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sanity,
humanity and science
Ethics In Economic Theory
Charles K. Wilber
(University of Notre Dame, USA)
Ecological Economics is
Post-Autistic
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The
arguments presented above cast doubt on the usefulness of GDP as the main
“pilot” of economic policy. If the thermometer is wrong, then the
policy based on it should be wrong too. The use of GDP produces biases in
favour of a particular set of political choices, consisting in marketisation of economic activity. This also means that
international comparisons based on GDP are fundamentally flawed. In two ways,
following the two problems associated with GDP:
-
two countries with different levels of “marketisation”
cannot be compared on the basis of GDP, as GDP will not include the same
activities in the two countries (part of economic activity will be excluded
from the comparison);
-
two countries with different levels of destruction cannot be compared
on the basis of GDP as these very destructions are not taken into account.
Peaceful societies, characterised by a lower level of crime (and consequently
legal activities, private prisons, etc.) are penalised in terms of GDP! As
are countries with a healthy way of life!
And all
this is without even taking into account the technical difficulties: how to
compare GDPs measured in different currencies? If we use simple exchange
rates, we run the risk to have very volatile results (the euro lost 30% of
its value against the dollar from January 1999 to October 2000, but it would
have been stupid to conclude that GDP dropped in the same proportion). The
purchasing power parity method, used by economists to take into account the
fact that currencies do not buy the same amount of goods and services, is not
without problems, too. Is it relevant to compare the price of the same basket
of goods and services in different countries (to derive purchasing powers)
when the structures of the studied economies vary. Finally, statistical
methods used to measure outputs and prices differ significantly across the
world. Thus, cross-country comparisons create many more difficulties than the
already problematic national GDP calculation.
Paradoxically,
it is mostly for poor countries that alternatives to standard GDP have been
developed, though they are badly needed for rich countries too. For instance,
the United Nations Development Programme (UNDP)
calculates a Human Development Index (HDI), which
includes GDP per capita, but also the literacy rate, life expectancy at birth
and school enrolment ratios. A report to the French ministry for Social
Economy (abolished by the current government) suggested that the human
development report (now limited to poor regions) be extended to cover Europe.
Others have tried to build more relevant measures of GDP, by removing from
standard GDP values added that do not increase well-being or that contribute
to the destruction of natural resources, and by adding domestic and voluntary
work. One such example is the Genuine Progress Indicator, calculated by the
US NGO Redefining Progress (see above) for the US, and which has been
stagnating since the early 1980s (while standard GDP almost doubled over the
same period).
Yet,
these interesting experiments are not without drawbacks : besides numerous
technical difficulties, similar to those identified for the measure of
standard GDP, the choice to include or exclude economic activities from the
new index can easily be arbitrary. For instance, should we exclude health
care linked to avoidable diseases on the ground that it merely reflects a
fundamentally unhealthy way of life (the counterpart of other parts of GDP
such as fast-food activities, or tobacco, so as not to be counted
twice…). Or should we include it because it makes people live better, everything else being equal…?
Should we exclude legal activities linked to divorces because divorce is a
sad thing which reflects the disintegration of families in contemporary
societies, or include them as they allow women to enjoy more independence?
In my
opinion, we should give up trying to compete in terms of GDP (an aggregated
indicator). Economic development is always something with many dimensions.
Therefore, an economic system should be judged on its ability to provide
individuals with what they need to achieve well-being : food, health,
leisure, clean air, a high life expectancy, means of communication, etc. For
each of these sub-categories, it is possible to build indicators that reflect
to what extent the population enjoys access to these resources. Not an
average indicator but one that takes inequality into account : two people
with a phone each is better than one people with two phones and one without
any. Thus, we would be able (in fact we already are, but these figures are
never publicized) to compare two countries by comparing their ability to
provide these essential goods to the largest possible part of their
population. We would certainly have some surprises, such as that the World
Health Organisation ranks the US health system as 37th in the
world, while France ranks 1st and Portugal 12th, two
countries with a much lower GDP per capita.
___________________________________
*This
article originally appeared in French in Les Éconoclastes,
Petit breviaire des idées
reçues en économie,
Paris: Éditions la découverte,
2003.
______________________________
SUGGESTED CITATION:
Olivier Vaury, “Is GDP a good measure of economic
progress?“, post-autistic economics review, issue no. 20, 3 June 2003, article 3, http://www.btinternet.com/~pae_news/review/issue20.htm
Economics can easily explain the demise of wheelwrights, weavers and wallpaper hangers. Technical progress dispelled the first group, globalisation the second, changing preferences the third.
The
‘dismal science’ has more difficulty accounting for its own
disappearance. But the downtrend in UK economics has now persisted too long
to be dismissed as a mere correction after momentary excess.
Entry of
home students to PhD courses has fallen to “dangerously low
levels” according to Royal Economic Society research published in 2000.
