Efficiency or a “Fair ” Game

Efficiency or a “Fair” Game: John Rawls Contra Lionel Robbins David M. Levy Center for Study of Public Choice George Mason University Fairfax VA 22030 DavidMLevy@gmail.com Sandra J. Peart Jepson School of Leadership Studies University of Richmond Richmond VA 23173 Speart@Richmond.edu 27 November 2007 Introduction On the occasion of its 75th anniversary, we consider the message of Lord Robbins’ Nature & Significance of Economic Science [N & S] through the vantage of John Rawls’ systematic reading of 20th century economists. Robbins seems to have been an early guide, perhaps the earliest, in Rawls’ search for understanding the classical utilitarian tradition. In his early work, Rawls emphasized that Robbins’ statement of classical utilitarianism was the best form of that doctrine. Rawls’ deepest criticism of that doctrine was that it did not sufficiently respect persons (Rawls 1971, p. 24) so that, in principle, it offered no objection to slavery so long as slavery was efficient, that is to say, maximized social happiness (Rawls 1971, p. 137). Rawls’ preferred alternative to utilitarianism, justice as fairness, is found in embryonic form in the writings of Frank Knight for whom personhood and liberty are prior to happiness itself. Rawls’ reading of Robbins as a utilitarian philosopher sheds light on the still controversial matter of interpersonal comparisons of well-being. For both Robbins and Knight interpersonal comparisons are part and parcel of the human condition. Interpersonal comparisons are agents’ motivating beliefs about the well-being of others. What distinguishes Robbins and Knight from other economists of their time is this emphasis on the importance of the theorizing ability of the agents in their models. The economist’s warrant for acknowledging interpersonal comparisons is the fact that the agents we study make them. Whether that constitutes a “scientific” warrant for interpersonal comparisons depends upon what that word is taken to mean. However, if agents act on the basis of their interpersonal comparisons, but economists fail to recognize these comparisons then their models will not accord with actual experience. Robbins calls attention to Knight’s emphasis on the fact that agents are theorists. What makes Knight special is his continual insistence on the special nature of the problems of the social sciences, concerned as they are with individuals who are capable of learning and acting on the basis of such learning, 1 rather than with unreflecting entities. No one has so successfully waged war upon the position that “since natural objects are not like men, men must be like natural objects” (Robbins 1957, p. 399). In this paper, we begin by documenting Rawls’ reading of Robbins and of Knight’s Ethics of Competition. Second, we review Robbins’ discussion of Wicksteed at the time when interpersonal comparisons of well-being entered choice theory. We note Robbins’ opposition to hedonism in N & S, where by “hedonism” Robbins referred to the argument that an agent’s choice entails no concern for other people’s well-being. We call this “reclusive agency” to emphasize that this is our interpretation of Robbins’ “hedonism” and Rawl’s “rational unreasonableness.” Third, we consider the consequence of economists’ refusal to credit the possibility that the agents of their models engage in motivating interpersonal comparisons so the preferences of a Robinson Crusoe would not be perturbed when Friday enters the island (Bator 1957). This model of reclusive agency has fared poorly in the experimental arena (Sally 1995, Camerer and Thaler 1995) Rawls on the Economists Rawls’ views on Robbins and Knight are evident from two types of evidence. First, there is what Rawls published. Second, there are the marginal comments about Robbins’ and Knight’s arguments which Rawls made in his books in the course of his reading. The annotations add to the insights in the published work. It is not obvious from reading Rawls’ later work that either Robbins or Knight is important to his argument, but the marginal notations suggest otherwise. Indeed, at the foundation of economics itself Rawls sees two names: Robbins and Knight. Rawls’ marginal note on Gunnar Myrdal’s definition of the economic problem in Political Element in the Development of Economic Theory singles them out1 1 As a guide to the past Myrdal needs to be taken with great seriousness even though his achievements have been clouded by his involvement in eugenics (Broberg & Tydén 1996). The fact that sterilization of “the unfit” is a viable element in his policy space makes his reading of F. Y. Edgeworth’s Mathematical Psychics particularly valuable. Our reading of Edgeworth’s eugenic utilitarianism is found in Peart & Levy (2005c, pp. 226-33 ). There is a brief discussion of eugenics in Pigou’s Economics of Welfare (1932, pp. 10910) on which Rawls does not remark. The chapter “Quality of the People” (1932, pp. 106-22) argues one can bring about an equalization of capacity for happiness by equalizing income. The endogeneity of capacity for happiness might be what Rawls refers to when discussing utilitarianism in “Justice as reciprocity” which we quoted below. The sentence “When pressed they might well have invoked the idea of a more or less equal capacity of men in relevant respects if given an equal chance in a just society” is a nice summary of the hope in Pigou’s “Quality of the People” chapter. 