Right Reason

Of Dignified Authority and Efficient Utility

 

One of the perennial questions brought up by a philosophical approach to politics is the question of “Why do people obey and show, frequently self-destructive, loyalty to their nation’s customs and officials?” More succinctly: “Why do people obey the law?” The answer, like all human affairs, must involve both an animal instinct to obey and a higher capability to reason. Homo sapiens is neither purely an animal of instinct nor a disembodied calculator.

This is an aspect of politics that I think has been lost in recent discussions, especially those pertinent to Donald Trump. Politics cannot be distilled into questions about facts. There is the entire Quine-Duhem thesis aspect at play that political ideologies cannot be tested against the facts directly, but instead rely on background assumptions that are frequently incommensurable across political divides.

However, more important, I think, is that one needs to consider why people follow some focal points and the motivations for doing so. Ideas and politicians alike can only command people when they can coordinate them. Coordination, in turn, requires the existence of focal points that people both follow and find mutual sympathy in other people who follow them. Der Führer and the Declaration of Independence were both significant focal points for the Third Reich and the United States of America respectively.

 

In his 1766 set of lectures on jurisprudence, Adam Smith argues for a taxonomy of two principles upholding a society pertinent to these thoughts: Authority and utility. He lectures:

There are two principles which induce men to enter into civil society, which we shall call the principles of authority and utility. At the head of every small society or association of men we find a person of superiour abilities; in a warlike society he is a man of superiour strength, and in a polished one of superior mental capacity. Age and a long possession of power have laso the tendencey to strength authority. Age is naturaly in our imagination connected with wisdom and experience; and a continuance in power bestows a kind of right to the exercise of it. But superior wealth still more than any of these qualities contributes to conferr authority… This principle is fully explained in the Theory of moral Sentiments, where it is shewn that it arises from our sympathy with our superiours being greater than that with our equals or inferiors: we admire their happy situation, enter into it with pleasure, and endeavour to promote it.
…
The second principle which induces men to obey the civil magistrate is utility. Every one is sensible of the necessity of this principle to preserve justice and peace in the society. By civil institutions, the poorest may get redress of injuries from the wealthiest and most powerfull, and tho’ there may be some irregularities in particular cases, as undoubtedly there are, yet we submit to them to avoid greater evils. It is the sense of public utility, more than of private, which influences men to obedience. (Smith 1978: 401-2).

One of the noteworthy aspects of Smith’s discussion here is that nowhere does he imply that contract is one of the reason that people obey the laws and their magistrates. Indeed, he goes on to mock the idea of an original contract in the very same lecture.

Reducing society to a contract only obfuscates the problem at hand, it does not shed much light onto it. The fact is that there are certain aspects of our lives where we are governed by contracts, but that itself is an artifact (in the wider sense of the word à la David Hume’s “Letter from a gentleman to his friend in Edinburgh” and Herbert Simon’s Sciences of the Artificial) of society. Contracts, as used in our peculiarly modern society, are part of the explicandum.

Almost a century later, Walter Bagehot would have a very similar taxonomy in The English Constitution when he distinguished the ‘dignified’ parts of that constitution from its ‘efficient’ parts:

No one can approach to an understanding of the English institutions, or of others which being the growth of many centuries exercise a wide sway over mixed populations, unless he divid them into two classes. In such constitutions, unless he divide them into two classes. In such constitutions there are two parts (not indeed separable with microscopic accuracy, for the genius of great affairs abhors nicety of division): first, those which excite and preserve the reverence of the population,—the dignified parts, if I may so call them; and next, the efficient parts,—those by which it, in fact, works and rules. There are two great objects which every constitution must attain to be successful, which every old and celebrated one must have wonderfully achieved:—every constitution must first gain authority, and then use authority; it must first win the loyalty and confidence of mankind, and then employ that homage in the work of government.

There are indeed practical men who reject the dignified parts of government. They say, we want only to attain results, to do business; a constitution is a collection of political means to political ends; and if you admit any part of a constitution does no business, or that a simpler machine would do equally well what it does, you admit that this part of the constitution, however dignified or awful it may be, is nevertheless in truth useless. And other reasoners, who distrust this bare philosophy, have propounded subtle arguments to prove that these dignified parts of old governments are cardinal components of the essential apparatus, great pivots of substantial utility; and so manufactured fallacies which the plainer school have well exposed. But both schools are in error. The dignified parts of government are those which bring it force,—which attract its motive power. The efficient parts only employ that power. The comely parts of a government have need, for they are those upon which its vital strength depends. They may not do anything definite that a simpler polity would not do better; but they are the preliminaries, the needful pre-requisites of all work. They raise the army, though they do not win the battle. (Bagehot 2001 : 7)

In Bagehot’s description, there is a very keen emphasis on the dignified part of the constitution, on the authority that people wield based on people’s awe of them, as motivating people’s decisions to follow certain focal points. I think that’s a wise place of emphasis, and one that deserves to be meditated on.

 

Bibliography:
Bagehot, Walter. 2001. The English Constitutions. Oxford: Oxford University Press.
Smith, Adam. 1978. The Lectures of Jurisprudence. Ed. R.L. Meek, D.D. Raphael, and P.G. Stein. Oxford: Oxford University Press.

