion how far Hobbes could be seen as anticipating David Hume’s suggestion that reason is and ought to be the slave of the passions. That relates to discussion about the levels of sensation and cognition in Hobbes, from the most immediate to the most abstract.

Meta-ethics in Hobbes. The theoretical foundations of ethics for Hobbes. Discussion of subjectivism and objectivism in Hobbes, that is the relation between: subjective desire and aversion on one side: independent moral truths on the other side. A focus here was an apparent contradiction in Hobbes, between fear of death as the strongest subjective influence, and the influence of things like honour which may lead us to sacrifice life. One issue I brought up here, was the possibility of looking at Hobbes as someone concerned with the individual belonging at a deep level to the political community, in preference to any tendency to se Hobbes as just aggregating individuals under a sovereign

Another theme was natural law in Hobbes, so how far we can see Hobbes as a critic of Medieval natural law and how far we can see him as continuing that tradition. Hobbes is ostensibly very critical of Medieval Scholasticism, but he does also bring natural law into his theory. That is law based on a universal reasoning about right and wrong, which we might see as guided by God or in accordance with God’s commands, though distinct from purely religious commands. Hobbes both places the sovereign above any law and argues that the sovereign should be guided by natural law. There was some discussion of what might happen if the sovereign violates natural law, and how close Hobbes’ comes to Locke’s position in which rebellion is justified against a sovereign who violates natural law.

Another theme was how Hobbes was received in France from Pierre Bayle to Rousseau. Some particularly interesting points came up about how Hobbes was associated with the legal and political theory of Samuel Pufendorf, through Jean Barbeyrac, a commentator on, and translator of, Pufendorf. Hobbes was known through Barbeyrac’s translation of De Cive, which Rousseau clearly knew well. From this perspective, Rousseau’s reaction to Hobbes in The Discourse on Inequality can be seen as decisive for his whole political theory.

There was some discussion of how Hobbes’ theory related to the British history of the time, particularly the Civil War. This connected with discussion of the relation between religion and sovereignty in Hobbes, How far was Hobbes demanding that we conform to the religious requirements of the sovereign and how far the sovereign should leave subjects free in matters of religion in order to preserve civil peace.

My own contribution is something that I’ve explored in previous posts on Hobbes. Search the blog. Very briefly I was concerned with paradoxes in Hobbes, the ways in which he relies on terms which appear to exclude each other: natural law and positive (state made) law; sovereignty by consent and sovereignty by conquest; man as wolf and man as god; sovereignty based on fear and sovereignty based on agreement to covenant and so. I framed this with regard to Pascal, a philosopher of paradox, who looks as issues of sovereignty, law and violence.

ADAM SMITH

I need a separate post to cover this, which I hope to put up tomorrow.

The part of that workshop which perturbed me was a paper on how Adam Smith apparently did not predict capitalism and was in contradiction with current free market libertarians (who are the same as the political establishment), and is not relevant to current economics. The paper gave some very useful information about how Smith was taken up by radicals in the late 18th and early 19th centuries, but the assumptions I summarised in the last sentence are wrong, and will return to that in the next post. The speaker correctly pointed out that Smith was driven by criticisms of state power and class privilege, by sympathy for labourers and a belief in independence of the individual rather than absolute freedom from independence, but drew the wrong conclusions. Another presentation discussed Smith’s ethics with regard to changing standards of fashion. At the most serious levels of changing fashion, intellectual systems and basic standards of behaviour, the process in which fashion changes converges with moral evolution. There was some discussion of ‘natural’ in Smith, that is how far ‘natural’ refers to description of reality and how much it refers to a moral ideal. Smith’s criticisms of slavery on economic grounds rather than moral grounds came up here.

Link:Tim Harford on Private Schools for Global Poor

Primary version of this post, with visual content, at Barry Stocker's Weblog.