2 Reading Robbins Rawls seems to have learned to read the philosophical economists of the past through Robbins’ Theory of Economic Policy in English Classical Political Economy. From that text he found Nature & Significance and as a result of reading that and the discussion which followed, he concluded that Robbins’ was the best formulation of utilitarianism. Here’s is Rawls’ statement from 1955 which is echoed in the opening of TJ: It is important to remember that those whom I have called the classical utilitarians were largely interested in social institutions. They were among the leading economists and political theorists of their day, and they were not infrequently reformers interested in practical affairs. Utilitarianism historically goes together with a coherent view of society, and is not simply an ethical theory, much less an attempt at philosophical analysis in the modern sense. The utilitarian principle was quite naturally thought of, and used, as a criterion for judging social institutions (practices) and as a basis for urging reforms. It is not clear, therefore, how far it is necessary to amend utilitarianism in its classical form. For a discussion of utilitarianism as an integral part of a theory of society, see L. Robbins, The Theory of Economic Policy in English Classical Political Economy (London, 1952).2 2 Rawls (1955, p. 19). The second paragraph in Theory of Justice’s preface says this: “Perhaps I can best explain my aim in this book as follows. During much of modern moral philosophy the predominant systematic theory has been some form of utilitarianism. One reason for this is that it has been espoused by a long line of brilliant writers who have built up a body of thought truly impressive in its scope and refinement. We sometimes forget that the great utilitarians, Hume and Adam Smith, Bentham and Mill, were social 3 In Rawls’ vision there is an unbroken discussion among the classical utilitarians. What he tells his students in his history of political philosophy class is much more detailed: Before I actually turn to Hume I might point out that he is one of long line of utilitarian writers, only a few of whom we will be able to discuss. Utilitarianism was, and still is perhaps, the most influential and longest continuing tradition in English speaking moral philosophy. While it perhaps can claim no writer of the stature of Aristotle and Kant (their ethical works being in a class by themselves), taking the tradition as a whole, and viewing its extent and continuity and ever increasing refinement in certain parts of the view, utilitarianism is perhaps unique in its collective brilliance. It has run at least from the early part of the 18th century to the present time and has been marked by a long line of brilliant writers who have learned from each other. These include Frances Hutcheson, Hume, and Adam Smith; Jeremy Bentham, F. Y. Edgeworth, and Henry Sidgwick, the main classical utilitarians; and John Stuart Mill, whose views include many nonutilitarian features. As a result, having evolved continuously over nearly three centuries, it is probably the most impressive tradition in moral philosophy. One must remember that utilitarianism is historically part of a doctrine of society, and is not simply a detached philosophical doctrine. The utilitarians were also political theorists and had a psychological theory. Also, utilitarianism has had considerable influence in certain parts of Economics. Part of the explanation for this is that if we look at the more important economists in the English tradition before 1900 and the well-known utilitarian philosophers, we'll find that they're the same people; only Ricardo is missing. Hume and Adam Smith were both utilitarian philosophers and economists, and the same is true of Bentham and James Mill, John Stuart Mill (though he is questionably a utilitarian, for reasons I shall discuss later) and Sidgwick; and Edgeworth, while he was known primarily as an economist, was something of a philosopher, at least a moral philosopher. It is not until 1900 that this overlap in the tradition stops. Sidgwick and the great economist Marshall were both in the same department at Cambridge when they decided to found a separate department of economics, I believe in about 1896. (Rawls 2007, p. 162). Connections between economics and philosophy were lost with considerable cost: Since that time there has been a split, although utilitarianism still influences economics, and welfare economics has a close connection historically to the utilitarian tradition. Still, since 1900 the tradition has divided into two more or less mutually-ignoring groups, the economists and the philosophers, to the reciprocal disadvantage of both. (2007, p. 162) Rawls read Nature & Significance carefully, a reading which shows in his “Justice as Reciprocity,” (1959/1971, p. 222). Here utilitarianism, with the normative assumption of equal capacity à la Robbins, is interpreted as theorists and economists of the first rank; and the moral doctrine they worked out was framed to meet the needs of their wider interests and to fit into a comprehensive scheme.” Rawls (1999 [1971], p xvii). 4 moral and political principles expressed in a somewhat technical language. .... More importantly, one could hold that the best way to defend the classical utilitarian view is to interpret these assumptions as moral and political principles. ... When pressed they might well have invoked the idea of a more or less equal capacity of men in relevant respects if given an equal chance in a just society. Giving Robbins’s three major publications pride of place, the footnote to the passage adds: See D. G. Ritchie, Natural Rights (London, 1894), pp. 95ff., 249ff. Lionel Robbins has insisted on this point on several occasions. See An Essay on the Nature and Significance of Economic Science, 2d ed. (London: Macmillan, 1935), pp. 134-143; “Interpersonal Comparisons of Utility: A Comment,” Economic Journal, 48 (1938): 635-641; and more recently, “The Theory of Economic Policy,” in English Classical Political Economy (London: Macmillan, 1952), pp. 179ff. Rawls’ description