Two of the country’s most prestigious institutions (London School of
Economics and Nuffield College, Oxford) had, that year, attracted no new UK
doctoral students. Demand for national funds to support these had also
slumped to the level of supply, while sociology and politics maintained their
usual over-subscription.
The
Royal Economic Society gives a predictably economic explanation for the
flight from higher degrees. “Relatively low pay and unattractive
working conditions in academia” persuade high-flyers to seek higher
returns on their instructional investment. Writing before stock markets
stumbled, report authors Stephen Machin and Andrew
Oswald noted that City economists could earn up to five times their academic
counterparts, with senior management, consultancy and civil service jobs also
catapulting more basically qualified economists above the professors who
taught them. At Oswald’s Warwick University, the proportion of
first-class honours students staying on for further study dropped from 80% in
1983-5 to 33% by 1995-7.
But if
this were the only explanation for decline, demand for more basic economic
qualifications would have held up. In reality, the PhD numbers plunge is the
culmination of a fall in interest all along the economist production line..
Shrinking UK postgraduate entry results
from steady decline in undergraduate and taught masters interest, now
mirrored in the final pre-university years. Entries for economics A-level slid
from over 32,000 in 1993/4 to less than 20,000 in 2000/01.
The
American Economic Association has dug more deeply for explanations of its own
declining undergraduate enrolments, which peaked in 1990. American Economics
Association research suggests this is due not just to doubts on the economic
rewards of staying the course, but disillusionment with the way it is
structured and taught. From being a historical and literary subject, whose
journals could still be understood by non-specialists into the 1960s, the
subject’s ‘mainstream’ research has become submerged in
mathematical modelling and statistical analysis. A shift in assessment methods from essays
to exercises and multiple choice tests further opens the subject to
mathematicians who have never read the economic ‘classics’, while
closing it to those who study nothing
else.
By
‘formalising’ past ideas into highly stylised models, economics
has become a narrow problem-solving exercise, denying students the big
picture they expect it to provide. With dialogue confined to a shrinking
range of specialists familiar with the same formulae, the subject’s
past power to clarify everyday dilemmas has if anything been reversed.
“Many college seniors who have taken an economics course still show a
lack of understanding of basic economics,” laments the latest American
Economics Association survey of economic literacy by William Wallstad and Sam Allgood,
echoing recent British results. Though adept at deducing a rational
agent’s optimum consumption bundle, new graduates are often baffled by
practical questions - what happens when an exchange rate falls, who sets
monetary policy, or what can be done to fend off a recession.
Detachment
from reality is especially a deterrent for women and ethnic minorities, whose
second-class status is confirmed in other Royal Economic Society surveys. In
the UK women comprise one-third of PhD candidates and hold almost the same
proportion of fixed-term lecturers in economics, but hold only 17% of
permanent lectureships, and 4% of professorships. Although family-unfriendly
faculties are part of the explanation, the earnings gap for unmarried women
(14% below male counterparts) is actually greater than that for married women
(‘only’ 9%). Similar discrimination was found for ethnic minority
economists, who on average earned 8% less than white counterparts, even after
adjusting for their relatively greater youth and resultant shorter experience
and publication records.
Reviewing
these millennial results, Royal Economic Society president Partha Dasgupta and
women’s committee chair Carol Propper looked
across the Atlantic for salvation, inferring from a strong PhD market that
“clearly US economics continues to generate innovation and intellectual
excitement.” When, as end-century chair of the Cambridge economics
faculty, Dasgupta led a radical redesign of its
undergraduate course, he had little hesitation in swapping ‘Cambridge
Tradition’ for the North American approach.
Cambridge’s
new course, whose final phasing-in this year will coincide with the hundredth
anniversary of the original, downgrades Keynesian demand deficiencies,
business cycles, capital debates and income distribution effects, in favour
of more statistics and mathematical modelling. Supporters say the expanded
technical toolkit will restore the subject’s relevance to those who
currently by-pass it for business studies or other social disciplines.
However,
critics charge that narrower focus and procedural prescriptiveness
are what have stifled interest, just when the spread of everyday economic
problems – from widening world inequality to underfunded
personal pensions – should be reviving it. A reductionist
search for optimising ‘microfoundations’
neglects economies’ ‘emergent’ properties, produced by
individuals’ interactions and not predictable from their actions.
Economists build an unrealistic ‘micro’ picture, based on
well-informed rational choices that even statistically trained subjects seem
incapable of making. They thereby lose the macro picture, denying (or
ascribing to state interference) such awkward phenomena as persistent
unemployment and growth-rate differences, because the models point to
‘equilibrium’ and ‘convergence’.