‘Why millions of the world’s poor still choose to go private’ by Tim Harford, Financial Times, 22nd August, 2009

This article refers to something I first heard about a few years ago, but which would probably surprise a few people. There is a growth in private schools amongst low income people in Africa and Asia, not the rising middle class or the rising bourgeoisie but people on very low incomes, 2 dollars or less a day. As Harford points out, publicly provided education is so bad that it’s worth even very poor people paying for private schools. The private schools concerned are not exactly little Etons, low grade buildings and teachers less qualified than publicly employed teachers. The difference is that the private teachers have to turn up to class and do a reasonable job; publicly employed teachers don’t turn up, go to other jobs, or fall asleep in class.

What lessons can be drawn from this? Most generally, education improves with competition between providers, incentives for teachers who perform well and sanctions for teachers who do not pay well. That applies generally to education in general in all countries, and was discussed by Adam Smith in The Nature and Causes of the Wealth of Nations, as I mentioned in my last post. This does not mean we should want the Third World Poor to pay fees for education, it does mean we should hope the governments concerned will use economic incentives for public education, and parents should have a choice of schools bringing a slice of public funding to the school they choose, maybe through government issued education vouchers.

Other lessons can be drawn from this about Third World development. Bad education and the restraints that places on individual, and social, economic chances are not just the result of existing poverty; Third World governments are not passive victims of ‘globalism’ supposedly sucking resources out of the Third World. There is injustice in the way, the wealthier countries behave to Third World countries: support for unjust and economically inefficient governments, blocking imports, trying to plan even well-meaning economic reform from outside. The solution is not to block trade and investment as ‘unfair’ to poor countries, or to pump development aid to governments which are wasteful and best and often kleptomaniac, or to scapegoat financial institutions which are trying to recover loans from governments which have wasted the money.

The ‘anti-globalists’ are right to say that reforms should come from within countries; they might be surprised by how much free marketeers make the same point, and are critical of the way development aid and externally suggested reforms largely benefit politically powerful groups. I don’t suggest that the solution is to cut all aid, but the focus should shift from development aid to humanitarian aid directly delivered to people who need it. Development can only come from governments making the right decisions and making decisions with develop the society as a whole, not influential client groups. Economic restructuring should be largely left to the responsibility of governments, though trade negotiations should lead rich and poor countries to agree on eliminating trade barriers on both sides.

Trade barriers in Third World countries do not benefit the population, they benefit producers with privileged political contacts. Trade barriers push up prices, they push up the price of food for people hovering on the edge of starvation. Open trade means some companies close and economic sectors lose jobs, but also creates incentives for investment in new companies and sectors. An economy cannot succeed as a static entity, it can only create growing wealth for everyone, including the poorest, through change. Growth means change, and means responding to market demands, not state interventions on behalf of politically powerful companies and sectors.

Link of the Day: Graeber on Debt, Slavery, Money

Primary version of this post, with visual content, at Barry Stocker's Weblog

‘Debt: The First Five Thousand Years’ by David Graeber in Eurozine.

Graeber is an academic anthropologist and left-anarchist activist. I’m not in favour of anarchism of left or right, or any other variation, but I sometimes find that anarchist thinkers are very good at getting at the violence in the evolution of social institutions. That applies to anarcho-capitalists like Murray Rothbard as much as socialist anarchists like Graeber, though the tendency to see institutions as purely the instrument and outcome of unjust violence has its disadvantages as well. I believe Michel Foucault, particularly in his later years, adopted a good approach on these issues, but I will be discussing that great thinker and activist on other occasions.