of Robbins’ reformulation of egalitarian utilitarianism as the “best way to defend the classical utilitarianism” might be read in light of Rawls’ interpretative principle.3 In Rawls’ markings on the critical line of argument in N & S, “Yes” and “Spendid!” are clearly visible. “Maine’s Brahmin” suggests that Rawls came to N & S through a later text. Rawls notes Robbins argument that public finance in a democracy presupposes that the judgment of an equality of capacity is widely shared. Now, of course, in daily life we do continually assume that the comparisons can be made. ... In Western democracies we assume for certain purposes that men in similar circumstances are capable of equal satisfactions ... so for purposes of public finance we agree to assume equality of capacity (Robbins 1932, p. 140). Thus, interpersonal comparisons are not isolated to the observing economists but rather spread throughout the population. The economist’s warrant comes from the agreement of the agents. 3 Rawls’ attitude is quoted to preface his Lectures on the History of Moral Philosophy “I took to heart Mill’s remark ... ‘A doctrine is not judged until it is judged in its best form.’” “I always took it for granted that the writers we were studying were much smarter than I was. If they were not, why was I wasting my time and the students’ time by studying them? If I saw a mistake in their arguments, I suppose those writers saw it too and must have dealt with it. But where? I looked for their way out.” (Rawls 2000, xvi) 5 6 7 8 9 10 Rawls reading Knight. Rawls’ criticism of utilitarianism’s insufficient attention to personhood in the possible defense of slavery suggests why he would be attracted to Knight, who absolutely rules out slavery. Without liberty and the exercise of personhood life is not worth living even in slavery “however bountiful for all physical wants” (Knight 1935, p. 28). Rawls saw this in Knight’s teaching. Here’s the page from Ethics of Competition with his note: “Lexical order!” 11 12 A benefit of juxtaposing Rawls’ notes with his published work is that we can fill in the steps that were obvious to Rawls, perhaps, but which we might not otherwise see. Consider the first of the three times in which Knight is cited in Theory of Justice. Rawls worries that “political power rapidly accumulates and becomes unequal” These questions, however, belong to political sociology.14 I mention them here as a way of emphasizing that our discussion is part of the theory of justice and must not be mistaken for a theory of the political system. We are in the way of describing an ideal arrangement, comparison with which defines a standard for judging actual institutions, and indicates what must be maintained to justify departures from it (Rawls 1971, p. 199) Note 14 reads this way. My remarks draw upon F. H. Knight, The Ethics of Competition and Other Essays (New York, Harper and Brothers, 1935), pp. 293-305. The commonality is not simply an empirical claim; the emphasis on ideals to direct reform is common to Knight and Rawls. Rawls identifies Knight’s idealism with what “J as F holds” as we can see in the notation which Rawls added to Knight (1935, p. 44). “J as F” surely stands for “Justice as Fairness.” Knight’s adherence to what he calls as “common-sense ideals of absolute ethics in modern Christendom” (1935, p. 44), which Rawls underscores, stands in contrast to Robbins’ provisional utilitarian opposition to “absolute systems.”4 4 Robbins (1938, p. 635): “My own attitude to problems of political action has always been one of what I might call provisional utilitarianism. I am far from thinking that thorough-going utilitarianism and a la Bentham is an ultimate solution of any of the major problems of social philosophy. But I have always felt that, as a first approximation in handling questions relating to the lives and actions of large masses of people, the approach which counts each man as one, and, on that assumption, asks which way lies the greatest happiness, is less likely to lead one astray than any of the absolute systems” 13 14 Robbins and Wicksteed As noted above, for Robbins interpersonal comparisons are continually made by ordinary people in their daily lives. Rawls takes great care to emphasize how important sympathy is for the utilitarians in their account of interpersonal relations. (Rawls 1971, p. 155) While his own system placed more stress on reciprocity and impartiality than it does on sympathy, Rawls made an important distinction between reasonable and rational actions in terms of interpersonal actions however motivated. Reasonable people reciprocate; rational people may or may not reciprocate.5 In his classroom lectures on Hobbes’ political philosophy, Rawls explains the distinction between the reasonable and the rational in terms of how hard one bargains.6 Rawls’ utilitarian economists, David Hume and Adam Smith, answered Hobbes by going beyond the rational to the reasonable.7 So as not to prejudge the issue, we refer to agents without sympathy – those Robbins would call “hedonistic” -- as reclusive agents. We shall sketch an example later in the paper to show how the refusal 5 In a letter to James Buchanan, August 27, 1978, Rawls discusses as some length his growing unhappiness with rational choice considerations. A “consistent lunatic” can be rational but we don’t what have him to have an influence in political discussions, Peart & Levy 2008. In Justice as Fairness, Rawls adds this note: “Here I correct a remark in Theory, §3: 15 and §9: 47 (1st ed.), where it is said that the theory of justice is a part of the theory of rational choice. From what we have just said, this is simply a mistake, and would imply that justice as fairness is at bottom Hobbesian (as Hobbes is often interpreted) rather than Kantian. What should have been said is that the account of the parties, and of their reasoning, uses the theory of rational choice (decision), but that this theory is itself part of a political conception of justice, one that tries to give an account of reasonable principles of justice. There is no thought of deriving those principles from the concept of rationality as the sole normative concept.” Rawls (2001, p. 82). 