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An Interpretation of McCloskey (2006)

The following essay is a version of what I read in the “Virtue Palaver” hosted by Prof. Daniel Klein on his YouTube channel.

Aristotle says that virtue is knowledge of the soul. Knowledge of virtue is knowledge about your proper role in both the polis and the cosmos. Virtue, in that sense, is a knowledge that is intensely practical. The goodness of a virtue is a meaningful goal that is self-motivating. We don’t need something external to justify virtue. Justice is a virtue. A direct understanding of virtue connects good conduct to the good of the whole. The utilitarian vision has spent a lot of computer time describing the contours of the good of the whole, but none motivating or clarifying good conduct. The deontological vision has spent a lot of time laying out the standards of good conduct, with the contributions to the good of the whole playing second fiddle. Without a reason beyond the rules to conduct yourself well, the thorough instructions fall flat. A virtue, when apprehended, describes both what you are if you contribute to the good of the whole and gives practical instructions on the proper conduct towards that end. Holding that something is virtuous motivates the pursuit of said virtue.

Virtue ethics provide us with genuine knowledge, with something that is true in a practical sense. If ethics is practical knowledge, how can we afford ignoring it in economics, the science of practicality. In economic terms, knowledge of virtue is knowledge about the production function of you (which by construction you are trying to maximize). The knowledge that we’ve accumulated in economics itself might be thought of as a study in the virtue of prudence. When an economist aspires to positive over normative claims and to remain agnostic about morality, they usually are burying the lede, and covertly declare prudence the only meaningful moral lens.

In other spheres, we allow ourselves to declare chemical, biological, or psychological theories true as background to our economic models. Growth happened because scientists finally found the true theory that led to the steam engine and cotton gin. Again though I’ll say, if ethical knowledge is practical knowledge, why don’t we allow ourselves to presume ethical truths as a meaningful discovery of how to live better by our little men in the model? When Jim sympathizes with Mary, he discovers something real about the world that elevates his behavior. It changes the matrix in which his decisions are made. When a man discovers his place before God, how can that truth be less impactful than man’s discovery of the laws of mechanics? When we separate the positive from the normative we separate the common meaning between the true and the good. Pursuit of the true without attention to the good, or pursuit of the good without attention to the true, leaves us with neither Truth nor Goodness.

Mokyr (2016) holds that there are a number of theories one can hold about chemical or mechanical processes. They are theories about how we should interact with the physical environment. He also holds that a subset of these are true. He holds the institutional conditions in Europe, as well as some other factors that led us to holding the true theory. Consequently, there were more profound effects on the growth of industry in Britain and the Netherlands. Presumably, Mokyr believes that he agrees with his audience about which set of physical theories are true. With this shared agreement, his rhetoric proceeds reasonably.

McCloskey might be asking us to go a level deeper. McCloskey holds that there are a number of theories that one can hold about morality or ethics. They are theories about how we should approve and disapprove of one another’s conduct and how we should respond to each other’s behavior. She holds that a subset of these are true. She holds the institutional conditions in Europe, as well as some other factors that led us to holding the true theory. Consequently, there were more profound effects on the growth of industry in Britain and the Netherlands. McCloskey however has the added challenge that the truth of moral values might not be shared with the reader. The truth of these beliefs is not arbitrarily related to their practical import and conduct. I am not reducing the truth of the bourgeois virtues to their prudent consequences.

If ethics can’t help us explain the world, then the ethics we have is not useful for this world. I don’t know how to begin addressing this problem, but I suspect that the answer comes from dwelling in the great mind of Adam Smith as Dr. Klein has spent so much effort helping us to do so. A complete economics pays attention to more virtues than prudence, heals the positive/normative division, and binds back together the Theory of Moral Sentiments with the Wealth of Nations.

Philosophical Conceptions and Equilibrium Results

Imagine a strategy in an iterated prisoner’s dilemma game called “Pessimistic Tit-for-tat” (PTfT). It is functionally the same as normal Tit-for-tat. The player plays the same move that their opponent played last round. The only difference is that this player plays Defect in the first round instead of Cooperate. If both players play PTfT, they’ll receive the infinite series of (D,D) payoffs. The good news is, if I know that the other player will copy my moves, maintaining defection rarely holds as an equilibrium.

The question stands however, why wouldn’t they start with normal TfT? We might presume that a player who is pessimistic plays PTfT at the outset. They begin with the belief that the other player will play Always Defect (AD). If both players begin with the pessimistic mindset befitting the PTfT strategy then an infinite stream of both defecting is an equilibrium no matter what their discount rate is. Not only that, but given that the players cannot communicate in any way except through the strategies of the game, the stream of (D,D) that both players observe does not refute their initial pessimism. Little does either player know, but if they only took one small leap of faith and played C, just for the heck of it, a window of opportunity and the ability to communicate would open up that could lead both players into each other’s loving arms.

Robert Hardin describes a similar thought experiment in his 2003 book Indeterminacy and Society. The supposedly unique equilibrium of a finitely repeated prisoner’s dilemma is (AD,AD). The trough equilibrium is due to the ability of both players to backwards induct and anticipate the final round of defection, unraveling any prior possible cooperation. Hardin proposes that in the first round, one player plays Cooperate. By making this simple sacrifice, one player has opened up the window of possibility and no longer given the game a strictly determinate outcome. Interestingly enough, this strategy was exactly what was played in a 100 period prisoner’s dilemma game played by Armen Alchian and John D. Williams as recorded in William Poundstone’s Prisoner’s Dilemma. For the remainder of the game the two economists used the two strategies as both a means of punishment and reward as well as a means of communication.