Kling on Coordinated Specialization

In "Co-ordinated Specialization," Arnold Kling meditates on the problems of teaching economics from an emergent perspective. He departs from a quote taken from the textbook, The Economic Way of Thinking, that he lauds as progress from Samuelson's seeing-like-a-state textbook. In the quote, the authors, Paul Heyne, Peter Boettke and David Prychitko, argue that economics is a theory of choice that studies the unintended outcome of purposive action within the market order:

I prefer something more Smithian and less Misesian. I would be inclined to start with something like this:

The most striking economic feature of modern society is that we can consume the products and services requiring millions of tasks while performing only a few tasks ourselves. Obviously, this requires some form of coordinated specialization. How can this coordination take place? Consider three possible extremes.

1. Decentralized decisions, but with no prices and profits. People just spontaneously decide on their own what would be most useful to society.

2. Centralized decisions, made by an expert planning bureau.

3. Decentralized decisions, guided by prices and profits, and regulated by competition.

The problem with (1) is that you will get imbalances. Suppose that getting milk to urban consumers requires both dairy farmers and truck drivers. If too many people would rather be truck drivers than dairy farmers, then there won’t be enough milk to transport. If too many people would rather be dairy farmers, then the milk will spoil on the farms. More generally, the jobs that no one wants to do will tend to go undone. Computer programmers will all work on video game hacks, not on inventory control systems. Basically, (1) only works when there are very few tasks to be divided among a small number of people who all get along.

...

Returning to Heyne-Boettke-Pryhitko, I would prefer not to put as much emphasis on the methodological dogma that people choose in response to expected benefits and costs. Instead, I prefer to emphasize the question of how a society can operate with each individual performing a few tasks while consuming the products of vast multitude of tasks.

I lean towards Mr. Kling's sentiments on this matter. Unlike orthodox Austrians, such as Boettke, I don't see economics first and foremost as the study of human choice. Rather, I think that the scope of economics is the study of economic order first and foremost.

Economics is about the study of human choice insofar as that choice is a cause of economic order, but we shouldn't let the focus on the emergent order, which cannot be expressed from the point of view of any single maximizing agent, drift from view. The ecological features of economics are most pronounced in this study of coordinated specialization. Just as species adapt to the different niches that other species have taken in an ecosystem, so do people adapt to the different specializations that people have taken in a commercial society. Here, the effects of variation and selection, be it market or natural, are to be emphasized above individual choice. 

The Smithian emphasis on the concatenation of activities within the market order, as illustrated by his parable of the workman's coat in The Wealth of Nations, must come before the Misesian emphasis on the logic of human action, as illustrated by the first hundred pages of Human Action. 

Washington: Man of Public Spirit?

 

Where may the wearied eye repose
When gazing on the Great;
Where neither guilty glory glows,
Nor despicable state?
Yes---One---the first---the last---the best---
The Cincinnatus of the West,
Whom Envy dared not hate,
Bequeathed the name of Washington,
To make man blush there was but one!

-Lord Byron, "Ode to  Napoleon Buonaparte"

 

Of what Adam Smith said about politicians, the negatives have, for one reason of another, been much more visible than anything he might have said to praise them. Smith’s man of system remarks have become an abused cliché, yet in the paragraphs preceding them in The Theory of Moral Sentiments, Smith discusses another side of the political animal that commentators haven’t nearly been so infatuated with: Public spiritedness. Motivated by a gentle humanity and an understanding of the habits, as well as prejudices, of those he rules, the man of public spirit, though Smith never uses such phrasing, can actually do much good as ruler:

The man whose public spirit is prompted altogether by humanity and benevolence, will respect the established powers and privileges even of individuals, and still more those of the great orders and societies, into which the state is divided. Though he should consider some of them as in some measure abusive, he will content himself with moderating, what he often cannot annihilate without great violence. When he cannot conquer the rooted prejudices of the people by reason and persuasion, he will not attempt to subdue them by force; but will religiously observe what, by Cicero, is justly called the divine maxim of Plato, never to use violence to his country no more than to his parents. He will accommodate, as well as he can, his public arrangements to the confirmed habits and prejudices of the people; and will remedy as well as he can, the inconveniencies which may flow from the want of those regulations which the people are averse to submit to. When he cannot establish the right, he will not disdain to ameliorate the wrong; but like Solon, when he cannot establish the best system of laws, he will endeavour to establish the best that the people can bear. (TMS: VI..2.41)

Like the man of system remarks, those of the man of public spirit weren’t added until 1790’s sixth edition. One of the thoughts that can immediately come into an American’s mind, considering the time of the changes, was whether Adam Smith thought of any of the Founding Fathers, and George Washington in particular, to be men of public spirit. 

 

Although Smith may not have had Washington in mind when he wrote of the man of public spirit, I would be surprised if Smith did not consider Washington one such animal. Adam Smith, who wrote optimistically of America in The Wealth of Nations, certainly would have known of Washington. Moreover, the act of resigning his commission after peace was secured with Britain in 1783 made Washington a minor celebrity, so Smith certainly would have been reminded of that act whenever he thought of Washington.

 

Thinking of whether Smith had Washington in mind when writing the passage is a historical curiosity, the recognizing the influence of of men of public spirit is not. Institutions matter, yes. And institutions should be what we talk about most when we talk about political systems. Yet when thinking about politics, we cannot forget that actual human beings occupy the roles that we ponder about and that they bring their own unique personalities along with them. The thought that Washington resigning his commission or retiring for the presidency is a minor event in American history, even though those events were based on Washington’s personality rather than institutional (or even cultural constraints), is quickly alleviated by remembering what happened within two decades when a Francophone general returned from a campaign with a hero’s welcome.  