Graeber goes back to the earliest societies in which money was used, going back to pre-urban societies where some objects have a privileged exchange role, but really gets going on the emergence of metallic currency under the earliest city based monarchies. Graeber suggests that this is entwined with issues of debt and slavery. These societies have slavery for two main reasons: unpaid debts and capture in war. This kind of organised war emerges from, and reinforces, monarch centred states. The people under a monarch are all considered to be in a state of infinite debt to him, justifying the payment of taxes. Graeber sees slavery as the origin of paid labour and the demand for currency. The point Graeber wants to get out of that is to equate capitalist wage labour with slavery, which is not something I would go along with. In recent posts on Adam Smith, I’ve discussed what the difference is and the advantages wage labour give to labourers in a competitive market economy. There is a slightly different point on which I think Graeber, in my inexpert view, is probably right. The more slavery there is, the more the slave owner may find money useful as a way of giving incentives to slaves beyond physical coercion. Smith explains why an employer should find wage labour more economically advantageous than slavery, that may not have been such a pressing issue in stages of history where economic growth and changes in the organisation of labour, are very slow compared with modern economic development. Smith’s argument does explain why at any time slavery might become a contractual relation most effectively realised with currency.

On the state level, Kings may have considered their subjects to be in infinite debt to them because of their role in providing law and state defence, that is protection form internal and external coercive violence. Currency is a way in which people can pay towards that debt. Kings can just extract goods, but Graeber argues that kings early on realised that an economy with money generates more wealth, so there has always been some element of capitalism. Silver and god for money was mined by slaves, and people who could not pay money debts became slaves, so at that time the money based economy was very compatible with the unfree labour economy.

Graeber ends up trying to establish continuity from the ancient world to the world now, with the suggestion that the extreme poverty of much of the Third World, can be equated with ancient slavery. I find this highly misguided. Slavery does not mean poverty, slaves could be privileged people in ancient societies. In the Ottoman system, the government chiefs were slaves of the Sultan. In pre-Civil War American, African-American slaves had a a higher standard of living than Irish immigrants of the time. Ancient slave economies may have had a mutually reinforcing relation with early elements of capitalism, and that continued up to the slavery of the 18th Century. It is the development if capitalism, as a direct economic force, and less directly through the emergence of organised public opinion in bourgeois civil society, which led to the end of slavery. The extreme poverty of the ‘bottom billion’ in the Third World comes from failed attempts at alternatives to capitalism, stories about IMF/World Bank conditions to financial rescue packages give some people the impression that capitalism has been forced on undeveloped countries, and this creates a slavery to debt and financial institutions. The reality is that the poor countries do not have free market economies, and those who have made most progress towards such economies have done the most to lift their people out of poverty.

Despite these reservations, I appreciate the way that Graeber looks at a genealogy of money in capitalism in highly unfree social relations. The point of genealogy in Nietzsche and Foucault is that it recognises that the origin(s) and the contemporary outcomes are not the same thing.

Adam Smith, the City, Natural Order, Republicanism

Primary version if this post, with visual content, at Barry Stocker's Weblog

At the end of Book III, Chapter 1, ‘Of the Natural Progress of Opulence’, of An Inquiry into the Nature and Causes of the Wealth of Nations, Smith refers to a unnatural and retrograde order. What he means is the inversion of a natural progress from agriculture, to manufacture to international commerce. That natural progress is the progress from improvements in agriculture which allow the formation of towns and investments in manufacture, and a similar progress to international trade.

The unnatural event takes place in European cities where international trade has introduced new luxuries to cities. These luxuries influence domestic manufacturers who compete in that new market, and that further influences agriculture.

I’ve mentioned dialectic in Smith a few times, and Smith as bringer of dialectic into his definitive work on political economy. The idea of an unnatural order is either a break down of dialectic, or a suggestion that dialectic leads to rigid unifying forms. Writing about Pascal and Smith as dialecticians yesterday, I suggested that Pascal’s form of dialectic is more contradictory, more concerned with paradox than Smith’s. Kierkegaard also provides a model of a more paradoxical kind of dialectic, he had a good phrase for it, dialectic of the absurd.

Smith is shocked by something that is clearly inevitable, I would have thought. That is the feedback consequences of a long historical process, so that ‘older’ forms of wealth are influenced by the older forms. There is a moralism here about the influence of ‘luxuries’, not that Smith ever thinks it would be a good idea to try to restrict them. At an earlier point in The Wealth of Nations, Smith even recognises the positive impact of the wealth of towns on the surrounding countryside. He also suggests that an alliance between monarchs and cities in the Middle Ages was a good thing in hastening the end of feudalism, and the increase in free trade.