In his
just-published Reorienting Economics*, Dasgupta’s
Cambridge nemesis and leading ‘realist’ Tony Lawson goes beyond
the usual arguments about what to measure and how to model, tracing the
economists’ troubles to the way they view the world. He accuses the
mainstream of twisting the economy to fit mathematical analysis by treating
it as a ‘closed’ mechanical system, ignoring complexities due to
reflection and reaction by its constituent parts, and their need for social
institutions to steer through the complexity. Economists’ search for
surface ‘event regularities’, showing which policy levers to
push, displaces concern for the more relevant underlying tendencies and
structures, whose surface manifestations resist statistical disentanglement.
Mainstreamers’ mistake, Lawson argues, is to mimic (nineteenth-century)
natural scientists in ‘inducing’ general principles from
superficial observation, or ‘deducing’ them from axioms, when all
they can realistically do is ‘retroduce’
the deeper reality from surface effects.
Instead of arguing, in a classic example, whether sighting
of a black swan negates the universality of white swans, realists want to
re-focus on the mechanisms that generate and change swans’ colour. Many
alternative views are demanding attention from the mainstream. Evolutionists
emphasise the path-dependent nature of technological and industrial change. Institutionalists deny the reducibility of all social
structures to individual decisionmaking and voting.
‘Austrian’ theorists point out how markets can coordinate choice
by interdependent individuals with scattered and limited information, inverting
the textbook depiction of fully informed and behaviourally independent
individuals. ‘Post-Keynesians’ seek the return of aggregate
demand to explanations of economies’ short-run cycles, and of income
distribution to accounts of their long-run growth.
UK calls
for a rethink have found strong resonance elsewhere in Europe, notably the
‘post-autistic economics (PAE)
movement’ launched on the internet by disgruntled French students in
2001. As the PAE’s Crisis in Economics**
manifesto hit the press in early April, the plea for pluralism reached the
‘other’ Cambridge, with 700 Harvard students rallying behind
Professor Stephen Marglin’s campaign for a
broader-spectrum introductory course. Colleagues’ rejection of his
eclecticism drove home the dissenters’ point..
Machin and Oswald speculate at the end
of their 2000 study that shrinking supply will eventually cause a jump in
economists’ price, until their soaring pay brings financially savvy
students flocking back onto their courses. But loss of initiative to more
inclusive disciplines could thwart that recovery. Non-mainstream staff and
students displaced from economics faculties have often found more fertile
ground in business schools and other social science departments, where
methodologies snubbed by peer review still prosper in the marketplace.
In an accompanying survey of minority representation, David Blackaby and Jeff Frank interpreted the high proportion of expatriate staff in higher-ranked UK economics departments as confirming the UK’s entry into a global market for top economic talent. But if the commercial capture of home-grown high flyers is as widespread as the Royal Economic Society suggests, this import of labour to resolve local skill gaps owes more to the pattern of the UK’s National Health Service than football’s Premier League.
Economists
used to joke that they had solved the unemployment problem – for
economists. For much of their subject’s history, this could be done
without any professional entry restriction. As chroniclers Keith Tribe and Alon Kadish have shown,
pioneering courses at London and Cambridge faced a protracted struggle to
attract sufficient students. Most continued to see classics, history, law or
moral philosophy as firmer career foundations, or preferred to keep their
elegant mathematics unsoiled by social concerns. A century on, that attitude
seems to be returning. Economics that continues to sidestep reality could
soon be down to economy size.
Notes
* Tony Lawson (2003) Reorienting Economics, London and New York: Routledge.
** Edward Fullbrook (ed) (2003) The Crisis in
Economics, London and New York: Routledge.
______________________________
*This article appeared in The Times Higher Education Supplement, 2 May
2003, under the title ‘Dismal Returns of Micro-Men’
______________________________
Alan Shipman (alms@aol.com)
is a freelance economist, affiliated lecturer in the Faculty of Social and
Political Sciences, Cambridge University. His books includeThe
Globalization Myth, The Market Revolution, and Transcending
Transaction.
______________________________
SUGGESTED CITATION:
Alan Shipman, “The Disappearing Science“, post-autistic economics
review, issue no. 20, 3 June
2003, article 4, http://www.btinternet.com/~pae_news/review/issue20.htm
A course in economics finds a place in almost every management education
program. This course, usually called
Managerial Economics, is intended to help students to solve decision-making
problems that they will encounter as managers. Most students find the course quite
fascinating and the economic models seem to provide them with
tools to solve important problems they are likely to face as managers. The MC = MR rule, in particular, tells a
manager what she needs to know most, price of the product and quantity to be
produced so that profits are maximized!
I had a student who came up to me at the end of the Managerial Economics
course and asked me to be a consultant for a project to dispense a popular
Indian food through vending machines.
He wanted my help in finding p* and Q*. I had to tell him that a local restaurant
manager would be of greater help to him than an economist. Quite irritated, he asked me of what use
then was a microeconomics course to managers.
This led me to think about why economics may have so little to offer
managers and entrepreneurs in their actual decision-making problems.