6 Rawls (2007, p. 54): “For the moment ‘rational’ and ‘reasonable’ are simply words, labels, and we do not know what the difference between them might be. In ordinary English both mean being consistent with or based on reason, in some way. But, in everyday speech we do seem to have a sense of the difference between them. We don't usually use these terms synonymously. One might say of somebody, ‘He was driving a very hard bargain and being extremely unreasonable, but I had to concede that from his point of view he was being perfectly rational.’ In that, we recognize the distinction, to some extent. We tend to use ‘reasonable’ to mean being fair-minded, judicious, and able to see other points of view, and so forth; while ‘rational’ has more the sense of being logical, or acting for one's own good, or one's interests. In my own work, and in this discussion, the reasonable involves fair terms of cooperation; while the rational involves furthering the good or advantage of oneself, or of each person cooperating.” 7 Rawls (2007, p. 161): “The utilitarian view differs from Hobbes inter alia in these three ways: (a) Utilitarianism rejects psychological egoism [except for Bentham], and it insists on the significance of the sentiments of affection and benevolence. Although here, Hume's thesis of limited generosity is important in his account of justice and politics, (b) Utilitarianism rejects Hobbes's relativistic conventionalism regarding the distinction between right and wrong, and insists on the reasonableness and objectivity of the principle of utility, (c) Utilitarianism rejects Hobbes's view that political authority rests on force.” 15 to take the interpersonal comparisons required by human sympathy seriously has left economic models illprepared for the tribunal of experimental evidence. Robbins reading Wicksteed. One economist who is not on Rawls’ list of utilitarians is central to Robbins’ project of clarifying that reclusive agents are not the sum and substance of economic theory: Philip Wicksteed.8 Following Wicksteed, Robbins supposes that economic agents in fact make sensible interpersonal comparisons of well-being in their daily lives. As a theorist, Robbins can make interpersonal comparisons of well-being by appealing to the beliefs shared amongst and with those he models. Recent scholarship explains how Wicksteed made a kindred argument.9 Robbins suggested that N & S owes more to the work of Ludwig von Mises and Philip Wicksteed’s Common Sense than to any other (1935, pp. xv-xvi). There are two versions of Robbins’ essay on Wicksteed. Chronologically, these essays bracket the publication of N & S. The first appeared in Economica in 1930 and was published in the Wicksteed biography (Herford 1931). The second version was published as the introduction to the 1933 reprint of Commons Sense of Political Economy and not reprinted until many years later. The passage emphasized below was added to the 1933 reprint. It speaks to Wicksteed’s chapter “Business and the Economic Nexus” 8 Wicksteed’s name is not in the index of Rawl’s Collected Papers nor that of Theory of Justice. Moreover, Rawls’ copies of Schumpeter History of Economic Analysis and Blaug’s Economic Theory in Retrospect reveal no attention to either authority’s discussion of Wicksteed. Lowry (1987, p. 210) and Comin (2004) press the Aristolean element in Wicksteed’s thought making a cause for regret that Rawls did not comment on Wicksteed. 9 Comin (2004, p. 481) summarizes Wicksteed’s position: “Fourth, economists should make use of ‘matter-of-fact’ sorts of argument, in those cases where judgments are theoretically false but correct in practical terms. For instance, it is theoretically impossible to reduce moral values and material objects to a common denominator, but in practical terms people are permanently engaged in this sort of calculation (364). He makes a distinction between what can be asserted strictl) speaking and what can be stated using the language of common sense (149), which could be theoretically false but true in practical terms. A good example is provided by our habitual estimates of the relative urgency of wants experienced by different people; suffering from being burnt alive is in practical terms worse than suffering from a gnat bite: practical matters can be considered relevant even if we cannot assess their complete theoretical accuracy.” Comin adds the following note: “Another good example, brought to my attention by Professor Ian Steedman, is Wicksteed's readiness to say both that interpersonal comparisons cannot be made and that one pound means more to a poor man than to a rich one.” 16 This, if I read him correctly, was the feature of his work to which he himself attached greatest importance, and it is for this above all that he deserves to be remembered. Before Wicksteed wrote, it was still possible for intelligent men to give countenance to the belief that the whole structure of Economics depends upon the assumption of a world of economic men, each actuated by egocentric or hedonistic motives. For anyone who has read the Common Sense, the expression of such a view is no longer consistent with intellectual honesty. Wicksteed shattered this misconception once and for all. Yet, curiously enough, no aspect of his thought has been more completely neglected. The reason is not far to seek. In England, at any rate, the average