In his 1898 essay “Philosophical Conceptions and Practical Results”, William James attempts to clarify the pragmatic maxim with an example.

“The question, is matter the producer of all things, or is a God there too? would, for example, offer a perfectly idle and insignificant alternative if the world were finished and no more of it to come. Many of us, most of us, I think, now feel as if a terrible coldness and deadness would come over the world were we forced to believe that no informing spirit or purpose had to do with it, but it merely accidentally had come. The actually experienced details of fact might be the same on either hypothesis, some sad, some joyous; some rational, some; odd and grotesque but without a God behind them, we think they would have something ghastly, they would tell no genuine story, there would be no speculation in those eyes that they do glare with. With the God, on the other hand, they would grow solid, warm, and altogether full of real significance. But I say that such an alternation of feelings, reasonable enough in a consciousness that is prospective, as ours now is, and whose world is partly yet to come, would be absolutely senseless and irrational in a purely retrospective consciousness summing up a world already past. For such a consciousness, no emotional interest could attach to the alternative. The problem would be purely intellectual; and if unaided matter could, with any scientific plausibility, be shown to cipher out the actual facts, then not the faintest shadow ought to cloud the mind, of regret for the God that by the same ciphering would prove needless and disappear from our belief.…Accordingly, in every genuine metaphysical debate some practical issue, however remote, is really involved. To realize this, revert with me to the question of materialism or theism; and place yourselves this time in the real world we live in, the world that has a future, that is yet uncompleted whilst we speak. In this unfinished world the alternative of materialism or theism? is intensely practical!”
William James “Philosophical Conceptions and Practical Results”

Now think back to the two pessimistic players. It appears that their pessimism leads them into a trap, and that in their debates about what theory more properly describes the past AD or PTfT, there will be endless pedantic debates. But when each player, iteratively choosing a strategy, must decide whether to remain in their pessimism to a predictable conclusion, or to take a momentary leap of faith, the question of what the other player is truly playing remains a lively and interesting question. So appears the game between man and the theories which he imposes upon his surroundings. As James notes, metaphysical debates remain live practical issues as long as there is a future to keep them alive.

Liberty, Stability, and Action: James, Lewis, Hayek, and Tolkien

https://www.reddit.com/r/lotr/comments/agiwpa/a_different_1988_lotr_chess_set_w_chessboard_i/

One of my walking routes on campus is through the Music and Theater Building bridge that borders College Hall. It’s a spot for either econ students or music students, and lucky me this time got to see my good pal Hayden Busby. Hayden was sitting with a friend of his, Luke Ratcliffe. Luke and I have a lot in common. We both are half-Armenian, we both visited the homeland this summer, and have unorthodox (and ironically heterodoxical orthodox) theological views. Oh, and we both listen to progressive metal. It was a wonderful friend meet friend moment that happens all too rarely. And I had another one a couple of nights ago in my mind when I realized that C.S. Lewis and F.A. Hayek have an eerily similar conception of freedom.

William James had a famous articulation of the relationship between God and Man as a chess-game.

“Suppose two men before a chessboard, the one a novice, the other an expert player of the game. The expert intends to beat. But he cannot foresee exactly what any one actual move of his adversary may be. He knows, however, all the possible moves of the latter; and he knows in advance how to meet each of them by a move of his own which leads in the direction of victory. And the victory infallibly arrives, after no matter how devious a course, in the one predestined form of check-mate to the novice’s king. Let now the novice stand for us finite free agents, and the expert for the infinite mind in which the universe lies.”
(James 1896, 180.)

In this case, God’s power is not diminished and free-will is allowed. The novice player has free will in its moves, but can never defeat the master. This model has a double practical punch. First, it places God in time. He will be making moves in the future that we cannot yet foresee. Second, it gives meaning to each individual move that we make in the here and now. Though, we know who wins the game, our moves now are a part of that tapestry.

The power of this metaphor transferred over to C.S. Lewis. In the second chapter of The Problem of Pain, Lewis is addressing the technical issues of God’s Omnipotence. A standard objection to the Augustinian theodicy (that God has granted us free will thus resolving the problem of evil) is that even if we freely choose evil, God ought to intervene repeatedly to correct all of our errors.

“We can, perhaps, conceive of a world in which God corrected the results of this abuse of free will by His creatures at every moment: so that a wooden beam became soft as grass when it was used as a weapon, and the air refused to obey me if I attempted to set up in it the soundwaves that carry lies or insults. But such a world would be one in which wrong actions were impossible, for the cerebral matter which we use in thinking would refuse its task when we attempted to frame them. All matter in the neighborhood would be liable to undergo unpredictable alterations.”
(Lewis 1944, 24-25)

If God was to take this course, we would actually lack the freedom he wants to give us. Omnipotence means that God can do anything but impossibilities are not even things in the first place. If the arena of my free action is entirely controlled, I was in fact never free. Free will is not a mere attribute of a soul, but rather a by-product of the interaction between a being and its environment.

Miracles, however, do happen and are an important part of the Christian faith.

“That God can and does, on occasions, modify the behavior of matter and produce what we call miracles, is part of the Christian faith; but the very conception of a common, and therefore stable, world, demands that these occasions should be extremely rare. In a game of chess you can make certain arbitrary concessions to your opponent, which stand to the ordinary rules of the game as miracles stand to the laws of nature. You can deprive yourself of a castle, or allow the other man sometimes to take back a move made inadvertently. But if you conceded everything that at any moment happened to suit him – if all his moves were revocable and if all your pieces disappeared wherever their position on the board was not to his liking-then you could not have a game at all. So it is with the life of souls in a world: fixed laws, consequences unfolding by causal necessity, the whole natural order, are at once limits within which their common life is confined and also the sole condition under which any life is possible. Try to exclude the possibility of suffering which the order of nature and the existence of free wills involve, and you will find that you have excluded life itself.
(Lewis 1944, 25)

Lewis invokes the same metaphor of a chessboard to get his point across. God can make exceptions to his own rules and preserve the stable environment for free action, but he can’t go all the way.