The moralism about cities appears in a slightly different form with regard to cities which are centres of political power. Smith refers to the huge waste of a royal court and its hangers on which outweighs even the wealth produced by Paris. At another point, Smith mentions the expense of royal courts and back tracks to refer to the honourable role of high royal servants. I’m disposed to believe that Smith was a covert critic of royalty. From that point of view, it;s interesting that in the discussion of the Navigation acts he repeatedly refers to what he normally calls Holland, also known then as the Dutch Republic, as the ‘maritime republic’. Smith strongly hints that royal courts continue the tradition of wasteful expenditure on hangers on, which is wealth diverted from investment, in nomad princes and the like.

The implied criticism of royal expenditure, and of the institution itself, is rather mingled with moralising about the sort of people to be found round royal courts. That lurking republicanism is maybe associated with the less rational dislike of the inversion of nature, since royal expenditure might be regarded as the diversion of economic capacity, occasioned by a premature entry of luxury goods from another country,

This odd outrage at countries which don’t follow economic stages in the right order, is in tensions with the feedback processes Smith otherwise values; and his general feeling that trade should be left alone, except where really very strong moral and national interests are at stake. It also suggests a limitation in the understanding of ‘nature’ at the time, which has natural theology somewhere within it, that is the view that everything in nature moves forward in orderly stages to an end ordained by God. I don’t think that notion is really abandoned, in general, until Nietzsche, and then later in the 19th Century when Darwinism became neo-Darwinism, and when the laws of thermodynamics led to a cultural interest in entropy in nature.

Blaise Pascal, Adam Smith and Dialectic

Primary version of this post, with visual content, at Barry Stocker's Weblog.

I’ve already mentioned the idea that Adam Smith belongs with Clausewitz as a ‘dialectical’ thinker, that is a thinker concerned with the relation between opposite, and differing , ideas and material forces, and how they are transformed when combined. That is dialectic in a rather general sense. The idea if dialectic was for sometime clouded by a few issues: association with Hegel and the belief that Hegel was an incomprehensible charlatan who was somehow responsible for Fascism and Marxism-Leninism (though if he was incomprehensible it’s difficult to see how he could have been responsible for anything; association with the dismal official ideology of Marxism-Leninism in the communist countries, and distinctly philosophical sub-prime manuals of dialectical materialism; Kant’s attacks on dialectic, by which he meant doctrines of concepts taken beyond the limits of experience, this is sometimes regarded as a refutation of Hegel before he got going, but that most Hegel scholars regard his ‘dialectic’ as a reconstruction of experience.

The situation for dialectic has improved. The inadequacies of state sponsored Marxism-Leninism is not a living issue; Hegel’s reputation as a constitutional thinker has been rehabilitated; Hegel’s method has been understood as something different from what Kant was attacking (a rather big subject I can’t begin to tackle here).

It’s widely recognised that Smith was a dialectical thinker. It’s widely recognised that Pascal was a dialectical thinker. However, the relationship between Pascal and Smith has only be looked at with regard to ideas of self-interest (self-love in Smith and amour-propre in Pascal) and notions of virtue. I haven’t even seen a detailed comparison on that issue, but there is some understanding of the connection. What I have not seen is an account of the connection between Smith and Pascal, with regard to dialectic. There may be some work out there, but it’s not easy to find.

Pascal’s sense of the dialectic is more contradictory than Smith, but they have the following in common.

The difficulty of combining a global and particularistic point of view, which would be necessary to real knowledge.

The sense that self-interest serves collective interests, at least under an effective sovereign authority

A sense of the limitlessness of human desire combined with the finite possibilities than can be grasped.