economist, secure in the tradition of an analysis which has proved its worth in practice, is apt to be impatient of inquiries which linger on implications and modes of conception. The man in the street, egged on by the inexpert practitioners of other branches of the social sciences, may reproach him for an ingrained materialism and an assumption of a simplicity of motive unwarranted by the complexity of the situation to be analysed. (1933, xxi-xxii) [Emphasis added.] Robbins added a note that he had “endeavoured to bring out some of the implications of this part of Wicksteed’s teaching” in N & S (1933, xxii). Wicksteed on interpersonal comparisons. Those who know Robbins’ Ely lecture will recall the image of the head of the household dividing a turkey based on the judgment of interpersonal well-being (Robbins 1981, p. 5). Robbins’ version was a variation of Wicksteed’s problem of whether the housewife who buys in the market and distributes at home is actuated by two sets of motives. Discussion of the role of the woman of the house as administrator is as old as “economics” itself since it appears in Xenephon’s Socratic dialogue Oeconomicus11. It is worthy of remark that the expert to whom Socrates defers is the woman of Pericles’ household.11 We quote Wicksteed at length: 10 Lowry (1987) prefaces his chapter “Xenophon and the Administrative Tradition” with a passage from Wicksteed. 11 Xenopon (III.12-15). Socrates is speaking: “Is there anyone to whom you entrust a greater number of serious matters than to your wife? ... Is there anyone with whom you have fewer conversations than with your wife? ... And you married her when she was a very young child who had seen and heard virtually nothing of the world? ... Wouldn't it be much more remarkable if she had any knowledge at all about what she ought to say or do than if she made mistakes. Critobulus responds:. “What about those who you say have good wives, Socrates? Did they educate them themselves?” Socrates defers to the expert: “There is nothing like personal investigation. I will introduce Aspasia to you; she is much more knowledgeable in this matter than I am, and she will show you all this far more expertly than I should. I think that a wife who is a good partner in the estate carries just as much weight as her husband in attaining prosperity. Property generally comes into the house through the exertions of the husband, but it is mostly dispensed through the housekeeping of the wife.” 17 (a) It is often said or implied that the housewife, for example, is actuated by a different set of motives in her economic transactions in the market and her non-economic transactions at home; but this is obviouslv not so. The buying potatoes and cabbages in the market and helping them at table are integral portions of the same process, and the housewife is considering the wants of her family when she is making her purchases just as much as when she is distributing them. She is herself one of the family, and her personal and particular tastes and wants are consulted more or less consciously, and carry more or less weight, according to her disposition, her powers of imagination, and her state of mind at the moment; but her purchases are effected and her distributions made with reference to one and the same set of wants. It would be transparently absurd to say that she is only thinking of herself in the market-place, and thinking chiefly of others in the home ; or that her motives are entirely egoistic when she is buying the potatoes, and preponderatingly or exclusively altruistic when she is helping them. And as it will be generally admitted that she conducts her marketing in the main on business principles, it follows that the difference between what we are to consider a business transaction and what we are not so to consider is not determined by the selfishness or unselfishness, the egoism or altruism, of the inspiring motive. (Wicksteed 1910, p. 170) The trustee case illustrates the difference between economic and selfish motivation. Trustees are under strict obligation not to be generous in their dealings because generosity hurts those for whom they serve as trustee. The distinction that we have drawn between the selfish motive, which considers me alone, and the economic motive, which may consider any one but you, is well illustrated by the case of trustees. Trustees who have no personal interest whatever in the administration of the estates to which they give time and thought will often drive harder bargains— that is to say, will more rigidly exclude all thought or consideration of the advantage of the person with whom they are dealing—in their capacity as trustees than they would do in their private capacity. Thus we see that the very reason why a man feels absolutely precluded from in any way considering the interests of the person with whom he is transacting business may be precisely the fact that his motive in doing business at all is absolutely and entirely unselfish. The reason why, in this instance, there is no room for “you” in my consideration is just because “I” am myself already excluded from my own consideration. If I counted myself I should find room for you just so far as “I” take an interest in “you,” but if I do not admit myself I cannot bring in your interests as part of my own programme. The “others” for whom I act are others than you, more completely and irrevocably other than I myself should be; for though I might myself adopt as mine some of your purposes, I cannot affiliate those purposes of yours upon these “others” for whom I am acting. The transaction then becomes more rigidly “economic,” just because my motive in entering upon it is altruistic. (Wicksteed 1910, p. 175) Wicksteed next considers the housewife’s problem as one embedded in her larger