The Constitution of Liberty (1960) is Hayek’s first comprehensive shot at articulating his political vision. He is not talking about a mystical document, but rather asking “What constitutes Liberty?” It’s very difficult for him to articulate directly what Liberty is. Most of the book is a description of the institutional conditions of liberty. Liberty, simply put for Hayek, is the absence of coercion. He then goes to great lengths to show what coercion is. Coercion (though he squirms on his own definition) is when one person’s will absolutely dominates another. When one man’s mind is made into the tool of another’s. Hayek curiously finds like Lewis that control of the environment is tantamount to control of the other’s actions.

“By ‘coercion’ we mean such control of the environment or circumstances of a person by another that, in order to avoid greater evil, he is forced to act not according to a coherent plan of his own but to serve the ends of another…Free action, in which a person pursues his own aims by the means indicated by his own knowledge, must be based on data which cannot be shaped by the will of another. It presupposes the existence of a known sphere in which the circumstances cannot be so shaped by another person as to leave one only that choice prescribed by the other.”
(Hayek 1960, 71)

In more political language, one may have freedom of thought, and freedom of desire, but if they have no freedom of property, their previous freedoms are meaningless. Whoever controls the means controls the actual ends. As Hayek took lengths to point out in The Road to Serfdom, one cannot be liberal in their politics, but be socialist in their economics.

Unfortunately, coercion is sometimes necessary to prevent coercion. To preserve a sphere of freedom, the defensive coercion must be institutionalized in rules which are generally fixed and announced beforehand. The realm of government action may include coercion, but it must be in a fixed rule. Thus, the executors of government power have little control over its actual scope.

“Coercion according to known rules, which is generally the result of circumstances in which the person to be coerced has placed himself, then becomes an instrument assisting the individuals in the pursuit of their own ends and not a means to be used for the ends of others.”
(Hayek 1960, 72)

I hope the similarity is not lost. Government, like God, has the power to manipulate the environment, though in a much more limited sense. In both cases, God to man and government to citizen, individuals are only free if the rules instituted above are generally untampered with. They are “fixed and announced beforehand”. The actor’s free constructions can only be erected on stable ground. The expectation that a certain zone will not be tampered with is an important facet of the willingness to build anything out of it in the first place.

Hayek stresses in his first chapter, that he is not speaking about metaphysical but simply personal liberty. I’d like to push against him on this. The Bible can be read as a social story between God and his creation. If we are in a relationship with a personal God, then metaphysical liberty is just a form of personal liberty that Hayek articulates. Both God and government, if they are to offer us freedom (which God does and government can), establish the rules by which they operate and only rarely deviate. Churches must operate in the same way so that parishioners are not the theological slaves of their priests. There’s a lot more to unpack here in church history and economics of religion that I hope to work on in the future.

Appendix: Tolkien’s Theodicy

In the 2nd chapter of the Quenta Silmarillion titled Of Aulë and Yavanna, we find a wonderful example of the chess-playing God at work. Eru had created the world, and the Valar (the pantheon of archangels/gods) were hard at work preparing it for the coming of the Firstborn Children of Illúvatar, the elves. Aulë, Valar of stone, became impatient with the dumbness of the world, and he made the first dwarves and hid them under a mountain. Eru, in a very Garden of Eden fashion, sees under the mountain and rebukes Aulë for his impatience. The elves are the intended firstborn, and the dwarves are a deviation from Eru’s plan. Eru commands Aule to destroy his own creation with his hammer, but at the last moment stays his hand (in a very Abraham and Isaac fashion).

Eru, though displeased with Aulë’s disobedience, sees that the dwarves are good handiwork and permits Aulë to keep them as long as they stay asleep until the elves awaken. Yavanna, Aulë’s wife and Valaress of Arda’s flora and fauna, become worried at the prospect of the dwarves. Dwarves, when they awaken will have no affinity for the trees, but they will need lumber for their mining operations. To counter this propensity in the dwarves, Yavanna creates the ents as shepherds of the trees.

Neither the dwarves, nor the ents, were necessarily part of Eru’s design, but he allows his creation the ability to go in that direction. Regardless, every fixed element of his plan still goes as follows. The elves are still his firstborn children to experience the world, and the rest of Arda’s history unfolds despite several new tensions that arise.

The Angel of Scarcity

²¹The Lord God made garments of skin for Adam and his wife and clothed them.²²And the Lord God said, “The man has now become like one of us, knowing good and evil. He must not be allowed to reach out his hand and take also from the tree of life and eat, and live forever.” ²³So the Lord God banished him from the Garden of Eden to work the ground from which he had been taken. ²⁴After he drove the man out, he placed on the east side of the Garden of Eden cherubim and a flaming sword flashing back and forth to guard the way to the tree of life.
Genesis 3:21-24; NIV

Consider three sets of plans or projects (p) that we can pursue in this life.

T= Those that are technologically possible.

E= Those that are economically feasible.

M= Those that are morally enriching.

