Category Archives: invisible hand

Democracy for a race of Mitch McConnells

Immanuel_Kant_(painted_portrait)Immanuel Kant famously believed that “the problem of organizing a state, however hard it may seem, can be solved even for a race of devils, if only they are intelligent.” These rational devils will realize that they need well designed and enforced laws for their own self-preservation, even though each “is secretly inclined to exempt himself from them.” So they need “to establish a constitution in such a way that, although their private intentions conflict, they check each other, with the result that their public conduct is the same as if they had no such evil intentions.”

In short, in this essay Perpetual Peace, published about 30 years after Adam Smith’s Wealth of Nations, Kant was optimistic that with a well designed constitution, something like an Invisible Hand (and sometimes, surely, a visible foot) could turn opportunistic political behavior into responsible, statesmanlike, governance.

Of course, this is all probably irrelevant for those following the current election cycle in the US. Kant thought that cleverly designed rules for the game could handle greed. But all bets are off if either the devils running for office, or those whose votes they are courting, lack intelligence, understanding, or rationality. So, well, all bets are off then.

A time-traveling Kant would nonetheless be intrigued by the political biography of the Senate majority leader, Mitch McConnell. At least, if the account developed by Alec MacGillis, author of The Cynic: The Political Education of Mitch McConnell, tracks the truth. In his recent attempt in The New York Times to explain McConnell’s tactics for the game of selecting and approving the appointment of a new justice to the Supreme Court, MacGillis portrays the Senate majority leader as exactly the kind of intelligent devil Kant had in mind.

The best way to understand Addison Mitchell McConnell Jr. has been to recognize that he is not a conservative ideologue, but rather the epitome of the permanent campaign of Washington: What matters most isn’t so much what you do in office, but if you can win again.

As an aspiring young Republican — first, a Senate and Ford administration staff member and then county executive in Louisville — Mr. McConnell leaned to the moderate wing of his party on abortion rights, civil rights and many other issues. It was only when he ran for statewide office, for the Senate in 1984, that he began to really tack right. Mr. McConnell won by a razor-thin margin in a year when Ronald Reagan handily won Kentucky. The lesson was clear: He needed to move closer to Reagan, which he promptly did upon arriving in Washington.

From that point on, the priority was winning every six years and, once he’d made his way up the ranks of leadership, holding a Republican majority. In 1996, that meant voting for a minimum-wage increase to defuse a potential Democratic talking point in his re-election campaign. In 2006, as George W. Bush wrote in his memoir, it meant asking the president if he could start withdrawing troops from Iraq to improve the Republicans’ chance of keeping the Senate that fall, when Mr. McConnell was set to become its leader.

A year later, it meant ducking out of the intense debate on the Senate floor about immigration reform to avoid making himself vulnerable on the issue. It is no accident that the legislative issue Mr. McConnell has become most identified with, weakening campaign finance regulations, is one that pertains directly to elections.

This is also the best way to understand Mr. McConnell’s staunch opposition to the president: It is less about blocking liberal policy goals than about boosting Republican chances.

MacGillis concedes that McConnell’s tactical obstructionism has been successful on its own terms:

The resistance from Mr. McConnell has had an enormous influence on the shape of Obama’s presidency. It has limited the president’s accomplishments and denied him the mantle of the postpartisan unifier he sought back in 2008.

But the game isn’t over yet, and McGillis wonders whether McConnell has overplayed his hand in the aftermath of Justice Antonin Scalia’s death.

This blog does not really have a dog in that fight. We’re interested more in the concepts and categories we use to think through issues than we are (at least within this blog) in the political conclusions they lead to. My interest in McGillis’s portrait of McConnell is about the viability of Kant’s constitutional optimism. Some deliberately adversarial institutions — like Wimbledon tennis matches, courtroom law, markets without dangerously exploitable market failures — can licence the players to pursue their own interests in a contest with well designed rules and close monitoring for compliance. In these cases those outside “the game” will benefit even if the “players” care only about their own interests.

But can we possibly expect a modern democracy to work well, and justly, if the players vying for, and holding, office are all rational devils? Do the US Constitution and other defining features of the political infrastructure (such as the Federal Election Commission and the 50 different states’ laws for drawing up federal constituencies and voter-eligibility rules) constitute the kinds of rules that will, as Kant put it, convert selfish or evil private intentions into virtuous public conduct?