view of life: her husband's income, and the general trend of her influence upon the expenditure of the rest and upon his methods of earning the whole, by the pressure of her character and energy in guiding and 18 stimulating not only his impulses, but those of his and her acquaintances, and any portion of the public to which she has direct or indirect access, by speech, by example, or by written word; above all, it is by her way of looking at things and feeling them, by her mental attitude towards life and her general sense of values, that the degree of her selfishness or unselfishness, her egoism or altruism, is to be determined ; and she is actuated by selfish or unselfish, by public-spirited or private-spirited motives, by a broad or a narrow selfishness, by a stupid appetite for martyrdom or a large sense of the significance of life for herself and others, according to her character, not according to the particular act that she is performing. (1910, p. 178). The particular allocation of household goods depends on interpersonal comparisons: The reason why she does not spend more in the market-place may be because she considers others besides her family; the reason why she eats some of the new potatoes herself may be because she considers herself; the reason why she does not eat more may be because she considers others as well as herself; but probably she is not thinking at all, but feels the collective or conjunct self from which neither she nor any other individual member could be withdrawn without impoverishment to the whole collective life, and into which so much as the idea of self-sacrifice could not be introduced without destroying its vital processes. Self-sacrifice would be no less fatal than self-assertion, and altruism and egoism are alike lost in the communal sense of which she is the organ. (1910, p. 178) The education function is not neglected: If she has occasionally to rebuke the egoism and appeal to the altruism of the little barbarians around her, it is because their communal sense is undeveloped; and she is well aware of the danger of turning them from barbarians into prigs if she develops altruism when it is the communal sense that needs development. Her normal function is by her own unconscious communal sense unconsciously to develop theirs. (1910, p. 178) Robbins Against Hedonism Robbins’ strictures against hedonism in Wicksteed presage the doctrine in N & S. There, Robbins cites Smith’s consideration of the esteem of others in the labor market as evidence that there is more to motivation in classical economics than pecuniary considerations (Robbins 1932, pp. 95-96). There were indeed appeals to hedonism in Gossen, Jevons and Edgeworth (1932, pp. 84-85), but as the examples of the Austrians demonstrate, those elements can be easily eliminated. The ability to deal with both egoism and altruism which we read in Wicksteed comes into N & S when Robbins explains why economists take wants as data: 19 So far as we are concerned, our economic subjects can be pure egoists, pure altruists, pure ascetics, pure sensualists or— what is much more likely—mixed bundles of all these impulses. The scales of relative valuation are merely a convenient formal way of exhibiting certain permanent characteristics of man as he actually is. Failure to recognise the primacy of these valuations is simply a failure to understand the significance of the last sixty years of Economic Science. (1932, p. 95). Of course, it is only in the case of the pure egoist agent that economists need not be concerned with an agent’s interpersonal comparisons to explain choice. Robbins writes about “economic man” and the question of selfishness: This, then, is all that lies behind the homo oeconomicus—the occasional assumption that in certain exchange relationships all the means, so to speak, are on one side and all the ends on the other. If, e.g., for purposes of demonstrating the circumstances in which a single price will emerge in a limited market, it is assumed that in my dealings in that market I always buy from the cheapest seller, it is not assumed at all that I am necessarily actuated by egotistical motives. (Robbins 1932, p. 96) The argument from the trustee case in Wicksteed appears when Robbins considers whether people are being selfish when we make economic decisions: On the contrary, it is well known that the impersonal relationship postulated is to be seen in its purest form when trustees, not being in a position to allow themselves the luxury of more complicated relationships, are trying to make the best terms for the estates they administer: your business man is a much more complicated fellow. All that it means is that my relation to the dealers does not enter into my hierarchy of ends. For me (who may be acting for myself or my friends or some civic or charitable authority) they are regarded merely as means. Or, again, if it is assumed—which in fact is usually done for purposes of showing by contrast what the total influences in equilibrium bring about—that I sell my labour always in the dearest market, it is not assumed that money and self-interest are my ultimate objects —I may be working entirely to support some philanthropic institution. It is assumed only that, to far as that transaction is concerned, my labour is only a means to an end; it is not to be regarded as an end in itself. (Robbins 1932, pp. 96-97) Wicksteed’s and Robbins’ agents live their lives making interpersonal comparisons. What does this suggest about Robbins’ strictures against the scientific basis of interpersonal comparisons? At a minimum, there is not a unique weighting scheme. Robbins and his utilitarian masters may well consider that a rule where everyone counts as one is uniquely defensible, but Maine’s Brahmin believes that he has a