The essential problem with the term Managerial Economics is its vague
meaning: is it economics for managers or is it the economics of
management? If Managerial Economics
means economics for managers then this course can be considered
supportive in nature, providing awareness, insights and a general
understanding of the market system – important ingredients for
managerial decision-making – but not meant to provide tools to solve
managerial decision-making problems per se. In other words, the course is not intended
to teach managers MC = MR type rules that they can “apply” in
business.
“Conventional price theory was never intended to serve as a conceptual
framework for the study of pricing of the individual firm … price
theory has been primarily developed for use in the analysis of broad economic
changes and the evaluation of social controls … therefore, it would be
unfruitful (and erroneous) to use conventional price theory as a unified
framework to guide the theoretical and empirical study of price determination
within real-world firms” (Diamantopoulos & Mathews).
Such a managerial economics course, however, becomes essentially an economics
course; there is nothing managerial about it.
In this case it is also not necessary to take just a neoclassical
approach – economic history, political economy, institutional economics
and even Marxist theory could all provide invaluable insights of the working
of a capitalist economy to managers.
And what is being discussed in the Post-Autistic Economics Review
is of utmost relevance to managerial economics courses.
I usually begin my Managerial Economics course with a reading of Heilbroner’s, “Worldly
Philosophers”. Students must
understand that economists, not just the neoclassical ones, try to unravel
the mystery of the market system, how it works, when and why it fails, where
government intervention may be useful and what are the effects of
intervention on societal welfare. Managerial
economics must be seen in this light – putting the market system in
perspective – the efficiency of the market system in a perfectly
competitive structure, the deadweight loss from tariffs and quotas, the
inefficiency of monopolies, the need for regulation of natural monopolies,
excess capacity in monopolistically competitive markets, price and output of
firms in oligopolistic markets, market failure
under information asymmetry or externalities like pollution and so on and so
forth.
The problem I find with most Managerial Economics textbooks is that they are
written as economics for managers, not in the way discussed above, but
as economics providing tools for the manager. In other words, we can go about using MC =
MR kind of rules. Consider, a popular
text, “Managerial Economics: Economic Tools for Today’s
Decision Makers” (italics my own) authored by Keat
& Young. This text propagates
“managerial economics as the use of economic analysis to make business
decisions involving the best use of an organization’s scarce
resources”. The many
“applications” (usually in boxes) and numerical examples are
intended to make the student feel and reinforce hope that their economics
tools will one day be “used” by them. However, when encountered with a problem
like the one my student faced, they realize that such a Managerial Economics
course is autistic. Why?
When advocating economics as a bag of tools to managers, the economist must
realize that managerial economics suffers from a case of asymmetric information
– what the economist works with and what a manager actually has to work
with. The result: economics fails to give any answers to,
even articulate, problems of managers.
If managerial economics were to be used as a set of tools for
managers, we need to begin with the economics of management,
articulating problems confronting the manager from a manager’s
perspective, taking into account the constraints they actually face, which
must then be related to their decision-making problems.
What is this information that an economist assumes but a manager does not
have? Recall Part I of your Managerial
Economics course: the actual demand curve. If you browse through an economics or
managerial economics text, you will notice that the demand curve derived from
consumer choice models is taken as the actual demand curve with a known slope
and location – giving information on what consumers are willing to buy
at what price. If the ceteris
paribus assumption is relaxed, the economist also knows by how much the demand
curve will shift. The economist then
freely uses this demand curve when she studies firm behavior;
whatever might be the market structure.
She is able to know in no uncertain terms what quantity of output the
firm must produce and at what price to realize its objectives.
The conventional Managerial Economics text “cheats” the student
by introducing a chapter on demand curve estimation: a brief chapter, on how
to estimate demand curves. Even if you
are told not to attempt this exercise yourself, given the dangers of
estimating a wrong demand curve, the student feels that “it can be done
nonetheless”. Students can then
go about the rest of the course feeling assured about the usefulness of the
course. Interestingly, this chapter on
demand estimation is missing in many (pure) Economics texts.
As a manager or entrepreneur, are you in the economist’s privileged
position? Do you have the actual or
estimated demand curve for your product on your table or computer
screen? Obviously not. If only we think about all those cases that
Jack Trout talks about in his book, “Big Brands Big Trouble”: the
failure of New Coke, A.1. Poultry Sauce, Xerox computers, Firestone
tires. If these companies, with access
to the best resources, could have estimated the demand curves for their
products would they have ended in failures?
The manager does not know or can never know with certainty where the actual
demand curve lies. In fact, if she knows
the actual demand curve for the firm’s product, there really isn’t
much of a management problem. With the
actual demand curve, all one has to do is to apply the profit-maximizing rule
(MR = MC) or any other rule meeting the firm’s objective and the
firm’s balance sheet could be prepared, not just for the current year, but
maybe even for the next year. A
manager may still have to motivate employees or obtain raw materials from the
cheapest source, but those are not usually the problems with which a manager
goes to the economist.