Even Mitch McConnell (thought not perhaps Francis Underwood) would surely agree that the answer to these questions is No. When this blog ponders politics, it will generally be to explore  “why not?” or “where, then, from here?”

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The Hesitant Hand: what Adam Smith did and didn’t say about government regulation, corporate lobbying, and CSR

Ethics for Adversaries has been on spring break, but should be roaring back to life in the coming days.

Here’s a newish book I’ve just ordered on the history of Adam Smith’s Great Idea — the one that still frames so much of our thinking about the ethics of deliberately adversarial institutions. (Steven G. Medema, The Hesitant Hand: Taming Self-Interest in the History of Economic Ideas.)

I just hope the book is better than the first line of Princeton University Press’s blurb, which seems at best skewed and revisionist, and at worst just false:

“Adam Smith turned economic theory on its head in 1776 when he declared that the pursuit of self-interest mediated by the market itself–not by government–led, via an invisible hand, to the greatest possible welfare for society as a whole.”

It is well-known that the famous phrase “an invisible hand” (not even “the invisible hand,” which is what we tend to say now) was used only once in the massive two-volume Wealth of Nations. It comes in a chapter railing against Restraints on the Importation of Goods. Much of the chapter concerns what we would now call the law of comparative advantage — that is, about why it is to each country’s advantage to produce what it can produce most efficiently, and to trade abroad for what can be produced more efficiently in other countries. Throughout the chapter and the book Smith points out the myriad ways restrictions on international trade create inefficiencies. And also how these restrictions inevitably come from business people lobbying gullible or corrupt politicians in order to secure domestic monopolies.

But not only is it inefficient to restrict imports of goods produced more efficiently abroad, it is usually unnecessary. Business people prefer to keep an eye on their investments and to be able to trust the people they deal with, so they will naturally, even other things not equal, invest domestically. As Smith says in the famous “invisible hand” paragraph,

“As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it… he intends only his own gain, and he is in this, and in many other cases, led by an invisible hand to promote an end which was not part of his intention.”

He is talking about a particular case, and criticizing a particular type of government regulation, namely, what we would now call protectionism. He notes that this basic logic of the market replicates itself “in many other cases.” He does not say “in all other cases.” We know, for example, that the invisible hand will get all messed up in situations that involve collective action problems like the Prisoner’s Dilemma. Adam Smith would have had no reason to object to that (and I suspect that a real Smith scholar could point you to his discussions of PD-like situations). And he wouldn’t think that the general welfare would necessarily be increased by trade involving deceit, the exploitation of what we now call information asymmetries, or negative externalities.

It is also noteworthy, given the wording of the Princeton University Press blurb, that he does not say that self-interest via the invisible hand leads to “the greatest possible welfare of society as a whole.” In the “invisible hand” paragraph he is talking about “the annual revenue of every society [which] is always precisely equal to the exchangeable value of the whole annual produce of its industry.” That is, something like GDP. It is obviously an open question whether GDP tracks the “welfare of society.” Even the British Conservative Party doubts that assumption these days!

Once again, I’m no Adam Smith expert, but I have actually read great swaths of the Wealth of Nations, which is more than most latter-day “disciples” of Smith can claim. It is somewhat odd that the enduring lesson from that monumental work is the panglossian one that markets, left to their own devices, always lead to the best of all possible worlds (since that is not what Smith ever says), rather than Smith’s repeated warnings that we should always be suspicious of corporate lobbying and corporate conspiracies.

The conspiracy part we do remember from the famous quote about how we should worry whenever members of the same trade meet, “even for merriment and diversion” since they will inevitably try to fix prices. That is why even conservatives support anti-trust regulation; even if they also tend to think it is unfair in almost any particular case. But just as relevant today would be Smith’s utter contempt for business people lobbying and corrupting hapless politicians in order to enact particular regulations that serve their interest more than the public’s. Smith was concerned with trade restrictions that create unnatural monopolies, but he would be just as worried today about lobbying to allow for the exploitation of other market failures in a modern economy. And he would have been horrified when the right-wing — supposedly pro-market — justices on the Supreme Court used the Citizens United case to make it easier for corporations to pursue their interests by manipulating election processes.

And while this new book is drawing our attention to the famous “invisible hand” paragraph, it is worth noting that Smith was no fan of Corporate Social Responsibility, or CSR, either. He continues the paragraph quoted above by noting:

“By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.”