twenty 20 fold capacity for happiness than some ordinary person.11 Famously, Robbins finds no way to prove that one of these is false on some scientific basis. These judgments of the human capacity for happiness are fundamental ethical claims which Robbins’ choosing agent employs in day-to-day activity. Anyone who shares or administers for others has to consider their well-being. So, a theory of society requires more than simply scientific claims and mute preferences. At a minimum, it requires judgments of interpersonal well-being. Robbins explains this in his 1938 comment in response to criticisms in Harrod (1938) and others. I would urge that, in practice, our difference is not very important. They think that propositions based upon the assumption of equality are essentially part of economic science. I think that the assumption of equality comes from outside, and that its justification is more ethical than scientific. But we all agree that it is fitting that such assumptions should be made and their implications explored with the aid of the economist's technique. Our dispute relates to definitions and to logical status, not to our obligations as human beings. In the realm of action, at any rate, the real difference of opinion is not between those who dispute concerning the exact area to be designated by the adjective scientific, but between those who hold that human beings should be treated as if they were equal and those who hold that they should not. (Robbins 1938, p. 641) Because of his hostility toward those who opposed classical economics on the grounds of the lesser capacity of some groups of people, Robbins refused to take such arguments seriously in his historical work (Peart & Levy 2005c, p. 233; Peart & Levy 2005b). What Knight and Robbins Share What distinguishes Knight and Robbins is their opposing adherence to “absolute ethics” vs. utilitarianism. What unites them is that both regarded the agents of their models as theorizers. Those who read Robbins within the positivist tradition that regards ethical claims as meaningless, e.g., Putnam (2002, pp. 53-54), neglect how emphatic Robbins was that the agents economists study are themselves capable of 12 In N & S it is 10x the capacity for happiness, Robbins (1932, p. 140). In Theory of Economic Policy it is 20x the capacity for happiness on the authority of Maine’s Brahmin, Robbins (1952, p. 180). The fact that Rawls’ addes “Maine’s Brahamin” to the passage in N & S suggests that Rawls comes to N & S from Theory of Economic Policy. 21 theorizing.11 Robbins is even more emphatic that this attention to theorizing agents was one of Knight’s great contributions. If the assumption of equal capacity comes from outside the economics profession (outside economic “science”), then its justification for use by economists is that it is a belief shared by the community in which economists practice. The emphasis on the shared value of equality is what distinguishes what might be called the Knightian school of political economy, George Stigler being its major voice in the 1940s, which was soon to be eclipsed by the new welfare economics, Levy & Peart 2008. Knight’s defense of interpersonal comparison is brusque. It is axiomatic; something which is revealed in economic policy: It is a judgment of common Sense, on a level of self-evidence virtually that of the simpler mathematical axioms that, other things being equal, the addition or subtraction of a dollar per week or month from his income means less to the recipient of a larger income than to one whose income is smaller. Apart from this principle, no one would defend or suggest the justice of progressive income taxation (Knight 1944, p. 297) His larger point is that Robinson Crusoe’s actions predict our social behavior very poorly, in particular our collective actions: Merely to explain individual choices among consumption goods (as a Crusoe would choose) we have no need for such comparisons between total states of different individuals, while practically no judgment on social policy can be made without them. They are involved even in our laws against robbery and fraud. Now it should be evident that, for practical purposes of discussion, the significance of income differences between persons is closely related to that of changes in income for a particular individual. The two are not finally the same thing, for many ceteris paribus reasons, some of which may be suggested. The "crudest" qualifications, and the most manageable, are due to "physical" differences, such as age, sex, state of health, and the like; more subtle are the effects of change as such, in view of habituation and expectations. For these some allowance has to be 13 Robbins (1979, p. 999): “there is also the further complication of the learning subject—Newton's apple did not change its habit because its behavior had been made the subject of generalized description, as a stockbroker might if quantitative laws of the response of fixed interest securities to various changes had been discovered. We should never forget that economic reactions, as distinct from physical reactions, are mediated by the existence of human minds capable of weighing alternatives and learning from experience, as Professor Machlup has so powerfully argued in his ‘If Matter Could Talk’.” 