It is useful for the economist to delve into the world of managers and
entrepreneurs. Al Ries
and Jack Trout provide some useful
tips for the economist trying to understand the economics of
management:
q
You can’t predict the future.
So don’t plan on it.
q
The fatal flaw in many marketing plans is a strategy based on
“predicting the future”.
q
Seldom are the predictions obvious.
Usually, they are so buried in assumptions that you need a degree in
rhetoric to ferret them out.
q
Remember Peter’s Law:
“The unexpected always happens”.
There is
something more that an economist needs to learn about management before
theorizing about it and that is, management is not about
“predicting” the future, but about “creating” the
future (Ries & Trout). It is not enough that top management
"sees" the demand curve for their product; they also must create
it. In other words, they must not only
know what people want but also make them want it - through advertising,
building brands, tactics or whatever.
Management decision-making is not only about setting p* and Q* given
the demand curve but also shifting the demand curve to meet the
company’s objectives. In his
book on entrepreneurship, “In the Company of Heroes”, David Hall
comments that “entrepreneurs do not find high profit opportunities,
they create them”.
We must, however, be fair to the economist.
The idea that the actual demand
curve is unknown to a manager is not a novel one in economics. Diamantopoulos & Mathews quote several
economists on this point:
The most challenging problems occur in attempting to
estimate the firm’s demand schedule, for typically the pricing
executive only knows one point in its demand curve – the number of
units being sold for the existing price (Alpert).
From the standpoint of decision-making, the relevant
demand curve is the one on which management basis its pricing and production
decisions. This need not be the actual
demand curve. From the decision-making
standpoint, it suffices that management behaves as if it were the
demand curve (Horowitz).
The demand curve whose image spurts entrepreneurial action
will be referred to indiscriminately as the subjective, or imagined, or
anticipated demand curve. It may even
be called the ex ante demand curve (Weintraub).
McKenzie
& Lee also point out the problem in knowing the actual demand curve:
Saying that the firm must
choose the ‘right’ price is easier than actually choosing it
… Managers can never be completely sure what the demand for their
company’s product is”.
The average-cost
pricing model in economics recognizes the impossibility of a determinate
demand curve:
Tastes in the market
change continuously and the reaction of the competitors is impossible to
predict. Thus firms cannot estimate
their future demand. Past experience
does not help much in reducing uncertainty, because extrapolation of past
conditions in the future is hap hazardous given the dynamic changes in the
economic structure. Given this
uncertainty average-cost pricing theorists reject the demand schedule as a
tool of analysis, thus abandoning half the apparatus of the traditional
theory of the firm (Koutsoyiannis).
But
outright rejection of the demand curve really “reduces” the
manager to an accountant. All she must
do is to compute average cost and add required mark-up, leaving it to the
market to determine sales. Do managers
then sit back and do nothing?
Don’t they engage with the market? Try to influence demand for their
products? A Post-Autistic
(Neoclassical) Managerial Economics course needs to consider these facts to
become less autistic and more useful to managers.
Chamberlin also talks about an actual demand curve
and an expected demand curve, the latter being more elastic than the former.
This notion of an expected demand curve assumes a manager to be a naïve
individual, always repeating the same mistake of not considering the actions
of rivals. Once again this approach
may be acceptable if managerial economics is about telling managers what
economists think of them. But the real
world is not this way. Else most
companies would have economists as their CEOs.
To conclude, teaching Managerial Economics needs to take a clear stance: is
it economics for managers based on an economics of
management? If not, there is no need
to restrict course contents to neoclassical theory and one should include a
wider understanding of economies and economics. If one were to look at Managerial Economics
as the economics of management, then a neoclassical approach could be
useful but is currently inadequate for direct application to business
management. We need a theory based on
an unknown or uncertain demand curve.
The present approach of masquerading neoclassical economics with
determinate demand curves as economics for managers is certainly
autistic.
References
Edward H. Chamberlin, 1969, The Theory of
Monopolistic Competition: A Re-orientation of the Theory of Value, Harvard
University Press, Cambridge, Massachusetts.
Adamantios Diamantopoulos & Brian Mathews, Making
Pricing Decisions: A Study of Managerial Practice, Chapman & Hall,
London, 1995.
David Hall, In the Company of Heroes: An Insider’s Guide to
Entrepreneurs at Work, Kogan Page Limited,
London, 1999.
Robert L. Heilbroner, The Worldly Philosophers:
The lives, times, and ideas of the great economic thinkers, Fifth
Edition, Simon and Schuster, N.Y. 1980.
Paul G. Keat & Philip K.Y. Young, Managerial Economics: Economic Tools for
Today’s Decision Maker, Third Edition, 2000.