  

 

A bit of a postscript: A shared similarity between the two, albeit a similarity between many, many thinkers at the time, is that there were both concerned with the adverse effects of faction. In Chapter 2 of Part IV of The Moral Sentiments, Adam Smith would lambast faction as being informed by “the spirit of system” and motivated by “the madness of fanaticism”:

Amidst the turbulence and disorder of faction, a certain spirit of system is apt to mix itself with that public spirit which is founded upon the love of humanity, upon a real fellowWashington and the Man of Public Spirit-feeling with the inconveniencies and distresses to which some of our fellow-citizens may be exposed. This spirit of system commonly takes the direction of that more gentle public spirit; always animates it, and often inflames it even to the madness of fanaticism. The leaders of the discontented party seldom fail to hold out some plausible plan of reformation which, they pretend, will not only remove the inconveniencies and relieve the distresses immediately complained of, but will prevent, in all time coming, any return of the like inconveniencies and distresses. They often propose, upon this account, to new-model the constitution, and to alter, in some of its most essential parts, that system of government under which the subjects of a great empire have enjoyed, perhaps, peace, security, and even glory, during the course of several centuries together. The great body of the party are commonly intoxicated with the imaginary beauty of this ideal system, of which they have no experience, but which has been represented to them in all the most dazzling colours in which the eloquence of their leaders could paint it. Those leaders themselves, though they originally may have meant nothing but their own aggrandisement, become many of them in time the dupes of their own sophistry, and are as eager for this great reformation as the weakest and foolishest of their followers. Even though the leaders should have preserved their own heads, as indeed they commonly do, free from this fanaticism, yet they dare not always disappoint the expectation of their followers; but are often obliged, though contrary to their principle and their conscience, to act as if they were under the common delusion. The violence of the party, refusing all palliatives, all temperaments, all reasonable accommodations, by requiring too much frequently obtains nothing; and those inconveniencies and distresses which, with a little moderation, might in a great measure have been removed and relieved, are left altogether without the hope of a remedy. (TMS: VI.2.40)

Washington likewise argued against the influence of factions in his 1796 Farewell Address, though, unlike Smith, Washington classified all factions as being motivated by the spirit of party: 

All obstructions to the execution of the Laws, all combinations and associations, under whatever plausible character, with the real design to direct, control, counteract, or awe the regular deliberation and action of the constituted authorities, are destructive of this fundamental principle, and of fatal tendency. They serve to organize faction, to give it an artificial and extraordinary force; to put, in the place of the delegated will of the nation, the will of a party, often a small but artful and enterprising minority of the community; and, according to the alternate triumphs of different parties, to make the public administration the mirror of the ill-concerted and incongruous projects of faction, rather than the organ of consistent and wholesome plans digested by common counsels, and modified by mutual interests.

However combinations or associations of the above description may now and then answer popular ends, they are likely, in the course of time and things, to become potent engines, by which cunning, ambitious, and unprincipled men will be enabled to subvert the power of the people, and to usurp for themselves the reins of government; destroying afterwards the very engines, which have lifted them to unjust dominion.

Adam Smith on Davos

 

 

What would Adam Smith think about the Davos World Economic Forum? He wouldn't think well of them and he would certainly see the forum, with its fleet of private jets, as a threat to liberty. From The Wealth of Nations:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the publick, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together; it ought to do nothing to facilitate such assemblies; much less render them necessary. (WN: I.x.c.27)

 

Where the Davos men congregate, liberty can, really, only be threatened. Liberty isn't about rich businessmen being able to get their way. It's about people not messing with one's stuff. It's about people being able to interact with each other as equals under the rule of law. Does Davos stand for that?

Davos isn't a symbol of the commercial society, it's a symbol of the special access that the Davos men have to the corridors of power throughout the world.  Inequality per se isn't the issue. The issue is whether the rule of law has been corrupted to favor some at the expense of the many. On such issues, whether it be too-big-to-fail or by regulatory capture, the élites of Davos aren't the posterboys the commercial society neither needs nor deserves. 

Omnes Legum Servi Sumus

 

In civilized life, law floats in a sea of ethics.

- Earl Warren

 

“Omnes legum servi sumus ut liberi esse possimus.” “We are servants of the law so that we can be free.” Cicero spoke these words in Pro Cluentio, a defense of Aulus Cluentius Habitus Minor against charges of poisoning his stepfather,in 66 B.C. A terse and enigmatic statement, it is one the most succinct explanations of the relationship between the virtue of commutative justice, the rule of law, and liberty. Prima facie, Cicero’s words are almost a glaring contradiction. Rather than nonsense, though, what we find is a sentence encapsulating the essence of law for ensuring people’s freedom in society because it restricts people’s actions in a predictable manners.  

Liberty and obedience to commutative justice are two sides of the same coin. One side is what commutative justice demands from a person, that is obedience, and the other side is what it promises him, liberty. In social life, we are all therefore perfectly free insofar as we are all servants of the law. 

  

 

I) Justice is a virtue, not just an abstract entity unattached to singular human actions.  

Justice, and commutative justice in particular are not just abstract entities existing at the level of society alone. Instead, they are both virtues which are practiced by people each and every day even in the most trifling of circumstances. Justice is practiced day in and day out by people living with harmony with those around them, and so the question of a just society can largely be distilled into a question of whether a society is conducive to the virtue of justice, and whether people are, in the words of Cicero, “servants of the law.”