These need a bit of clarification. T describes the set of plans that you imagine can be built given the limitations of natural law. These plans violate no general natural principle such as Newton’s Laws. We slowly refine our knowledge of which projects reside in this set as we grow in scientific knowledge. E contains the set of plans that if undergone would come to full fruition. We refine our knowledge of the particulars of time and place for the relevant resources over time. While T is about general rules, E is about particular circumstances. Is this within my current budget constraint? M contains the subset of plans that if pursued and if they come into their maturity are looked on with approval by the Divine, Most High, and Impartial Spectator.

As Peter Boettke likes to say, Property, Prices, and Profit & Loss, the constellation of guiding stars that guide those under the system of free enterprise will sort out the economically feasible plans from the merely technologically possible ones. A socialist planner can have general technical knowledge but not particular economic knowledge sans prices. E is a subset of T.

But I am curious about M. First, what is the relationship between M and T? If T and M are subsets of one another they are equal. Everything we can do, we should do. This would be meaningless. Morals are tools to guide our hearts, heads, and hands. If all is permitted, morals aren’t at all. Our morals must be derived in such a way to guide and making them equivalent to the possible doesn’t point anywhere. This logic also applies to the question of whether or not T is a subset of M. God, being merciful and loving, assures us that there is no p in M that is not in T. M is a subset of T.

Now, what is the relationship between M and E? The same logic above applies to whether or not E and M are equivalent or whether or not E is a subset of M. Again, if E and M are disjoint, we are doomed and God withdraws his loving hand. Now, we have another option. E and M are both subsets of T, but could they not be subsets of one another and not disjoint?

I will show that M is a subset of E with a proof by contradiction. Assume that E and M are subsets of T and that E and M are not disjoint. Also, assume that elements now exist in these three sets: M and ~E, M and E, ~M and E. Hold it right there, cowgirl. The existence of p such that p is in M and not in E is a contradiction with Axiom GE3:24. What is that you ask? Oh, why the truth of Genesis 3:24. God appointing the angel to guard Eden is evidence that he disapproves of attempts to do the infeasible. The Angel of Scarcity mandates that man toil for his food. Attempts to get to Eden, where beauty is plenty, but work is unnecessary are attempts to get around the mandate. Thus elements still exist in both M and E, and some exist not in M but still in E. M is a subset of E.

Prudence is a virtue. Prudence is the act of sorting out what is and is not in E. There is no honor in doing things you can’t, even if in your God approves in your imagination. Striving for goals that are in M and not in E is not love at all but shallow romance.

Edit: From Pascal’s Pensee No.431: We cannot conceive Adam’s state of glory, or the nature of his sin, or the way it has been transmitted to us. These are things which took place in a state of nature quite different from our own and which pass our present understanding. Knowing all this does not help us to escape. All that it is important for us to know is that we are wretched, corrupt, separated from God but redeemed by Christ’ and that is what is wonderfully proved to us on earth.

Two Different Defences of Religious Liberty

Religious liberty (along with freedom of speech and other pals huddled together in the First Amendment) is one of the less controversial aspects of our Classical Liberal Heritage. The purpose behind freedom of religion, however, I believe has become incredibly muddled. Two major defences of religious liberty have emerged. One believes that religion essentially doesn’t matter all that much, and the other that religion is of the utmost importance in the lives of individuals as well as the well-being of society. Just because they have the same conclusion does not mean that both defences are of equal value. They may have divergent implications under different external pressures.

The first defence I will call the lollipop religion defence. In a lollipop conception of religion, each religion is a different flavour that you can pull out of a bag. “Oh wow, I like a Jesus super-duper whole lot !”, the Christians say. “Yipee”, the Buddhists exclaim, “I’ve reached Nirvana”! Thus, from the supposedly “objective and secular” position, we are supposed to conclude that both religions are just fine and dandy little hobbies that people have. Criticizing what flavours others enjoy is clearly erroneous. It obviously makes them happy. What could you have against that? When one flavour club tries to sabotage another flavour club, they are clearly acting out of a bizarre irrational faith-based delusion. Religious Liberty is the much-needed replication of de gustibus non disputandum in the realm of beliefs about ghosts or burning bushes or whatever.

The second defence is the aspirational defence. This conception takes the truth in religion or any all-encompassing worldview seriously. The purpose of religious liberty, in this case, is to take control of religion out of any single or small group of human’s hands. No political or priestly class can wholly control the content nor application of any religion. The separation of Church and State is the separation of religious belief and the use of violence. Not the separation of religion from what forms people’s public lives. The lollipop defence of religious liberty asks everyone to partake in a public secular religion of the Enlightenment and practice their religious beliefs in private. The aspirational defence lets people live their religious lives to the fullest but limits the extent to which anyone, religious or not, can use the power of the state for their ends. In Civil Society, religions are able to clash and conflict. Muslims and Christians are allowed to proselytize as long as they respect the secular rules of property, contract, and consent. Nobody is asked to replace God with the State in this instance, but the excesses of religious fanaticism can be similarly curbed.

Freedom of Religion does not imply “Coexist” in the same way that freedom of speech does not imply all opinions are equally valid. The limits on the powers of the government must by extension cover all ideologies and plans, not just religion. Otherwise freedom of religion would be a policy that punishes religious worldviews over secular ones and would encourage religions to secularize themselves in order to compete with non-religious worldviews. Thoughts?

Edit: This is a quote from Mises’ Liberalism that I thought appropriate to clarify: “[W]hat impels liberalism to demand and accord toleration is not consideration for the doctrine to be tolerated, but the knowledge that only tolerance can create and preserve the condition of social peace without which humanity must relapse into the barbarism and penury of centuries long past” ([1927] 1985, 34) quoted in Peter Boettke’s F.A. Hayek: Economics, Political Economy, and Social Philosophy (2018) pg. 267

Making Austrian Economics Easy (by using Vector Addition)

If the origin point represents our actor then each vector is a unique goal that they pursue.