A. Koutsoyiannis, Modern Microeconomics, ELBS, Second Edition, 1994.
Richard McKenzie & Dwight Lee, Microeconomics for MBAs,
http://www.gsm.uci.edu/~mckenzie/onlinebooks.htm
Al Ries & Jack Trout, Bottom-up Marketing,
McGraw-Hill Company, 1998.
Jack Trout, Big Brands Big Trouble:
Lessons Learnt the Hard Way, East West Books (Madras) Pvt.Ltd., Chennai
______________________________
SUGGESTED CITATION:
Sashi Sivramkrishna, “Towards a
Post-Autistic Managerial Economics”, post-autistic economics review, issue no. 20, 3 June 2003, article 5, http://www.btinternet.com/~pae_news/review/issue20.htm
(Part II: A Spinoza-Sen
Economics Research Program will appear in the
next issue)
Jorge Buzaglo (University of Gothenburg,
Sweden)
In a recent article in this review, Emmanuelle Benicourt (2002) challenges heterodox economists to
explain why they consider Amartya Sen’s theoretical approach a real force for reform
in economics. I would like to communicate here what I see as a real force for
change in Amartya Sen’s
approach to the economic dimension of human development. I would like to
describe some of the genealogy of the approach, and also to show the
potential that this critical tradition has for the renewal of economics.
Before I embark in my task I would like to refer to
Emmanuelle Benicourt’s orthodox/heterodox
partition of economics, which I do not think is very useful. Both categories
are too heterogeneous to be helpful. If we consider what I think is a more
useful categorization, that between conventional and progressive economics (or
similar characterizations, such as conservative/radical, bourgeois/socialist,
etc.), we will find orthodox and heterodox economists in both categories. Amartya Sen, for instance, is
an orthodox economist, as both he and Emmanuelle Benicourt
point out (Amartya Sen
says “mainstream economist”). He is an orthodox economist because
he uses the conventional apparatus of ordinary neoclassical theory. But as I see it, he is a progressive orthodox economist, since
he applies this conventional apparatus to the advancement of a progressive
cause, namely, the cause of equality.1 The equality he advocates
is not merely economistic/utilitarian, but refers
also to all other dimensions (“functionings”)
of human existence. A quite radical message indeed, articulated in the suave
and diplomatic language of neoclassical economics. One can only speculate if
this is an Aesopian strategy of telling subversive truths in covered
language, or if it would be better or more effective to develop a more
appropriate heterodox idiom to say the same thing. But it must be admitted
that many a heterodox economist would shy away from so radical an objective
for economic science and human development.
I will argue here that Sen’s
radical approach to human welfare is not new, and that the original source of
the approach contains other important and deep insights. I will also argue
that this same source inspires some present-day approaches to natural
science, and could also inspire the renewal of economics that Emmanuelle Benicourt longs for.
The
“hideous hypothesis” of The
Ethics
The source I am thinking of is The Ethics of Baruch de
Spinoza.2 Spinoza’s doctrine of capabilities in The Ethics prefigures rather explicitly Amartya
Sen’s ideas, but it does not seem that Sen was aware of it. For one thing, Amartya
Sen is very open and magnanimous with his sources
and credits ─ he refers to Aristotle's Nicomachian Ethics, Marx’s Manuscript
of 1844 and Adam Smith’s
Wealth of Nations as sources of inspiration.3 Also, the
doctrine of capabilities, in spite of its crucial importance in
Spinoza’s message, if barely mentioned, is not given the importance it
deserves in most of the expositions, commentaries and criticisms of The Ethics I am aware of.4 This was perhaps due to the
fact that the doctrine appears among what are considered the most difficult
and “mystical” propositions of the last half of Part 5, which
usually repulse narrowly conceived positivism. In these last propositions
Spinoza explains when and in what sense the human mind can be said to be
eternal.
In effect, in 5.39 (Part 5, Proposition 39),
Spinoza affirms that
He, who possesses a body
capable of the greatest number of activities, possesses a mind whereof the
greatest part is eternal.5
Let us recall that The Ethics is composed in the
axiomatic-deductive mode, with all propositions deduced from preceding
propositions, lemmas, axioms and definitions.6 Proposition 5.39 is demonstrated as
follows.
Proof. He, who
possesses a body capable of the greatest number of activities, is least agitated
by those emotions which are evil ([by proposition] 4.38) ─ that is (4.30) those emotions which are contrary to
our nature; therefore (5.10), he possesses the power of arranging and
associating the modifications of the body according to the intellectual
order, and, consequently [5.14, missing in the Elwes
version], of bringing it about, that
all the modifications of the body should be referred to the idea of God [or
Nature, or Substance; i.e. self caused, infinite, eternal being]; whence it will come to pass that (5.15)
he will be affected with love toward God, which (5.16) must occupy or
constitute the chief part of the mind; therefore (5.33), such a man will
possess a mind whereof the chief part is eternal. QED.