22 made in (say) the theory of taxation, to take (as I did before) the simplest and most important case. It should be said emphatically that any "welfare economics" which does not consider distributive effects is an idle intellectual diversion. No social action can be conceived which will not injure anyone—-at least by infringing on his freedom by forcing him to accept the judgment of others in place of his own as to what is good for him; (Knight 1946, p. 173) Implicitly Assuming Reclusive Agents When economists took Robbins’ strictures to heart about the “scientific” status of interpersonal comparisons of well-being, they drew the conclusion that economists ought to refuse to recognize any the interpersonal comparisons – including those which our agents make. And at that moment in economic theorizing, hedonistic economic man returned. To see this, consider an Edgeworth box as conventionally constructed. Two isolated individuals come together and nothing happens to their preferences. Consider the construction in detail. Two isolated people, Jill and Jack, have preferences for cheese and crackers. How many goods are there when they are apart? Two for Jack – his cheese and his crackers -- and two for Jill – her cheese and her crackers. There are a total of four goods. When they come together as a society of two, then new commodities may be created. If she lacks both, is he willing to give a little so that she can have some? If so, two new goods emerge. If he lacks both, is she willing to give a little so that he can have some? If so, yet two more goods are goods created. Only for a reclusive Jill and Jack would no new commodities come into existence in the creation of this society. This is precisely Knight’s position – that consumption by other people is an argument in the utility function.11 These goods, created by social life, may well be overlooked when the economy is constructed from a Robinson Crusoe beginning. Even Robbins, when he drew an Edgeworth box (Robbins 1998, p. 265), has the bottom left and the top right – the zero bundles for both agents – on the contract curve. Yet, 14 “But men in society do not choose among goods as a Crusoe might do, and the consumption of other persons is a factor in an individual's satisfaction, often on a par with his own. The psychological worth of any level or style of living is largely symbolic of such social values as conformity and distinction; income has the meaning of counters in a competitive game, as well as enjoyment connected with ‘commodities’” ... Knight (1946, p. 174) 23 sympathetic agents, those for whom new goods come into existence with the creation of social life, would have a personal bliss point somewhere interior to the Edgeworth box.: sharing some amount would be preferred to letting one’s trading partner go without. Rawls distinguished between reasonable and rational agents on the basis of whether they are willing to reciprocate with their equals.11 The creation of new goods in society may well be contingent upon a norm of reciprocity: if Jack matters for Jill then Jill matters for Jack. J. S. Mill hailed the principle of reciprocity in Christianity as the perfect statement of the utilitarian principle (Mill 1861; Peart & Levy 2005c). Conclusion Rawls’ reading of Robbins might be the best cure for the belief that Robbins’ message is a skepticism which says that moral judgment is arbitrary. Robbins’ agents are theorists making judgments of other’s capacity for happiness. Robbins offers utilitarianism as a shared belief in equality of capacity. The fact that this belief is widely shared, and acted upon, gives warrant to use it in policy matters. Since individuals’ theories about the well-being of others play out constantly in their daily choices, not including these theories in models of behavior is tantamount to assuming reclusive agency. 15 Rawls (2001, pp. 6-7): “As applied to the simplest case, namely to persons engaged in cooperation and situated as equals in relevant respects (or symmetrically, for short), reasonable persons are ready to propose, or to acknowledge when proposed by others, the principles needed to specify what can be seen by all as fair terms of cooperation. Reasonable persons also understand that they are to honor these principles, even at the expense of their own interests as circumstances may require, provided others likewise may be expected to honor them. It is unreasonable not to be ready to propose such principles, or not to honor fair terms of cooperation that others may reasonably be expected to accept; it is worse than unreasonable if one merely seems, or pretends, to propose or honor them but is ready to violate them to one's advantage as the occasion permits. “Yet while it is unreasonable, it is not, in general, not rational. For it may be that some have a superior political power or are placed in more fortunate circumstances; and though these conditions are irrelevant, let us assume, in distinguishing between the persons in question as equals, it may be rational for those so placed to take advantage of their situation. In everyday fife we imply this distinction, as when we say of certain people that, given their superior bargaining position, their proposal is perfectly rational, but unreasonable all the same. Common sense views the reasonable but not, in general, the rational as a moral idea involving moral sensibility.” 24 Appendix The next four pages contain reproductions of the index which Rawls made on the inner lining of (first) Robbins’ Nature and Significance and (second) Knight’s Ethics of Competition. The latter suggests just how important Knight’s work was for Rawls. It also offers an explanation for the close connection between Rawls and Knight’s student, James Buchanan (Peart & Levy 2008) 25 26 27 28 29 References Rawls’ Annotated Texts Consulted Bentham, Jeremy. 1952. Jeremy Bentham’s Economic Writings. Edited by W. Stark. London: George Allen & Unwin. Blaug, M. 1962. Economic Theory in Retrospect. Homewood, Illinois: Richard D. Irwin. Knight, Frank H. 1935. The Ethics of Competition and Other Essays. New York: Augustus M. Kelley, 1951. Myrdal, Gunnar. 1953. The Political Element in the Development of Economic Theory. Translated by Paul Streeten. 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