 

There is a reason that philosophers like Adam Smith and St. Thomas Aquinas have described justice as a virtue. Just as commutative justice is a social grammar which we can understand by looking at people’s interactions within society, so too it is a virtue which sets by which we can measure and judge other people’s actions. Is someone just? That is a question we can answer by looking at their habits, and whether those habits correspond to commutative justice. Whether people have the virtue of commutative justice can, in turn, be seen as a question of whether they do not mess with other people’s stuff.

Every human action can have multiple goals, the virtues serve to condition human action into striving towards certain goals in a habitual fashion. In his discussion of virtue in the Summa Theologiae, St. Thomas Aquinas wrote about how the virtues incline human beings to their proper actions: “But the rational powers, which are proper to man, are not determinate to one particular action, but are inclined indifferently to many: and they are determinant to acts by means of habits…” (Aquinas ST, Ia-IIae 55.1). Aquinas further described virtue as “an operative habit, is a good habit, productive of good works” (Aquinas ST, Ia-IIae 55.3). The virtues are those habits which incline people towards proper actions

 

Even though its fruits ensure that people have their liberty, (Commutative) justice is a virtue which restricts a person’s degrees of freedom in their behavior. A just person is a person obedient to the injunctions of commutative justice, and thus could be considered less free than someone who did not have any regard for those rules. However, if there is going to be perfect liberty in a society, then it’s members must have the virtue of (commutative) justice. Becoming a “servant of the law,” as Cicero expressed it, is a matter of having the virtue of commutative justice.

 Overall, even though institutions may certainly do much to ensure justice, the question of whether a society is just is first and foremost a question of whether there is the virtue of justice in a society. While institutions can do much to ensure justice while that virtue fails, institutions themselves cannot ensure justice, and they cannot operate where people do not think of them as legitimate. Even the question of whether there are institutions that ensure commutative justice 

  

 

II) Commutative Justice is not messing with other people’s stuff, and liberty is other people not messing with our own stuff.

Put crudely but effectively, commutative justice is not messing with other people’s stuff. We can talk about it in more glamorous terms as abstaining from another’s, as Adam Smith puts it in The Theory of Moral Sentiments. Nevertheless, the cruder expression viscerally cuts to the heart of the meaning of commutative justice: There’s a line between my stuff and yours, do not cross it! The virtue of commutative justice enables human beings to enter society knowing, because of their confidence that their persons and their property are secure.  

I prefer talk in terms of commutative justice to talk in terms of property titles. The reason is that commutative highlights both the social aspect of property titles as an outcome of human interaction as well as provides a richer context for understanding property titles in context of. After all, the creation and preservation of property titles requires simply more than the existence of property titles in written law. They require a social ecosystem, made possible by the virtue of (commutative) justice, which ensures that people respect the injunction not to mess with other people’s stuff. 

Reliable property titles are only an outcome of commutative justice. The virtue needs to be there before that outcome can be observed, one reason why simply legislating property titles into existence without any concern for the underlying culture is bound to fail. What matters more for a society in the long run, in the historical perspective, is not whether there are property titles, but whether the virtue of commutative justice, is prevalent. That is turn is a sine qua non for there being reliable property titles. 

 

Commutative justice ensures liberty by providing each person with a protected private sphere, demarcated by their stuff, which ensures that they are protected against other people’s coercion. The essence of coercion is the replacement of one persons’s hopes and ambitions with another’s. It manifests itself when a person imposes their will upon another. Commutative justice protects against coercion by providing each person a space demarcated by their person and property which no other equal can step in without her consent. It is a grammar, a set of rules admitting of no exception or modification (Smith TMS, II.6.11), which ensures that people within society are treated with respect as an equal whose own ends are legitimate in the eyes of society.  

 

 

III) Liberty can only be achieved if everyone obeys commutative justice, and therefore necessarily involves social interaction. The virtue of commutative justice is singular, but the rule of law is emergent.

The rule of law, the rule of laws not of men, is an emergent outcome of a society of people perfectly obeying the virtue of (commutative) justice since the law is an outcome of everybody’s virtue rather than a single person’s dictates, and, without that need for a single person’s dictates, the virtue of (commutative) justice alone determines the interaction of people within society. The rule of law is the outcome of a society in which the people who constitute that society are all obedient to the injunction of the virtue of commutative justice not to mess with other people’s stuff. 

When we think about freedom as being able to do what one wants (which is certainly a way the word is used in common language), then the virtues restrict human freedom. By being commutatively just, we are restricting ourselves not to mess with other people’s stuff. Indeed, the tyrant and the thief, in their violations of commutative justice, could be said to be more free than the virtuous citizen and the man of public spirit. However, the tyrant and the thief are only more free because they are intruding upon the freedom of others. For people to be protected against the interference of others and to be  confident in their liberty, other people in a society must restrict themselves by adopting the virtue of commutative justice even though that virtue restricts the degrees of freedom a person enjoys in his behavior. 

 

Commutative justice is not a cosmic constant; instead, it is a cultural innovation which human beings have learned in order to cope with the problems of social life. When human beings live in close proximity of one another, problems of conflict emerge because of the disparate ends which people seek in their own lives, and the various disagreements which occur in the course of social existence. 