Oranges = [2,2]

Apples = [-4,-1]

Bananas = [-1,2]

The sum of the vectors represents the amalgamation of the preferences, constraints, and goals of the actor. Their resultant behavior.

Sum = [-3,3]

Another person with different valuations will have this graph.

Oranges = [-6,4]

Apples = [1,1]

Bananas = [2,-2]

The sum, however, is the exact same.

Sum = [-3,3]

From the outside, all that we can see is the sum as expressed by the action of the individual. This is all that appears in aggregated data. From the perspective inside the mind, the individual can see each vector. If new goals developed or new means were discovered. We would have no way of knowing how each of these two actors would respond from merely analyzing present behavior. Human behavior is rational in the sense that we have commonly understandable concepts about it (in this case represented by vector addition). The mind locks up particular knowledge of time and place.

In “Shadow Economies: Size, Causes, and Consequences”, while discussing empirical studies of the shadow economy (underground wheelings and dealings that don’t get counted in official GDP Tony Soprano, crime, untaxed labor etc.), two findings are noted. The first is that increases in the marginal income tax rate are positively correlated with the size of the shadow economy. Second, that the size of the shadow economy is correlated with “ineffective and discretionary application of the tax system and regulations”.

A country with high tax rates and effective bureaucracy or a country with low tax rates and ineffective bureaucracy might show the same behavior in terms of shadow economy activity. Both economies would react differently with respect to different changes. If we only go by empirics here, we cannot tell which country requires which policy. We require a conceptual dimension of economic science to understand what is going on inside each economy. To know which move to recommend forreform ,we need to know about the hidden and locked away beliefs, goals, and perceptions of individuals, or at least have a concept of them. This is the contribution that the conceptual economics of the Austrian school offers.

Behavior doesn’t reveal preferences; in many ways it clouds them.

Citation: Schneider, Friedrich, and Dominik H. Enste. “Shadow Economies: Size, Causes, and Consequences.” Journal of Economic Literature 38, no. 1 (2000): 77-114. http://www.jstor.org/stable/2565360.

Towards a Practical Justice Part 3: The System of Natural Liberty and Smith’s Three-Tiered Justice

From the background of Smith’s moral psychology, I can now demonstrate the meaning that Smith ascribes to term justice. Smith employs the term justice in three ways, described by Daniel Klein (forthcoming). The first is commutative justice or “abstaining from what is another’s”. The second is distributive justice or “making a becoming use of one’s own” (what my neighbor did when he cleared our sidewalk for free). The last is estimative justice (Klein’s term), which is the hardest to define. It refers to treating things with due respect or estimating objects properly. I do a truly magnificent painting justice by giving it a prominent place on the wall in my house. Though Smith typically employs the term justice to mean commutative justice or the respect of property, Klein counts 30 times in TMS that he uses it to mean distributive justice and 36 times he refers to estimative justice (Klein forthcoming, 13 and 23).

In Part II of TMS, Smith uses the term beneficence to refer to distributive justice and uses the term justice to mean simply commutative justice. Beneficence can never be extorted from an individual. Taxation and redistribution do not make an individual generous or loving. Commutative justice, on the other hand, can be prompted by coercion. If someone takes your money by force, you have the right to take it back by force. Justice, in the form of general rules, prevents individual passion and partiality from corrupting a society. To the extent that simple respect for justice does not suffice, fear of law enforcement may be needed to fill in the gaps. Notice that this does not require aview of human nature that is fundamentally selfish, but only one that sees humans as partial and prone to make errors of passion. Justice and Beneficence play two distinct, but important roles to the functioning of a society.

Beneficence…is less essential to the existence of society than justice. Society may subsist, though not in the most comfortable state, without beneficence; but the prevalence of injustice must utterly destroy it… [Beneficence] is the ornament which embelishes, not the foundation which supports the building, and which it was, therefore, sufficient to recommend, but by no means necessary to impose
The Theory of Moral Sentiments pg.86

A society that wants to rely on only beneficence will surely collapse. Respect for Justice is needed because we cannot rely merely on an assumed love for all. We can, however, develop a serious love for the rules of just conduct. Justice can recommend us to behavior that makes us unintentionally useful to our neighbors, while simultaneously preventing us from intentionally harming them. Furthermore, like the example of the generous neighbor, beneficence focuses on the actions of individuals and not on the distribution of outcomes. Beneficence satisfies the pragmatic test in a way that schema of social justice does not.

There are many ways in which commutative justice is unique. Unlike other general rules, commutative justice is precise and accurate. There is little room for varying interpretations in the court of law. The rules of property are negative; they are upheld by not doing something. There are usually no rewards for not trespassing, whereas there may be rewards for acts of public service (distributive justice). Also, Smith makes clear that commutative justice is only intended for disputes between equal citizens. It may be bypassed by certain social entities. It may be proper for the government to violate property rights to extract taxes in the same way that it is okay for a parent to take away their child’s toy. This does not justify all government actions, in the same way that it does not justify all parental choices.

When the government does respect commutative justice, we call that liberty. In The Wealth of Nations (WN), Smith expounds on the “system of natural liberty”, a society in which the economy is guided by the invisible hand and the government largely respects property rights. Natural liberty is the system that Smith wants policy-makers to fall in love with when considering the well-being of the people. There are times when Smith does recommend government intervention in the economy as a matter of distributive or estimative justice. These include taxation, restrictions on notes of small-denomination, and usury laws among others.