The first proposition referred to in the proof is crucial
for the understanding of Spinoza’s doctrine of capability. Proposition
4.38 states that
Whatsoever disposes the
human body, so as to render it capable of being affected in an increased
number of ways, or affecting external bodies in an increased number of ways,
is useful to man; and is so, in proportion as the body is thereby rendered
more capable of being affected or affecting other bodies in an increased
number of ways; contrariwise, whatsoever renders the body less capable in
this respect is hurtful to man.
Proof: Whatsoever
thus increases the capabilities of the body increases also the mind’s
capability of perception (2.14); therefore, whatsoever thus disposes the body
and renders it capable, is necessarily good or useful (4.26, 4.27); and is so
in proportion to the extent to which it can render the body capable;
contrariwise (2.14, 4.26, 4.27), it is hurtful, if it renders the body in
this respect less capable. QED.
That is, the proof says that whatsoever increases the
capabilities of the body also increases the mind’s capability of
understanding. And what increases our power of understanding is certainly
good.
In order to prove that whatsoever increases the
body’s capabilities also increases the capabilities of the mind, the
proof uses Proposition 2.14, which states that
The human mind is capable
of perceiving a great number of things, and is so in proportion as its body
is capable of receiving a great number of impressions.
Spinoza could also have stated that the reciprocal
statement is also true; that whatsoever increases the capabilities of the
mind augments also the capabilities of the body. That is, the proof could
have used the often quoted Proposition 2.7, base of Spinoza’s so called
body/mind “parallelism” theory:
The order and connexion
of ideas is the same as the order and connection of things.
The Note to this proposition further affirms this same
idea, that is, that
[…] substance
thinking and substance extended are one and the same substance [God or
Nature], comprehended now through one
attribute, now through the other. So, also, a mode of extension and the idea
of that mode are one and the same thing. This truth seems to have been dimly
recognized by those Jews who maintained that God, God’s intellect, and
the things understood by God are identical.
Now, we know also from the Note to Proposition 2.1 that
[…] in proportion as a thinking being is
conceived as thinking more thoughts [or, what is the same, as an extended
being is conceived as capable of more activities], so it is conceived as containing more reality or perfection.
This relationship between increased capabilities and
increased perfection or reality can be used for an alternative explanation of
our starting Proposition 5.39, on the relationship between capability and
eternity. Spinoza affirms in the same Note to 2.1:
Therefore a being which can think an
infinite number of things in an infinite number of ways [or,
what is the same, which can perform infinite acts in an infinite number of
ways], is, necessarily, in respect of
thinking [or in respect of extension],
infinite."
Infinite thoughts are timeless, eternal thoughts. A being
capable of thinking infinite thoughts would be thinking eternal thoughts.
Such a being would be so sharing, as to say, in eternity, insofar as it
thinks infinite/eternal thoughts.7 Also, psychophysical identity
(“parallelism”) would suggest that a mind which is thinking
infinite thoughts has an extended correlate which is performing infinite
acts. This would be one way of interpreting the relationship between
capability and eternity in Proposition 5.39.
Spinoza’s demonstration of 5.39 quoted above recurs
to his idea of scientia intuitiva.
The proof says that the larger the capabilities of the body, the greater the
faculties of the mind (and vice versa, we should add); in particular, the
greater is the capability of the mind of rationally comprehending its
emotions. The mind will be thus more able to form clear and distinct ideas;
that is, ideas that can be referred to the idea of God or Nature, since
whatsoever is (or is conceived in the mind), is in God or Nature. Spinoza
calls this ability of the mind scientia intuitiva, and this type of knowledge third kind of knowledge, by which the
mind conceives things under the form of eternity (sub specie aeternitatis).8
Now, the mind, regarding its own power of comprehension, is affected of
pleasure, being this pleasure accompanied by the idea of God or Nature (so
much the more in proportion as it understands itself and its emotions).
According to Spinoza, pleasure accompanied by the idea of an external cause
is love. Pleasure accompanied by the idea of God or Nature is what Spinoza
calls intellectual love of God.
This intellectual love is an activity whereby God or Nature ─ insofar
it can be explained through the human mind ─ regards itself accompanied
by the idea of itself. Since God or Nature is an absolutely infinite being,
this love of the mind is part of the infinite love wherewith God or Nature
loves itself. This love, this knowledge sub
specie aeternitatis, is possible for the mind
insofar as it conceives its own body under the form of eternity. And this
idea, which expresses the essence of the body under the form of eternity, is
necessarily eternal.
The above ideas are indeed difficult and mind-boggling.9
They nevertheless clearly point towards the idea of human growth or human
perfection as the increasing realm of human capabilities of thought and
activity, that is, of effective freedom (cf. Sen
1999). Human perfection depends on expanded domains of activity for every
individual on every conceivable dimension of human existence, which implies
also increased domains of knowledge and understanding in enlarged dimensions
of thought. Human development does not
depend on increased levels of “utility” derived from consumption.10
Notes
1. There are many well known economists in this category. Serge-Christophe Kolm could for
instance be mentioned, as a continental member of this class.