The inevitable gap between what’s legal and what’s ethical

Every writer I’ve ever read on ethics in adversarial settings takes explicit note of the obvious: that is it neither possible, nor desirable, in a deliberately adversarial institution to regulate away all unethical behavior.

As Arthur Applbaum puts it in the book that shares the name of this blog, if “the best of regulatory worlds is understood as a set of rules and levels of detection and enforcement that best balances the gains of eliminating the costs and harms and liberty restrictions of the regulations themselves, then the best set of regulations will legally permit a great deal of adversary action that is economically inefficient, harmful, and liberty-restricting.” (p. 196)

So we cannot expect that “the invisible hand of competition, even in a well-regulated market, will channel all adversary action to good ends.”

In this inevitable gap between what’s legal and what’s ethical we can pack a significant percentage of the best comics about business. Like this one from a couple of days ago.

(This comic is reposted without permission and will be removed upon request.)

 

Love is not a battlefield: it’s a market

And that’s why the New York Times can run a headline (in the Sunday Styles section…), Adam Smith, Marriage Counselor.

It’s a bit of a stretch. But when you come up with a sure-fire title for a book like “Spousonomics” (not to be confused with “home economics,” which was a whole nother thing — or is it?), all that remains is to find a bundle of theory and anecdotes to fill up the space between the covers. I haven’t read the book yet, so please take that as a plug and not a dis.

In the Times article, Jenny Anderson notes, after losing an argument with her husband:

I had just spent two years writing a book about how to have a better marriage. One secret, my co-author and I concluded, was to think like an economist: apply the rational laws of Adam Smith, as well as recent findings about why we do some of the weird things we do — mining the field of behavioral economics — to increase marital happiness.

Adam Smith, of course, is most famous for developing the “invisible hand” argument for how deliberately adversarial institutions like markets can produce benefits for the society that none of the “players” intended. “It’s not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner,” he argued, “but from their regard to their own interest.”

Is that the way we want to think about a successful marriage?! Can “you scratch my back and I’ll scratch yours” get you all the way “until death do us part”?

Of course, incentives and mutually advantageous arrangements can help in both cooperative and competitive endeavors. And a family should surely be more about cooperation than competition. It is also worth remembering that Adam Smith never claimed that humans could be moved only by the pursuit of their own self-interest. The ability to sympathize and empathize with others, and to be moved to act on the basis of their needs was, for Smith, equally a part of human nature.

Seven years before he founded modern economics (and post-modern marriage counseling, apparently) with his famous Wealth of Nations, he published his Theory of Moral Sentiments which begins with the following much more Valentines-friendly observation:

How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it. Of this kind is pity or compassion, the emotion which we feel for the misery of others, when we either see it, or are made to conceive it in a very lively manner. That we often derive sorrow from the sorrow of others, is a matter of fact too obvious to require any instances to prove it….

Conference Announcement: Property, Markets, and Morality

At least since the publication of Adam Smith’s An Inquiry into the Causes of the Wealth of Nations in 1776, most discussions on the foundations of political economy have been about the design of a very important deliberately adversarial institution we call “the market.”

Here is an announcement for a conference on some of the philosophical and ethical issues at the heart of capitalism (so to speak), taking place in my neck of the wood.

PROPERTY, MARKETS, AND MORALITY

18-20 March, click here for an early schedule.

University of North Carolina Greensboro

Speakers:

Hillel Steiner (University of Manchester), “Greed and Fear”

Richard Arneson (UC San Diego), “What is Wrong with Working for a Boss?”

Daniel Russell (Wichita State University), “Capabilities, Redistribution, and Ownership”

Michael Munger (Duke University), “Euvoluntary Exchange and the Difference Principle”

Julian Lamont (University of Queensland), “University Education, Economic Rents, and Distributive Justice”

Commentators:

Eric Mack (Tulane University)

Geoffrey Brennan (UNC Chapel Hill / Australian National University)

Jonathan Quong (University of Manchester)

Daniel Shapiro (West Virginia University)

Bas van der Vossen (UNC Greensboro)

This symposium is hosted by the philosophy department at the University of North Carolina Greensboro and the BB&T program in Capitalism, Markets and Morality.

All welcome. Attendance free, but registration required.

To register and for more information, please contact Bas van der Vossen: b_vande2@uncg.edu

Before there was EthicsForAdversaries.com there was Ethics for Adversaries, the book

This blog shares its name with what we believe was the first academic book to deal with the dilemmas of ethics across a broad range of what we are calling “deliberately adversarial institutions.” Arthur Isak Applbaum’s book came out in 1999, and continues to be widely read and cited in the scholarly community. But it cannot be said to have spawned a new subfield. Yet.