In Book I, Chapter 2 of the Wealth of Nations, Smith says: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest” (WN 27, emphasis added). I highlight the word expect because ignoring it has led many to believe that Smith recommends we all remain selfish. That interpretation misses a lot of context. First, the butcher, the brewer, and the baker are living in a society where commutative justice is respected. In a market society, few have the time to develop intimate relationships, but they can recognize a duty to one another by respecting rules of just conduct. Second, Smith clearly does desire beneficence to be added to a society over and above commutative justice and self-love, but we should not expect our bread to be provided by it.

A similar misreading is done of Friedman’s famous article, “The Social Responsibility of Business is to Increase its Profits”. He says that executives have a duty to meet the demands of stockholders, but many forget that he continues, “…while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom” (Friedman 2007, 173-4). Friedman wants executives to respect commutative justice, but also the general rules that are laid out for the conduct of distributive and estimative justice.

Smith is able to straddle the demands of social justice while recommending a practical guide to personal conduct. Though the rules for distributive and estimative justice are less precise than those of commutative justice, they still pass the pragmatic test because they are tailored to individual conduct. The rule that makes the man sacrifice his pinky for the “immense multitude” is directed at the person making the decision, not the at distribution of pinkies worldwide. I do not mean to imply that Hayek had no concern for issues of higher justice. Smith, however, does a better job at describing all the types of justice that we may want to address without sacrificing coherence. Some sentiments we are born with and some we develop over time. If we develop respect for property rights without love for our neighbor, we will have only an ugly foundation. Social justice, however, attempts to pursue love for our neighbor with disregard for commutative justice, a path that leads to the disorders of partiality and ignorance. Moving into the future, I recommend a multi-faceted justice to take advantage of the fruits that Adam Smith intended for the system of natural liberty.

Bibliography

Friedman Milton (2007) The Social Responsibility of Business Is to Increase Its Profits. In: Zimmerli W.C., Holzinger M., Richter K. (eds) Corporate Ethics and Corporate Governance. Springer, Berlin, Heidelberg
Klein, Daniel B., Commutative, Distributive, and Estimative Justice In Adam Smith (March 10, 2017). Adam Smith Review (Vol. 12), Forthcoming; Working Paper in Economics No. 17-11.
Smith, Adam (1759) The Theory of Moral Sentiments. Liberty Fund.
Smith, Adam (1776). An Inquiry into the Nature and Causes of the Wealth of Nations, edited by RA Campbell and AS Skinner Indianapolis: Liberty Fund.

Toward a Practical Justice Part 1: The Incoherence of Social Justice

Every idea comes to a final judgment when it is made into a tool of practical use. An idea eventually faces its adult life and the responsibilities that come along with it. The idea has to live up to its promises.

The pragmatic test is clear for the technological products of science, but I suggest the same test can be laid on more abstract principles. If abstract rules and beliefs assist their follower in the quest for virtue, beauty, and truth, we can say that such rules are good to believe; they are for all intents and purposes, true. A map is only good if it gets you somewhere, and abstract concepts function the same way. If a map cannot help you find where you are, or point in which direction you should go, it might as well not be a map at all. No one would buy it.

A large part of Hayek’s career was dedicated to putting the elusive concept of social justice to the pragmatic test.

To discover the meaning of what is called ‘social justice’ has been one of my chief preoccupations…I have failed in this endeavor – or, rather, have reached the conclusion that, with reference to a society of free men, the phrase has no meaning whatever…I have come to regard ‘social justice’ as nothing more than an empty formula, conventionally used to assert that a particular claim is justified without giving any reason. (Hayek 1967, 57)

Social Justice has “no meaning whatever” not because it is impossible to come up with a definition. Principles of Justice will only survive the pragmatic test, if they are able to recommend real guides to those who can follow them. In a free society, when the outcomes are the result of human action but not of human design, justice cannot be determined by distribution outcomes as no one is responsible for designing the total array of who gets what.

Appeals to social justice typically take the following form: “Our society is unjust because Group X is in such a position relative to Group Y. Society must take Action Z (usually some government policy) immediately to rectify the situation.” There is no such actor Society that can satisfy these demands. “…the demand for ‘social justice’ is addressed not to the individual but society—yet society, in the strict sense which it must be distinguished from the apparatus of government is incapable of acting for a specific purpose” (Hayek 1982, 228).T

Hayek wants us to return to a form of justice that is applicable at the individual level, a form that he calls “the rules of just conduct”. Here justice is determined by clear, distinct, and followable rules such as property, contract, and consent. These rules are unique in that they are end-independent, impersonal, and universally applicable to all (Hayek 1982, 197). Their universality doesn’t prevent them from being adapted to any particular circumstance. The rules of just conduct directly apply to individuals and are designed to be followed. Each rule is not set in stone, but the criteria that Hayek suggests of end-independency, impersonality, and universality are needed to make each rule followable. Equality of opportunity is granted meaning because, at least respect to these rules, everyone must be treated equally for us to say that justice is done. Justice to Hayek must always be a negative case that no rule has been violated, and never a positive one that some outcome has been achieved.

Milton Friedman claimed that “A society that puts equality—in the sense of equality of outcome—ahead of freedom will end up with neither equality nor freedom” (Friedman 1980, 148). He strikes at the same problem. Equality of outcome is another name for social justice in that it lays its claim against the outcome of the decentralized acts of a free society, and not the conduct of any living member. Friedman, however, continues, “Freedom means diversity, but also mobility. It preserves the opportunity for today’s disadvantaged to become tomorrow’s privileged and, in the process , enables almost everyone, from top to bottom, to enjoy a fuller and richer life” (Friedman 1980, 149). Hayek is right that individually followable rules are necessary to apply the idea of justice to individual behavior, but the rules are not the ultimate end. We respect each other’s liberty in order to maximize the possibilities for individuals. The respect of life, liberty and property are crucial, but they don’t satisfy all of our moral demands.

