Be careful what you ask for; you just might get it

In a 1923 essay called “The Ethics of Competition,” Frank Knight, who would become one of the founders of the Chicago School, thought that business had become a kind of game or sport, and he wondered how good or “healthy” a game it was.

Knight begins his classic text by rehearsing the argument from an earlier essay of his, “Ethics and the Economic Interpretation.” He had previously tried “argue against the view of ethics most commonly accepted among economists…” It was, he argued, “against ‘scientific ethics’ of any kind, against any view which sets out from the assumption that human wants are objective and measurable magnitudes and that the satisfaction of such wants is the essence and criterion of value…”

The problem with the so-called “scientific ethics” – by which he means some kind of utilitarianism – is that it cannot really distinguish between “higher” and “lower” wants, and therefore reduces the former to the latter.

But, Knight argues,

the fact is that human beings do not regularly prefer their lower and more “necessary” needs to those not easily justified in terms of subsistence or survival value, but perhaps rather the contrary; in any case what we call progress has consisted largely in increasing the proportion of want-gratification of an aesthetic or spiritual as compared to that of a biologically utilitarian character, rather than in increasing the “quantity of life.”  The facts, as emphasized, are altogether against accepting any balance-sheet view of life; they point rather toward an evaluation of a far subtler sort than the addition and subtraction of homogeneous items, toward an ethics along the line of aesthetic criticism, whose canons are of another sort than scientific laws and are not quite intellectually satisfying.

In short, for Knight, we cannot judge how valuable or successful our lives are in the same way that companies organize and analyze a balance-sheet. In the financial arena the balance sheet is used to analyze what a company has (assets) and what it might be risking or not have (liability).  But how would we ever make sense of the owner’s equity section in a balance sheet? And how are we supposed to ensure that the assets and liabilities sides of the balance sheet should be equal or balanced?

Knight rejects the view that is still predominant in economics more than 75 years later, of “want satisfaction as a final criterion of value.” We can’t accept that because even in our own lives we don’t “regard our wants as final; instead of resting in the view that there is no disputing about tastes, we dispute about them more than anything else.” In fact, for Knight, “our most difficult problem in valuation is the evaluation of our wants themselves and our most troublesome want is the desire for wants of the ‘right’ kind.”

This is a profound, and these days much more widely accepted, critique of utilitarianism. Why is it relevant for adversarial ethics? Because we need to be able to judge whether the market system produces better overall results (via the invisible hand) than some other system. But how do we evaluate what is a better overall result? Not, Knight is arguing, by judging whether it satisfies more wants. We might not really want those wants. Or worse still, as he will go on to argue in this essay, because the system (or adversarial institution) itself has generated the wants that it satisfies.

Sometimes a founder of the Chicago School can sound remarkably like a founder of the Frankfurt School….

 

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