The rule of law can then be understood as the emergent outcomes of human interactions directed by the virtue of (commutative) justice. It is an emergent outcomes because it cannot be understood by looking at the actions of only one person; rather, it is only once the greater choreography of society, with its many interacting components, comes into view that we can see what commutative justice actually is. By establishing a line beyond which each is free to pursue their own desire, property titles ensure that people of disparate ends can cooperate peacefully in society, and that no one will be made, against their will, another’s mean towards ends they have no say over.

That commutative justice is necessarily social is illustrated by its meaningless outside of the context of human interactions. Take Robinson Crusoe: Any notion of commutative justice would be alien to him, surviving alone upon a deserted island. Alone upon his island, he does not have to deal with the problems of living in close proximity with other people. The injunction not to mess with other people’s stuff is meaningless to him. He has no need for such things as the rule of law, and has no need to constrain his actions according to its dictates. Crusoe may do as he pleases because there is no other human being with whom he can have a conflict of ends with. Just as he has no use for the concept of society, he has no use of the concept of commutative justice.

 

In a meaningful way, Robinson Crusoe could be said to be freer than the citizens of the most liberal nation imaginable because Crusoe does not have  to obey commutative justice. People tend to want to be able to judge each situation on its own, and to act unobstructed by any general principle Commutative justice gives people no such opportunity. By being just, people are bound to not mess with other people’s stuff, and as Adam Smith writes in The Theory of Moral Sentiments: “The rules of justice are accurate in the highest degree, and admit of no exceptions or modifications” (Smith TMS, III.6.10).  The man living in society has to obey this social grammar in order to live in harmony with his fellow human beings. Otherwise, he cannot live with the expectation that he will be protected from the coercion of those around him.  

Crusoe, though, is no way constrained by the demands of those around him, and he can therefore do whatever he pleases without a concern for them. Crusoe, though, does not have to deal with all the problems of social existence which commutative justice, and the rule of law are meant to alleviate. Just as Crusoe does not have to deal upon the restrictions upon the degrees of freedom in his actions which commutative justice would impose upon him, he does not deal with the threats to his freedom which conflict with other people could have, and which commutative justice alleviates.  

Here we can understand the thrust of Cicero’s saying that “We are servants of the law so that we can be free.” Each person must constrain his own behavior according to the grammar of commutative justice if there is to be perfect liberty in a society. By obeying that grammar, they all become servants of the law, and they are all free because they can be confident that others will be obeying the same virtue. 

 

 

Conclusion 

In the end, the perfect maintenance of liberty requires that each person voluntarily accept the injunction of commutative justice not to mess with other people’s stuff. Liberty and obligation, albeit obligation to a virtue rather than a person’s desires, therefore come hand-in-hand in human society. The very force which ensures our liberty demands that we obey it ourselves if it is to have any meaning. 

Smith Contra Praxeology

 

From Smith's 1762-63 lectures on jurisprudence:

A free commerce on a fair consideration must appear to be advantageous on both sides. We see that it must be so betwixt individualls, unless one of them be a fool and makes a bargain plainly ruinous; but betwixt prudent men it must always be advantageous. For the very cause of the exchange must be that you need my goods more than I need them, and that I need yours more than you do yourself; and if the bargain be managed with ordinary prudence it must be profitable to both. It is the same thing with regard to nations. The exchange must always be profitable if they act with prudence, and as the number of the prudent will be pretty much the same on both sides, and this will be the far greater part, the benefit will be mutual. For it is evident that the other nation stands more in need of it than the other does of its own, and this must be the case on both sides (Lectures of Jurisprudence B: vi.160).

 

Clearly, Smith wouldn't go along with Mises' idea of praxeology. Smith wasn't trying to establish his study of the commercial society as a science as Mises was trying to do with praxeology. Instead, he was simply trying to understand the effects that people's interactions would have in the commercial society. He was a moral philosopher - one who believed The Theory of Moral Sentiments,rather than The Wealth of Nations,was his magnum opus - and so the notion of virtue was never far behind his writings, and here the virtue of prudence is on display. 

In the quote above, Smith depicts the commercial society as an ecosystem of virtue. Surely, yes, it's important that most trades in the commercial society are mutually beneficial, but also important from Smith's moral point of view that people who exercise prudence are the ones who most gain from trade.  The commercial society encourages virtue, which is a layer of analysis absent from Mises.  

 

In Human Action, Mises, ever the Kantian, was very much trying to elucidate a series of schemata of human behavior all architectonic by the principle that man acts. The first hundred and so pages of Human Action is largely simply a recapitulation of Immanuel Kant's method from The Critique of Pure Reason. Whereas Kant used the schema to establish the possible forms of our perception, Mises used his schema to establish all of the possible forms of purposeful behavior. Whereas Kant established his architectonic of transcendental idealism under the idea that all forms of perception are determined a priori, Mises established his architectonic of praxeology under the idea that human beings always trade a less satisfactory world for a more satisfactory one.  

 

Motivating Mises' use of schemata is his view that economics should be treated as a science: "Science always is and must be rational. It is the endeavor to attain a mental grasp of the phenomena of the universe by a systematic arrangment of the whole body of available knowledg" (Mises 1998: 10).  Throughout Human Action, Mises pounds the table that economics is a science, and that it should be treated as a science. Yet, I find that annoying.  

A discipline doesn't have to be a science to make meaningful statements about the world nor is being a scientist the badge of epistemological soundness that all too many. Even scientists can talk jibberish when they should know otherwise.  

Myself, I don't see what the fuss is all about. The modernist obsession with science is something we should grow out of. It would be nice if we could easily categorize sense and nonsense as 'science' and 'non-science', but we should know better. Gaining understanding is a more worthwhile goal than doing science, and we should leave no options to gain understanding untouched. 