Hayek leaves many unsatisfied. He tends to leave an impression on the reader that justice should only be conceived as negative rules. There are reasons that social justice activists demand something greater than the basic rules of just conduct. Equality of outcome is something that people really do care about, and failing to address these concerns is failing to address real moral claims. These higher demands may also properly be called justice. One of my childhood neighbors was the only man on our street to own a snowblower. When the winter blizzards came, he would plow not only the sidewalk in front of his house but those up and down half of the street. Most would find nothing wrong with calling what he did just, even though it was not strictly required of him. Nor can we find a particular rule of just conduct that he has fulfilled. If Hayek’s standard of justice does not satisfy the moral demands of people, then a wider sense of justice must be adopted to stand the pragmatic test.

Next week, I talk about the moral psychology of Adam Smith and work closer to a practical moral philosophy.

Bibliography:

Friedman, Milton, and Rose Friedman. (1980) Free to Choose: A Personal Statement. Harcourt.
Hayek, Friedrich. (1967)“The Atavism of Social Justice.” New Studies in Philosophy, Politics, Economics and the History of Idea.
Hayek, Friedrich. (1982) Law, Legislation, and Liberty. Routledge. 2013 ed.

The Form of Justice

One of Hayek’s biggest faults is that he is nearly impossible to read sometimes. Sometimes to the point that you have to read the same paragraph multiple times, only to get more confused each time. In the second volume of Law, Legislation, and Liberty entitled The Mirage of Social Justice, Hayek associates multiple principles with what he calls rules of Just Conduct. Among these are impersonality, universalizability, generality, and end-independency. The cohesion between these principles was not apparent to me at first until I experienced them directly.

As I was walking home from the Mercatus office this afternoon, I took my usual route through the Johnson Center. I like to take the Northeastern door as it has very efficient automatic door openers. This instance, however, I had an additional hurdle. Someone was coming through in the other direction! We both kept up our regular pace, but if neither of us deviated from our regular path we would collide. As we only noticed each other seconds before the imminent disaster, we had no time to make a plan as to who would go through first. I stepped to the side and waited for a moment while he passed through. On reflection, it was decided implicitly between the both of us that I would be the one to step to the side as he was closer to the door when we both noticed each other. At the time, I didn’t make an efficiency calculation and judge from a total social welfare position what the optimal distribution of door usage would be. I just knew the rules of justice and followed them.

In this case, the rule was end-independent as it didn’t take into account how much either of us needed the extra 2 seconds of time. It was impersonal as it did not I.D. either of us to make sure we were of the right class to participate in such a rule. It was general as it could apply to any situation in which two people try to use a door, but only one must be chosen. It was universalizable as I (and I presume the other gentleman) would have applied the same rule regardless of the gender, race, or otherwise distinguishing feature of the other person. We would treat all humans equal according to such a rule.

I lost two seconds not because it is more just for him to have those seconds and me to lose them, but because such rules are blind to circumstance, and can have no comment on the outcome. If we discover that some rules often create certain kinds of outcomes then we may have reason to change the rules. But those rules again must be changed by other rules of this general type. In no way does Hayek mean to say that all inherited rules are principles of an eternal justice, but that a certain form of rule, one that is generalizable, universal, impersonal, and end-independent, the product of human action but not of human design, is necessary to a general form of cooperation. Social justice then acts on the ignorance of the existence of such laws and the belief that the criteria of justice at the outcome level can be used to judge such rules.

Pragmatism and the Economic Way of Thinking

Image result for fate forger behance I’ve always felt a philosopher’s project to be incomplete if she does not reflect on her own role as a philosopher in the new system she has created. Here can breed a particularly pernicious form of ignorance. An inability to recognize your own role in the creation of an idea leads one to lack full understanding of the idea. Both the classical pragmatists and a man who some characterize as a proto-pragmatist, Adam Smith, reflected on the proper place of the philosopher and the dangers of those who mistreat their role as thinkers. Their philosophy of the philosopher informed both their work and the way that they conducted themselves as philosophers. The pragmatists saw ideas as tools. The “truth” or “goodness” of an idea is judged by its use in the world. If an idea fails at alleviating one’s doubts, then it has failed as an idea. Adam Smith did not explicitly commit to a form of pragmatism, but the way that he describes the philosopher’s role in the division of labor fits the school of thought very well. They both see the philosopher as a manufacturer of ideas. She is not a disinterested observer, but rather acutely interested in developing good answers to genuine problems. Like a carpenter, the philosopher attempts to make an object for other’s use. The level and saw are tools like logic, self-reflection, the scientific method, and public debate. These intermediate tools produce a product which is then judged by its efficacy in practice. The tools that produce it are similarly judged by their efficacy in producing a good quality product and may be dropped, adapted or harnessed anew as the carpenter sees fit.