There have been philosophical worries about the perverse consequences of competition in public and private life ever since Socrates denounced political corruption, and Plato scorned the Sophists (the lawyers of his day) for discarding the truth when it was not in their clients’ interest. But few before or after Applbaum have tried to develop a framework for addressing these dilemmas across the full range of competitive institutions, and to link this up with more “foundational” ethical and political theories.

(Applbaum is not founding member of this blog team; though he would certainly be welcome if he wanted to join us.)

From time to time, we will post salient quotes from scholarly works, including Applbaum’s. Let us start where Applbaum himself did (in the preface to Part I of his Ethics for Adversaries: The Morality of Roles in Public and Professional Life), with a quotation from the 16th-century French thinker, Michel de Montaigne:

“Likewise in every government there are necessary offices which are not only abject but also vicious. Vices find their place in it and are employed for sewing our society together, as are poisons for the preservation of our health. If they become excusable, inasmuch as we need them and the common necessity effaces their true quality, we still must let this part be played by the more vigorous and less fearful citizens, who sacrifice their honor and their conscience, as those ancients sacrificed their life, for the good of their country. We who are weaker, let us take roles that are both easier and less hazardous. The public welfare requires that a man betray and lie and massacre; let us resign this commission to more obedient and suppler people.”

Michel de Montaigne, “Of the Useful and the Honorable.”

Montaigne is addressing the morality of roles. There are defined roles in all institutions (i.e. adversarial and non-adversarial), and some of these will require role-holders to do things they could not do outside of those roles. In this blog we will focus especially on the roles within deliberately adversarial institutions, which are even more ethically treacherous. Montaigne’s reluctant public servant administers poison-as-medicine for he knows it is ultimately for the public good. But in contemporary adversarial institutions like financial markets and electoral politics, that links between legal and winning tactics, on the one hand, and the invisible-hand benefits for the public good, on the other, may be so tenuous or dubious they look like delusional rationalizations. If only we could be sure that it was not the “weaker” among us who gravitate toward these roles….

And they’re off!

This blog is based on a hypothesis: that we made a slight mistake when we carved out the sub-fields of ethics and political philosophy. The blog will not, for the most part be trying to prove this hypothesis in a heavy-handed way, but hopes to make it a little more compelling by way of examples.

What was the mistake? At some point “we” assigned some scholars to work on the foundations of moral theory, and others to work on the foundations of political philosophy, and then several other mutually exclusive bands of scholars to look into the peculiar ethical challenges facing professionals working within particular kinds of institutions and professions, like business, law, politics, international relations, journalism, accounting, international relations and, say, sports.

So what’s the hypothesis? That there just may be something similar about the challenges faced in design of all the aforementioned institutions, and also in the ethical dilemmas faced by people working within these settings. And further, that the challenges of designing and justifying these institutions may strain any more foundational theories of justice that have not adequately accounted for how different these competitive institutions are from other “merely administrative” institutions. (And we suspect this includes almost all famous theories of justice — not least John Rawls’s.)

The institutions, professions, and practices that we will be exploring throughout this blog are what we might call “deliberately adversarial.” They set up highly — but never completely — regulated competitions in order (ideally, in principle, as if by an invisible hand) to benefit those outside the competitions. We do not need to use free(ish) markets to produce and distribute goods and services, but if we do so in the right way, consumers should get better value for their money. We have not always had an adversarial legal system, or democratic elections, but when we do, citizens should be less likely to face injustice. We could have events where athletes show off their individual physical talents, but we tend to find competitive sports, where they do this in an attempt to win, a more satisfying spectator experience.

When does it make sense to try to get results from competitions rather than merely by attempting to achieve them directly? Why aren’t cooperation, mutual deliberation, and professionalism more efficient and just ways to deliver services? And if we do need to structure competitive environments, how do we ensure that the system won’t be “gamed” by the players so that they benefit more than the intended beneficiaries (like consumers, criminal suspects, or the general public)?

These will be the sorts of questions we will have in mind in this blog as we search for examples of effective or flawed “deliberately adversarial institutions” all around us.

We offer no prizes for the best leads, but we would be delighted if readers pointed us to interesting issues arising in deliberately adversarial institutions you are paying attention to.