 

Adam Smith on the American Future of the English-Speaking World

 

 

In The Wealth of Nation, Adam Smith recognized that the future of the English-speaking world would increasingly become the future of Britain’s North American colonies. In the eighth chapter of the first book, Smith discusses the comparative wealth of England and North America, arguing that even though England may be more wealthy when he was writing, that North America might eventually outpace that level of wealth thanks to its rapid advancement:

It is not the actual greatness of national wealth, but its continual increase, which occasions a rise in the wages of labour. It is not, accordingly, in the richest countries, but in the most thriving, or in those which are growing rich the fastest, that the wages of labour are highest. England is certainly, in the present times, a much richer country than any part of North America. The wages of labour, however, are much higher in North America than in any part of England. In the province of New York, common labourers earn three shillings and sixpence currency, equal to two shillings sterling, a day; ship carpenters, ten shillings and sixpence currency, with a pint of rum worth sixpence sterling, equal in all to six shillings and sixpence sterling; house carpenters and bricklayers, eight shillings currency, equal to four shillings and sixpence sterling; journeymen tailors, five shillings currency, equal to about two shillings and tenpence sterling. These prices are all above the London price; and wages are said to be as high in the other colonies as in New York. The price of provisions is everywhere in North America much lower than in England. A dearth has never been known there. In the worst seasons they have always had a sufficiency for themselves, though less for exportation. If the money price of labour, therefore, be higher than it is anywhere in the mother country, its real price, the real command of the necessaries and conveniencies of life which it conveys to the labourer must be higher in a still greater proportion.

But though North America is not yet so rich as England, it is much more thriving, and advancing with much greater rapidity to the further acquisition of riches. The most decisive mark of the prosperity of any country is the increase of the number of its inhabitants. In Great Britain, and most other European countries, they are not supposed to double in less than five hundred years. In the British colonies in North America, it has been found that they double in twenty or five-and-twenty years. Nor in the present times is this increase principally owing to the continual importation of new inhabitants, but to the great multiplication of the species. 

 

Later in The Wealth of Nations, in chapter seven of book four, Adam Smith goes even so far to predict that the North American colonies, thanks to their fecundity, would eventually surpass the importance of the British isles in the English-speaking world:

We, on this side of the water, are afraid lest the multitude of American representatives should overturn the balance of the constitution, and increase too much either the influence of the crown on the one hand, or the force of the democracy on the other. But if the number of American representatives were to be in proportion to the produce of American taxation, the number of people to be managed would increase exactly in proportion to the means of managing them; and the means of managing to the number of people to be managed. The monarchical and democratical parts of the constitution would, after the union, stand exactly in the same degree of relative force with regard to one another as they had done before.

The people on the other side of the water are afraid lest their distance from the seat of government might expose them to many oppressions. But their representatives in Parliament, of which the number ought from the first to be considerable, would easily be able to protect them from all oppression. The distance could not much weaken the dependency of the representative upon the constituent, and the former would still feel that he owed his seat in Parliament, and all the consequences which he derived from it, to the good will of the latter. It would be the interest of the former, therefore, to cultivate that good will by complaining, with all the authority of a member of the legislature, of every outrage which any civil or military officer might be guilty of in those remote parts of the empire. The distance of America from the seat of government, besides, the natives of that country might flatter themselves, with some appearance of reason too, would not be of very long continuance. Such has hitherto been the rapid progress of that country in wealth, population, and improvement, that in the course of little more than a century, perhaps, the produce of American might exceed that of British taxation. The seat of the empire would then naturally remove itself to that part of the empire which contributed most to the general defence and support of the whole.

Trucking, Bartering, and Trading: Unnecessary Propensities

 

Piaget, who was originally trained as a biologist, views intellectual development as an interaction of an inherited genetic program with the environment. It is no coincidence that he calls this conception "genetic epistemology," in effect the study of the hereditary unfolding of understanding.

- Edward O. Wilson, On Human Nature

 

In The Wealth of Nations, Adam Smith writes of the division of labor as a “very slow and gradual consequence of a certain propensity in human nature which has in view no such extensive utility; the propensity to truck, barter,  and exchange one thing for another” (WN I.ii.1). Smith’s focus on the propensity to truck, barter, and trade, as we tend to say today. For one thing, if the propensity to truck, barter, and trade is to have any meaning, then it must be some primordial propensity within humanity, but it simply isn’t. 

 

Nobody ever paces around their house at night thinking that they haven’t traded enough. Nobody ever goes outside of their home’s doors in the morning thinking about how they can relieve that itch to truck, barter, and trade. Instead, someone paces around their house at night thinking about how they will pay their bills after being laid off from a job they held for years. Instead, someone leaves their doors thinking about finally getting that Playstation 4, or BMW, that they had long been desiring. 

When those people pay their bills or buy that coveted item, to speak as if they are expressing some innate propensity to truck, barter, and trade is misguided. After all, the people in question aren’t acting out of a desire to truck, barter, and trade; instead, they are acting out of a desire to see their own betterment. The propensity to truck, barter, and trade is itself a manifestation of something more fundamental to human motivation: the propensity for improvement. 