Adam Smith is most well known as the godfather of economics. An Inquiry into the Nature and Causes of the Wealth of Nations very much sounds like a hard-nosed natural science attempt to state cold hard facts about the way the economy runs, whether you like it or not. His earlier book, The Theory of Moral Sentiments, makes one see the Wealth of Nations in a different light. Smith is doing much more than blackboard economics. The most widely respected insight from Smith is known to us as the theory of the “Invisible Hand” or the division of labor that is the product of human action, but not of human design (a phrase taken up by spontaneous order theorists like Hayek). Smith marvels at the creation of a coat. How many workers efforts and actions were necessary to produce the coat despite the fact that few of them directly communicated with one another nor even knew that their labor would end up in a coat. Smith offers three major reasons why he thinks the division of labor is so effective. “…first, to the increase of dexterity in every particular workman; secondly, to the saving of the time which is commonly lost in passing from one species of work to another; and lastly, to the invention of a great number of machines which facilitate and abridge labour, and enable one man to do the work of many.” (WON 17)

The first two reasons are interesting in their own right and say much more about Smith’s ideas in economics, but it is the third reason that he uses to explain his thought on the role of the philosopher.

Many improvements in machinery, however, have by no means been the invention of those who had occasion to use the machines. Many improvements have been made by the ingenuity of the makers of the machines, when to make them became the business of a peculiar trade; and some by that of those who are called philosophers or men of speculation, whose trade it is, not to do anything, but to observe everything; and who, upon that account, are often capable of combining together the powers of the most distant and dissimilar objects. (21-22) WON

In other words, the philosopher’s role is at the same level as any other craftsmen but is only different in the scope of its topics. A carpenter may realize that certain measurement and technical practices having to do with the shape of the wood with which he works. A philosopher, since she is in the economic position where she doesn’t have to be producing new products every day, can observe the carpenter’s practice and apply it to what the artist or builder is doing, thus becoming a philosopher of geometry. “The difference between a philosopher and a common street porter, for example, seems to arise not so much from nature, as from habit, custom, and education.” WON 28-29

Dewey describes his concept of common sense inquiry and its distinction from scientific inquiry along similar lines. “Such inquiries are, accordingly, different from those which have knowledge as their goal. The attainment of knowledge of some things is necessarily involved in common sense inquiries, but it occurs for the sake of settlement of some issue of use and enjoyment, and not, as in scientific inquiry, for its own sake.” (60-61) Common sense inquiry is the issue of searching for a solution to a problem. He describes it in terms of biology. Common inquiry is what allows an organism to respond to its environment, survive, and reproduce. Much like the simple craftsmen, creating tools allows him to produce quality products, sell these on the market and continue his business. All questions are towards that end.

Scientific inquiry is thus a slave to common sense inquiry. Its goal is in the creation of bodies of facts and theories for use in common sense issues. Just like answers to common sense inquiry, scientific inquiry is judged by its ability to solve problems. Science’s goal is not to give us what Hilary Putnam would call a God’s eye view, but to provide solutions to genuine conundrums. Good science achieves that goal. In Smith’s conception of the philosopher, the division of labor would be more productive if the products of the philosopher’s observations proved beneficial those who end up using it. Science and practice are not two different endeavors.

Some, perhaps they could be called common sense, conceptions suppose that practice is impossible without knowledge. The goal of science, philosophy, or any inquiry is to access true facts that tell the actor what, how, and why to do what they’re doing. Practice always comes second. There is here an epistemological difference between book smarts and street smarts. The knowledge produces according to scientific methods are facts, and the various musings and insights of the street porter are just opinions. This ontological chasm has had a degree of harm on the ability of individuals to solve issues.

In the region of highest importance to common sense, namely, that of moral, political, economic ideas and beliefs, and the methods of forming and confirming them, science has had even less effect. Conceptions and methods in the field of human relationships are in much the same state as were the beliefs and methods of common sense in relation to physical nature before the rise of experimental science. These considerations fix the meaning of the statement that the difference that now exists between exists between common sense and science is a social, rather than a logical, matter. (The Logic of Inquiry pg. 77)

Science has its victories, but it has failed to solve the vast majority of human issues. Neither should we expect it to, if we just treat it in its role as subservient to the greater realm of common sense inquiry.

Dewey attempts to show examples of the social distinction between the forms of inquiry appearing in history. In ancient cultures, labor was often divided into higher and lower faculties. The lower faculty was the direct labor of the artisans. The higher faculty was also for a particular practice, but it involved cultivating a good relationship with the gods or organizing the whole of society from the top. These types of labor were so different from one another that they developed social distinctions, and their labor took a very different character. Similarly, in Ancient Greece, philosophy became associated with rational thought while practical work was associated with empirical knowledge.

Lastly, I want to mention a character brought up in Smith’s The Theory of Moral Sentiments, known as the man of system.

The man of system… is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chessboard of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might choose to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder. TMS 233-234

We can imagine that a practitioner of scientific inquiry only could easily be characterized by the man of system. A scientist can fall in love with their own discoveries. If a biologist falls in love with their genetic discovery, they may treat others as potential breeding partners in a mad experiment. More pertinently, if an economist falls in love with their model of the economy, they may treat policy as a series of cogs and levers to be manipulated regardless of the real effects. The problem here is not that the scientists attempted to answer questions or develop useful theories, but that they did so in a way that divorced them from the proper role of scientific inquiry. Their discoveries were no longer judged by their efficacy in practice, but rather the opposite. The world was judged by whether or not it accrued to their theory. If a philosopher is granted a position where her word is taken as truth, then she is no longer tied to the efficacy of her ideas. In a very Smithian sense, the sentiments here are misplaced. The philosopher’s role is to cultivate and develop in the abstract what is to be exported to and judged by the concrete.

Smith, Adam. 1976. An Inquiry into the Nature and Causes of the Wealth of Nations. Vol. 1. Oxford: Oxford University Press.
Dewey, John. n.d. “Common Sense and Scientific Inquiry.” Essay. In The Logic of Inquiry. New York: HENRY HOLT AND COMPANY , 1938

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