Pascal’s thought contains a sense of interaction of parts and wholes, which Smith finds in the world and which must be present in the structure of his thought. Smith does not reflection on his own thought, but he does reflect on the way that individuals find it difficult to grasp the consequences parts coming together. He quotes the community in Britain which tried to reject a road because it thought that would allow competition to drive local producers out of business. The real effect is that some producers lose out, but the community gains overall from lower prices and greater competition, and the chance to invest a bigger surplus in new businesses. This seems removed from Pascal’s concerns, but Pascal was aware of the rise of commercial society, though in less articulate terms than Smith, This informs Pascal consciousness of self-love and limitless desire in humanity.

Smith seems more optimistic and social, Pascal seems more pessimistic and inward looking. Both are concerned with a restlessness in human spirit where extremes of moral elevation and depravity become very close. Both look at how the human individual reacts to a world of infinite divisibility: atoms for Pascal, division of labour for Smith. Both look at a world of infinite scope: ever growing markets with ever more intense production in Smith, infinite spaces in the universe, and the infinity of God, for Pascal. Both are concerned with how those must interact in a way which never produces a final comprehensible moment of unity and stasis.

I don’t suggest a direct link, both knew about the history of philosophy, modern science, and were sensitive to the the development of the social world towards the paradoxocal looking combination of greater complexity and integration. Pascal talks of gambling, and uses it as a way of thinking about how we have faith in God, in ‘Pascal’ Wager’; Smith talk about a world of calculation of economic factors and risk taking by economic agents.

Adam Smith and the Ethics of The Wealth of Nations

Primary version of this post, with visual content, at Barry Stocker's Weblog.

Adam Smith wrote two important books: An Inquiry into the Nature and Causes of the Wealth of Nations and Theory of Moral Sentiments. This division of labour between economics (in the book which maybe founded the discipline) and ethics has produced some unfortunate results. Both critics of, and enthusiasts for, free market economies have taken this to mean that we look in the Theory of Moral Sentiments for Smith’s ethical views, and not The Wealth of Nations. For the enthusiast for the market, the Theory of Moral Sentiments provides the complement to The Wealth of Nations; the critic of the free market economy, may suppose that Smith’s ethics is in some kind of contradiction with his political economy. Late 19th Century German Adam Smith commentators took to this paradigm with enthusiasm for a while labelling it ‘das Adam Smith Problem’. Most people do not belong as that generation did that there is a contradiction between the two books. Some points still have not been recognised widely enough though.

There is a moral vision underlying Wealth of Nations, which is that of commerce thriving without certain kinds of restriction will be good for human civilisation and welfare. The emphasis though is not on those who become rich from a functioning market economy, but on the advantages to labourers, and their families, as workers and as consumers. Smith was very sober in his attitudes and doesn’t really care for luxury and what we now call conspicuous consumption. He does not want to restrict it, but he does treat is more as a something to be endured than something to be enjoyed. The point for Smith is that we cannot restrict the economy without restricting the liberties and economic welfare of labourers. Labourers are free to find the best employment and get the best conditions where there is little in the the way of economic restrictions. Smith has a lot to say about urban and agricultural labourers in Scotland and the chances they get from economic freedom.

Smith points out that laws requiring 7 years of apprenticeship before being legally permitted to practise as a master craftsmen is a disadvantage to labourers. 7 years of apprenticeship puts an enormous financial burden on the apprentice, and effectively restricts entry to the trade, pushing up the money made by qualified masters. That means higher prices for labourers as consumers. Clearly master craftsmen lose out if guild restrictions are lifted but everyone else gains.

Creating an artificially well compensated class just above labourers creates unemployment for labourers who would be willing to go into that trade at a lower wage, and the high wage artificially directs labour to that occupation instead of others which are productive for society.

Smith refers to the restrictions on labourer moving between districts at that time and moving into a new area to find work, and increase wealth by deploying thier labour where it is wanted.