2. The “hideous hypothesis” of “that famous atheist”
was “the doctrine of the simplicity of the universe, and the unity of
that substance, in which he supposes both thought and matter to inhere”
(Hume 1911 [1739-40], p. 229). (I must say that I do not agree with the word
“simplicity” in Hume’s description; the reasons why will be
apparent in what follows.) According to Jonathan Israel (2001, p. 159)
“hideous” could had been an ironic characterization. Hume belonged
in fact to the same banned category of radical Enlightenment thinkers such as
Diderot, Voltaire and Spinoza himself (Israel 2001,
p.109). Curiously, Diderot’s article on
Spinoza in the Encyclopédie
could be also said to be “ironic.”
3. See for instance Sen (1988). By the way, the young
Marx was a dedicated student of Spinoza (see e.g. Rubel
1978). Aristotele's ideas do not exactly prefigure Sen’s (or Spinoza’s) notion of capabilities ─ see e.g. the discussion of
the “Aristotelian Principle” in Rawls (1999, § 65).
4. As an assiduous reader of Spinoza literature, I know that I am aware of
only one small portion of it. According for instance to the Swedish
bibliographic database (www.libris.kb.se)
there are 743 Spinoza related books in Nordic libraries ─ 42 of them
published in 2001-2002. (Journal articles must most probably be counted in
the thousands. There are also several Spinoza websites.) The increasing rate
of publication may perhaps be announcing the near fulfilment of
Lichtenberg’s (1990 [1800-1806], p.115) famous prediction: “If
the world should endure for an incalculable number of years the universal
religion [ethics] will be a purified Spinozism.
Left to itself, reason can lead to nothing else and it is impossible that it
ever will lead to anything else.”
5. I quote from the Elwes’ version in compact
disc in Lire l’Éthique
de Spinoza, Phronésis, Paris, 1998.
6. The title of The Ethics in the original is Ethica ordine geometrico demonstrata.
Possibly Spinoza chose this mode of argumentation because of its overwhelming
power of conviction. For many centuries The
Elements of Euclid was second only to The
Bible in number of extant copies. Also, the prominence of mathematics and
natural science was rapidly growing in XVIIth
century Europe.
7. For a suggestive comparison of this insight with the insight of
meditation, see Wetlesen (1977).
8. Spinoza’s first and second kinds of knowledge can be succinctly
described as hearsay or opinion and science respectively.
9. But all things excellent are as
difficult as they are rare.
Spinoza’s own reply in the last words of The Ethics comes naturally to the mind.
10. Increased levels of passive
consumption or leisure, from The
Ethic’s perspective, might indeed be seen as lessening human perfection. Cf. Proposition 5.4: In proportion as each thing possesses more
of perfection, so is it more active, and less passive; and, vice versa, in proportion as it is more active, so
it is more perfect. But of course in most cases increasing capabilities
involve increased consumption and/or investment.
References
Benicourt, Emmanuelle, 2002, “Is Amartya Sen a Post-Autistic
Economist?” post-autistic
economics review, Issue no. 15, September 4.
Hume, David, 1911 [1739-40], Treatise
of Human Nature - Volume I, J.M.Dent & Sons, London.
Israel, Jonathan I., 2001, Radical
Enlightenment: Philosophy and the Making of Modernity 1650-1750, Oxford
University Press, Oxford.
Lichtenberg, Georg C., 1990 [1800-1806], Aphorisms, Penguin, London.
Rawls, John, 1999, A Theory of Justice
– Revised Edition, Oxford University Press, Oxford.
Rubel, Maximilien, 1978, “Marx à la rencontre de
Spinoza”, Économies et Sociétés,
Jan.Feb., vol.12, pp.239-65.
Sen, Amartya,
1988, “The Concept of Development,” in H. Chenery
and T.N. Srinivasan
(eds.), Handbook of Development
Economics – Volume I, North Holland, Amsterdam.
Sen, Amartya, 1999, Development as Freedom, Oxford
University Press, Oxford.
Wetlesen, Jon, 1977, “Body awareness as a
gateway to eternity,” in S. Hessing (ed.), Speculum Spinozanum,
1677-1977, Routledge, London.
(Part II: A Spinoza-Sen Economics Research Program will appear in the next
issue)
______________________________
SUGGESTED CITATION:
Jorge Buzaglo, “Capabilities:
From Spinoza to Sen and Beyond. Part I :
Spinoza’s Theory of Capabilities”, post-autistic
economics review, issue no. 20,
3 June 2003, article 6, http://www.btinternet.com/~pae_news/review/issue20.htm
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