The propensity for improvement has many manifestations, and it is better to speak how that, more fundamental propensity, manifests itself across different contexts. For example, many have written about the propensity to rape, murder, and steal as a propensity opposed to the propensity , yet that propensity is itself merely a manifestation of the propensity for improvement. People rape, murder, and steal for reasons much alike to why they truck, barter, and trade: the desire to improve their current circumstances. Talking about those two propensities as two different sides of human nature which we need to direct and channel is at worse obfuscating the main issue and at best adding more parts than needed to the discussion. 

 

The main drive of the discussion is not that people have an innate desire to truck, barter, and trade; instead, it is that institutional contexts influence how people will interact. If we talk about propensities to truck, barter, and trade, and to rape, pillage, and murder, then we are speaking about a dual nature within the human soul which are opposed to one another. Yes, humanity has opposing desires, but talk of two contrasting propensities just rings too Manichean too me. The reality is much more muddled. What is really happening is that people are generally act so as to improve their lives. What they actually do is determined by the particular circumstances they face in the course of their lives. 

The persona dramatis is not the container of two conflicting captains seeking to pilot the ship, but people who are seeking how to better their conditions. Talk about different propensities only serves to introduce unnecessary and misleading aspects into the narrative. Smith’s talk about the origin or the division of labor just needs a discussion of the human propensity to seek a better world. He could’ve done without talk about a propensity to truck, barter, and trade so today we shouldn’t consider ourselves at all obligated in following with such talk as well. 

Garett Jones' Tenth Commandment Club

 

You shall not covet your neighbor's hour; you shall not covet your neighbor's wife, or his manservant, or his maidservant, or his ox, or his donkey, or anything that is your neighbor's.

Gen: 20.17 

 

In a review of Thomas Piketty's Capital in the Twenty-First Century, "Living with Inequality," Garett Jones makes a point that I think is much broader than merely a critique of Piketty's approach:

Instead of preaching to reduce inequality as a means to reduce social conflict, we should instead preach to reduce social conflict itself. The best way to defuse the situation is to teach tolerance for inequality. Piketty wants tolerance formerit-based inequality, for better workers earning more than others, for a reward to frugality, and the like. But we could also use tolerance for luck-based inequality: for the inheritor of a fortune, for the pretty-good CEO who gets an eight-figure bonus just because his company's product went viral on Vine. Political battles against inequality have too many invisible casualties—missing factories, unbuilt apartment complexes—even in the best of cases. And given the intense political world of the aging rich countries, we're unlikely to experience the best of cases.

That's why I propose the creation of the Tenth Commandment Club. The tenth commandment—"You shall not covet"—is a foundation of social peace. The Nobel Laureate economist Vernon Smith noted the tenth commandment along with the eighth (you shall not steal) in his Nobel toast, saying that they "provide the property right foundations for markets, and warned that petty distributional jealousy must not be allowed to destroy" those foundations. If academics, pundits, and columnists would avowedly reject covetousness, would openly reject comparisons between the average (extremely fortunate) American and the average billionaire, would mock people who claimed that frugal billionaires are a systematic threat to modern life, then soon our time could be spent discussing policy issues that really matter.

People who are genuinely materially desperate aren't the issue here. The Tenth Commandment Club has no qualms with a Jean Valjean stealing bread to feed his family. But the implicit emphasis of Piketty's Capital is with comparing the 1 percent (or 0.01 percent) to the typical person living in the G-7, a person who is, on average, more fortunate than most of the world's population and more materially fortunate than almost anyone living in the 19th-century novels that Piketty so loves to discuss. To paraphrase an old P.J. O'Rourke joke, just think about Mr. Darcy's visits to the dentist.

 

 Jones' point was probably inspired by Vernon Smith's Nobel Memorial Banquet Speech, when Smith said we wished to celebrate:

The ancient Judeo Commandments: Thou shalt not steal or covet the possessions of thy neighbor, which provide the property right foundations for markets, and warned that petty distributional jealousy must not be allowed to destroy them. Neither shalt thou commit murder, adultery or bear false witness, which provide the foundations for cohesive social exchange.

As usual, ancient wisdom does better than modern economics. Piketty aside, inequality is simply an unjustified obsession of far too many economists on the left. With that obsession they all too often violate the Tenth Commandment.

Nassim Taleb, a magnificent voice in the current debate in favor of ancient wisdom, lambasts those who have focused on inequality per se instead of the threat of those who gain income despite having not skin in the game:

Worry about skin in the game, not inequality. Worry about equality in opportunity not outcome. Worry about the powerful corporations taking over the system via lobbyists and blocking artisans. Worry about the class of privileged mandarins-WNSITG (with no skin in the game) taking over the system via "grandes ecoles"... 

Taleb also critiques Piketty's statistical measurements of inequality, but here I don't see myself talking about Piketty himself as much as larger trends within leftist economics.

Really, what matters is an ethical point: We all too often violate the Tenth Commandment when we talk about the threats of inequality. It doesn't matter whether our words are put in terms of the 99% or of the social conflict created by inequality, they are still motivating by wanting what is our neighbor's.

A pity is that one of the principalc jobs of the economist is to teach the public that the commercial society is morally good. That is something we can all learn from Adam Smith's research program from The Theory of Moral Sentiments to The Wealth of Nations. Through the honest pursuit of income, the very rich work towards the benefit of all. The very rich thereby deserve celebration, not derision. 

It is only when the very rich don't have skin in the game and when they use politics to game the system for themselves that we should worry. Otherwise we should simply be good Jews/Muslims/Christians/Smithians and respect the Tenth Commandments. As usual, traditional deontic morality > modern technical economics. 