Another problem which arises in interpreting Smith, from the non-market enthusiasts point of view, is to equate morality with restrictions on the market. The non-free marketeers like to quote a passage about tradesmen conspiring against everyone else when gathered together, even for purely social purposes. However, Smith’s solution is not of legal measures against such conspiring which he thinks could interfere with liberty and justice. He argues for the state to withdraw measures which force merchants to belong to a town corporation of disclose names and addresses on some public register, as this only encourages them to get together and get conspiring. Conspiracies by merchants are best tackled by competition, so that merchants outside the conspiracy – and there are always some as such conspiracies are always about restricting conspiracies – will force down prices and raise quality. This is to the benefit of labourers as well, since their wages and conditions are improved by competition between employers for their labour.

Smith introduces the idea that employers should not force workers to exhaust themselves constantly. As he points out, it is simply not possible to work well and work at full speed for more than a few days in a row. The ethics comes out of practical reality, rather than an abstract standard. It is no less ethical to say that something is wrong because it harms the perpetrator.

This extends to arguments about slavery. Smith refers to slavery as economically inefficient because even the modestly rational slave owner in all circumstances has to keep the slave and the slaves’ family alive and in reasonable condition for work, however productive or unproductive the slave is. Both employers and employees benefit from freedom to find the best match. From what I can gather Smith may have slightly simplified the situation, in practice slave owners did use incentives of a financial kind, or the promise of manumission, in order to get better work out of slaves. Nevertheless, Smith’s overall point holds, it’s clear enough that the more complex forms of economic organisation which emerge with growing prosperity and larger markets, are not compatible with labour and owner tied to each other for ever.

The size of the market is an important point for Smith in general. A large market destroys the older forms of labour organisation, because the bigger the market is, the more competition there is, and the more reason there is to reorganise labour around more division of labour and new forms of labour. Smith recognises this can lead to very boring repetitive work for some, but it’s unlikely there was any more of than in agricultural labour which involves boring repetitive work, for many hours a day particularly in the Summer, and which is very demanding physically. This evolution of the division of labour certainly leads to economies based on free labour. The growing market has the additional ethical benefit of linking people together, in Smith’s time barriers to trade within nations had not been eliminated, so to some degree he is talking about the task of completing a nation through measures promoting economic freedom, and he believed that should extend to the world and the joining together of people throughout the world.

I have emphasised that Smith often sees the free market as the solution to bad behaviour by merchants, rather than restrictive legislation. It is important to note that this in not true in every case. For example Smith says both that it is morally wrong for a employer to give goods to a labourer instead of cash, and that the law should intervene in this case. One could also add that a market functions better on currency than barter, so employers who essentially pay for labour with barter are undermining the market. In some respects Smith thinks the law should intervene to protect labourers and the implication is that overall efficiency of the market may be improved by measures, though strictly limited of this kind. This also shows that Smith does not belong to the libertarian extreme where there is no public good, only contracts between individuals, and possibly a state which exists merely to enforce those contracts. I don’t think Smith belongs with A Rawlsian commitment to limiting inequality in some rational design of society either, despite Rawls’ attempts to incorporate Smith into the thinking of A Theory of Justive. While Smith recognises that basic justice has a place in economic thinking, certainly not to the extent of the kind of corrections and compensations Rawls favours. It’s important to recognise the space between Rawls and and the most absolutist forms of free market libertarianism.

A moralising tone appears when Smith refers to the advantage of a labourer going into business as an individual instead of working with a mass of other employees. Smith believes this will keep the labourer away from corrupting influences. Smith’s greatest respect is for hard working, sober, and disciplined, people in the middle station of life. There is something a bit like Rousseau here, though they are far apart on economics. It certainly distinguishes Smith from his friends David Hume and Edmund Burke, who both associated with the aristocracy and gave reasons why people prefer to do so. Smith, Burke and Hume are sometimes grouped together, they did all share a belief in the benefits of commerce, but Smith stands as the one who is more democratic in social spirit.

What I’ve been referring above is not morality in the sense of a purely moral realm. It’s more like an emergent ethics, which arises from describing the workings of the economy. That does not make it less ethically significant, and even provides a positive insight into the scope of ethics. Though the situation in Smith studies has certainly advanced since ‘das Adam Smith Problem’, a lot of perceptions about Smith have not changed outside the ranks of commentators. Even in the commentaries, there’s still a tendency to see The Wealth of Nations as compatible with Theory of Moral Sentiments, and as having a moral dimension in that context, rather than making its own ethical points.

Clausewitz, War, Dialectic and Political Economy

Primary version of this post at Barry Stocker's Weblog

I’m following on from remarks I made yesterday at the end of my post on Carl von Clausewitz’ On War. Something I’ve mentioned before is the link between Clauswitz’s approach and German Idealist philosophy of the time. I’m not concerned with details of influence here, but with significant similarities with regard to ideas and methods which did not appear before. There is a ‘dialectical’ approach in Clausewitz’ book in its concern with the relation between part and whole and between opposites. Tactics and strategy only exist in comparison with each according to a boundary which shifts according to context. The success of Napoleon’s battles and campaigns changes according to how much we think about the overall consequences of a battle and consider what might have happened if Napoleon had done something different, or if his opponents had judged the situation more accurately. What I didn’t talk so much about yesterday is how far Clausewitz suggests that the success of one side in a battle depends on its relation to original goals. A battlefield victory in which the general does not achieve goals with regard to destroying the enemy’s army or occupying territory is not a real victory. A defeat in which the general was intending to retreat to predetermined lines while destroying as much of the enemy as possible is not a defeat.

This does parallel Hegel’s idea of dialectical method in philosophy, which emphasises context, relation between part and whole, the move from particular to universal and simple to complex as all relevant concepts are brought in relation to a single concept, the importance of conflict and resolution between differing ideas.

It also parallels political economy, which must have had some impact of Hegel. What I mean by political economy is largely Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations (1776). What Smith is concerned with is how trade and commerce integrates differing and competing interests from different parts of a country and even the world. On a very simple level, we can only understand why a village bake makes bread in relation to the demand for bread from other villagers. At a slightly more complex level, we can only understand why wheat is grown in certain parts of a country because of the demand from bakers for the materials to make bread. Economic processes allow the mergence of very complex co-ordination of a mass of different points of production and demand through a mass of individual decisions to respond to demand and production. What happens at any one point can be partly understood through a simple relation, people in that village want bread, but only fully understood through the complex set of intersecting relations in the economy as a whole.

Some of what Clausewitz says about military organisation and decisions applies to economic activity. Smith referred to the economic gains of dividing a production process between simple repeated actions carried out by distinct individuals. Famously is model was a match factory. Clausewitz recognises the value of routine to reduce friction in the operations of an army. He sees the battle as made up of a complex interaction of decisions made by junior officers, which the commander-in-chief cannot control.

Clausewitz is very concerned with an overall estimate of costs and benefits, and the hidden costs of not following a certain course of action. This is the sort of thinking with which economists are very concerned, what are the hidden costs of an individual, corporate, or governmental decision; how to calculate the opportunity cost of lost benefits from another decision and the ways that not thinking about opportunity costs. Smith has a classic account of this at the governmental level in Book IV of The Wealth of Nations, ‘Of Systems of Political Economy’.

Some of this might sound very commonsensical, but as I pointed out yesterday Clausewitz explains that the importance of numerical supremacy had largely been ignored in war. What can seem like the obvious now, may not have seemed at all obvious for millenia of previous history.

Adam Smith’s attention to the basic forms of economic interaction and the appearance of complex systems, was certainly known to Kant as he refers to the role of self-interest and trade in creating human communities and unifying human communities. Before Smith it may have seemed to bizarre to think that humans come together because of self-interest, but Smith explains who competitive self-interest and co-operation need each other and even if they conflict sometimes they also depend on each other.