Liberty and Discrimination

English idea: Every man has a right not to be robbed by a neighbor - an Englishman must not be robbed by the state. Abstract [idea]: Every man has good a right as an Englishman to be protected against the state as well as against the subject.

- Lord Acton, Add. Mss. 4945, p. 36

 

Like property, liberty is a claim against the world. It is a claim that each may do with their stuff whatever they want as long as they do no violate the liberty of another. It is such a simple idea, but it is an idea which has become at times a great taboo. Everywhere in modern society, people are laying claims on other people’s stuff as properly belonging to themselves, and this trend has recently manifested itself in Arizona.   

The brouhaha over Arizona’s bill SB 1062 to ensure that people can refuse service to gays if doing so would violate their religious beliefs shows just how little liberty has power in politics. What is wrong with the bill is not that it allows people to refuse service to gays, it’s that it doesn’t take a general position on the freedom of association. Why does a baker have to provide service to anyone they do not want? The baker’s property is not their customers’ property, and no one should be able to order a baker to bake them a cake in a free society. And yet, that’s exactly what happens. It shouldn’t matter if the customers are gay, and if the baker practices a certain religion; all that should matter is what the baker wants to do with his stuff.  

 

However, there are those who nevertheless argue that politicians should pass laws to prevent such freedom. The Economist’s S.M. in the blog, “Democracy in America,” S.M. writes:

That is a prospect much more worrisome than the bill’s opponents seem to fathom. Yes, SB 1062 gives businesses license to walk away from jobs with gay clients. But it also empowers any individual or entity to discriminate against people they find religiously unpalatable. Do you believe that physically unattractive people are marked as such by a disapproving deity? You needn’t hire them to work in your mail room. Are video games unholy pastimes of the Devil, in your sincere estimation? Ask people applying to wait tables in your restaurant if they play Minecraft and dismiss them if they do. If Governor Brewer decides to sign into law this radical expansion of Arizona's religious-freedom regime—something both Republican senators from the state are urging her not to do, along with three of the state senators who voted for the bill but have since changed their minds—every Arizonan will be a potential fount of religiously inspired discrimination.  

S.M. conceals an argument against liberty and the freedom of association, and property rights as an argument against discrimination. The problem is that S.M. is not arguing against discrimination, he’s arguing just against people’s freedom of association along with it, and he is saying that people should be forced to associate as long as there is no good reason why they shouldn’t. However, both liberty and along with it the freedom of association are rooted in people being able to do whatever they want with their own stuff as long as they don’t harm others. S.M.’s argument is therefore an argument against liberty. 

 

The liberal project in politics over the past three centuries can be seen as each person as being guaranteed as the allodial owner of their property as compared to a tenant to their property by the good will of those above them. In his Lectures on Jurisprudence, the great sage of the liberal project Adam Smith contrasts allodial ownership with feudal titles:

The lands in those countries were all what we call allodial, i.e. held of no one, but were intirely the property of the proprietor, so that the state could not limit the use he was to make of any part of his estate. But in the feudal governments, the king was considered as dominus directus, which had then a considerable benefit attending on it. The possessor<s> as domini utiles only his tenants, as they are called, and held of him (LJ A, 67).

An allodial title is a title to property in rem against the world. It is distinct from a feudal title in that there is no overlord who can tell the allodial owner what he can and cannot do with his property besides not harming others, which is something allodial property owners can expect from each other as political equals.  A liberal polity minimizes the power that superiors in politics have in dictating to people what they may do with their own., and so seeks to make all ownership allodial with respect to the state 

The liberal project can be expressed in other terms, whether that is the non-aggression axiom or the presumption of liberty, but the core of the project remains the same: minimizing the extent to which there are superiors in politics who get to tell the rest what to do. For a man to be his own allodial, he must be free to decide the use of his property as he wishes, constrained only by not injuring other people’s property. There cannot be a superior above him who can dictate to him how may he use it. He must be the sole lord to his titles of ownership. 

 

Laws against discrimination limit people’s free exercise of their property, and in doing so create a superior authority above people in society which limits the free exercise of their property. The subtitle of S.M.’S piece’s “Gay rights and religious freedom,” betrays just how far people have wandered from liberty. When gay rights encompass someone being able to order someone else to cooperate with him on the markets, people no longer has allodial ownership over their property Instead, they own their property on the condition, ensured by some superior in politics, that they do no discriminate against gays. Even though such laws have been dressed up as democratic, they are little more than a new form of feudalism. 

The important point of difference between the discrimination that can happen as a consequence of the freedom of association, and the discrimination which resulted from the Jim Crow laws is that only one involved superiors in politics telling others what to do with their stuff. Discrimination which results from private citizens not wanting to associate with one another is an equal-equal interaction. Here each person has allodial ownership over his property, and that he is therefore free to utilize it however he wishes without injuring another. The Jim Crow laws, though, are an example of superiors in politics determining what other people could do with their property. Here there is a superior present who can order others how they may use their property, and so people do not own their property in an allodial fashion, but only as tenants to the superior’s wishes.  

 

Liberty is a taboo, and freedom of association is all but dead. A new feudalism reigns in which people are constrained to the desires of others. It’s just that this form of feudalism is dressed up with a fig leaf of democracy with reference to some made-up social contract invented by a few, and certainly no signed by all. Nevertheless, no one owns his property allodially; instead, each is a tenant to the wills of others in society, and that tenancy goes as far as dictating with whom people must associate with.