Kant rejected the idea of ‘dialectic’ in philosophy, nevertheless his philosophy is dialectic in the sense that it deals with complexity, parts and wholes, interaction. Kant rejected ‘dialectic’ because he thought it was a kind of reasoning that lacks reference to experience, but in Smith we see a dialectic in an area of empirical study. We don’t have to call it dialectic, Smith did not, but it we describe Hegel’s ‘dialectic’ in the simplest terms possible we can see a connection. The connection goes indirectly through Kant, but also directly as Hegel thinks of law arising from the need to mediate property disputes within the kind of economy described by Smith. This is a dialectical move, law which is universal within a community emerges from conflicting particular interests.

It maybe that Hegel’s attempt at a dialectic of spirit or logic, is too abstract and speculative, but even if we think that, we can still take bits of Hegel independently of that grand project. This kind of social-political argument in Kant and Hegel, has an impact in their philosophy as a whole.

There are certainly other things to be taken into account, the development of science, the influence of slightly earlier and contemporaneous philosophers are among the most obvious; but the methods of German Idealist philosophy have some connection with political economy. Clausewitz could not have written On War before the era of political economy and German Idealism.

Link of the Day: Pirate Economics and Democracy

Primary version of this post at Barry Stocker's Weblog, with fun illustrative picture!

A great discussion of the economics and political organisation of pirates.

Leeson on Pirates and the Invisible Hook

Also this shorter video discussion

I’m later than I would normally expect to be with putting up this link, but it’s still on the home page of EconTalk, at the bottom. I really want to draw attention to what Peter Leeson does with pirates, He looks at the economic rationality behind piracy. The most obvious aspect of this free money through robbery, but there’s a lot more to why sailors became pirates. Conditions were more relaxed on pirate ships than naval or legal trading ships, but not in these sense of chaos. There was a Captain and a Quarter Master General, both elected by the crew. They provided inspiration, leadership, organisation and discipline, in a deal in which crew worked out for themselves which crew member would provide the best combination.

One of Leeson’s most interesting points is that the Quarter Master General provided a kind of constitutional check on the power of the Captain. Leeson argues that this anticipates aspects of the United States constitution and that the experience of mini self-governing republics on pirate ships did have an influence on political thinking in the early modern period, when democratic, constitutional and self-governing republican thought was growing.

Leeson also looks at the economics and calculations of self-interest in piracy. Pirate crew not only benefited from more relaxed conditions than on legal ships of the time, they had considerable employer benefits. Stolen property was shared in a transparent way, pirates were compensated for injuries and received medical attention. So pirate ships provide an early example of social and health insurance from employers.

Pirates used minimal violence, except where they were disposed to sadism anyway. Despite role of illegal violence in piracy, pirates found it is more economically efficient to minimise violence, and keep it as an unused threat. Pirates would torture and murder in order to locate property on ships, but realised that if they behave pleasantly where property was handed over quickly that they could avoid a lot of expenditure of effort. So pirates encouraged publicity which betrayed them as extremely violent and cruel when obstructed, but kind and pleasant when the loot was handed over. Crew and officers on ships robbed by pirates were likely to have more problems with ship owners who suspected them of not trying hard enough to fight off pirates.

Leeson also suggests a real basis for the way pirates talk in literature and then films, a high proportion came from the West of England where people did have that kind of accent and phrasing. Pirate travels also meant they really did have parrots.

All of this refers to Leeson’s book The Invisible Hook: The Hidden Economics of Pirates, which I have not read sadly. However, I hope during the course of this year, and produce several blog posts on what seems like a really admirable book, combining history, politics, economics and literature, with great humour. The title refers to a phrase used by Adam Smith in Wealth of Nations. Smith only uses the phrase once but it does sum up a central idea in the book, that individual pursuit of economic interests often has the unintended consequence of promoting the interests of society as a whole. Leeson looks at how this works within the world of piracy. He is of course not suggesting that piracy itself promotes social welfare, but he does point out that the way pirate ships self-organised did have some unintended consequences in showing how constitutional democracy might work, how individuals can be protected against misfortunes at work, and how employers may benefit from non-autocratic behaviour towards employees.