Welcome friends!
Can we talk about greed? I’ve been wanting to take this up again ever since Pope Francis appeared in the papers recently describing an “unfettered pursuit of money” in suitably anachronistic terms as “the dung of the Devil.” The fact he would say such a thing seems unremarkable to me. Isn’t that part of the whole Christian theme of respecting the poor? One of the nobler sentiments of the whole enterprise in my opinion. No, the interesting bit for me was not what the Pope had to say but what came after. Many commentators at least here in the US immediately claimed the Pope had said capitalism was the dung of the Devil. That got me thinking again about the tendency among certain economic conservatives to associate capitalism with greed and hence to believe greed is good presumably because one is ostensibly most useful to society if one is most attuned to the pecuniary incentives expressed in market forces and thus most liable to provide what society evidently values most highly. I’m sure I must have said a few words about this idea before but it’s been a while so maybe it’s time for another go. It’s not like it’s going anywhere soon.
My first thought on this whole conservative greed is good narrative is that, yes, greed can operate as a driving force for human activity, which I suppose might sometimes be useful activity, by which I mean something other than selling drugs or stealing someone’s car, etc. However, there would appear to be any number of other such wellsprings of human activity that would fall into pretty much the same category. People can also be motivated by insecurity, egotism, a lust for power, hatred, fear, cruelty, and any number of other less than entirely savory emotions and feelings. People can also be motivated by the nobler emotions: love, kindness, duty, honor, and so on. So why are conservatives always so hung up on greed as the great motivating force? Well, I don’t know. It might just be that’s the motivation they’re most familiar with and it just falls out of the familiar tendency of rich conservatives to love and respect themselves and their own motivations and desires above all others. However, given the close association between conservative ideology and certain branches of economic theory I’ve often wondered if some element of that theory or perhaps bastardization of that theory may have something to do with it. That’s what I’d like to discuss today.
Let me just start out by saying economic theory does not explicitly or literally portray greed as good. Therefore, trying to figure out how some people might have gotten this impression requires a bit of detective work. I see two main suspects in terms of elements of economic theory that might plausibly be related to such a belief. One is the common assumption within economic models that people have unlimited wants, that is, that holding everything else constant people tend to prefer more to less. That might seem a little farfetched concerning particular goods. I like hummus but how much of the stuff can one person eat? But if we’re talking about money I guess that assumption seems rather reasonable to me. I think most people could always do with a bit of extra cash even if they intend to save it for a rainy day, pass it out to loved ones, or even hand it out to whosoever they might think of as the deserving poor. Is that what we normally mean by greed? I don’t think so. Greed to me carries the implication of countervailing ethical considerations and one inappropriately choosing mammon over more suitable goals. I suppose that’s what the Pope was getting at when he mentioned the unfettered pursuit of money. The pursuit of money fettered so to speak by an attention to ethical concerns is a whole different kettle of fish.
Let’s move on to our second suspect lurking within economic theory, which I feel must be this whole business of utility and so-called welfare economics and so on. You know what that means, right? Another opportunity for me to talk about one of my pet peeves: what I consider the incomplete if not entirely incoherent social philosophy represented by neoclassical economic theory or as I’m always careful to say possibly a mangled popular interpretation of that theory.
I think to appreciate what’s going in the endlessly fascinating world of economic theory it helps to understand a little something about the history of the discipline. The first thing one needs to know is that Adam Smith and the other bewigged old timers who got the ball rolling were amateur theologians and ethicists as much as they were scientists. They were not concerned simply to predict human behavior. No, these people were mostly what were known as “deists” and had the rather grandiose agenda of establishing the world had been set up by a benevolent deity in such a way the natural laws of human behavior would inevitably lead to optimal outcomes if only people could refrain from mucking up the works. That’s why the imagery that clearly most resonated with these writers involved things like natural laws, invisible hands, clocks, and so on. Now I feel it’s quite likely these early writers were indeed concerned to establish that a certain amount of greed was both natural and good at least under the right conditions. No doubt they looked around and saw a whole heck of a lot of greed and said to themselves, well, apparently greed is a natural condition for the human animal and must therefore fit into the divinely ordained social order. It’s well known Mr. Smith at least was not so simple minded as to suggest greed was good always and everywhere. He made some rather pointed remarks about greed. But his general conviction was clearly if we set things up the way the good Lord intended, which he associated with nature despite the rather obvious human effort required to set up and maintain those particular natural conditions, then greed would function as nature had intended and would lead to beneficial results for us all.
Fast forward a few decades and both economic conditions and intellectual life had moved on. Some people had been working to formalize economic thinking using the concept of utility, which was at that time defined within the field of economics pretty much the same as it was within the field of ethical philosophy. However, something odd and clearly rather disconcerting for some people started to happen. Serious philosophical ethical utilitarians began to cast doubt on the notion the results of any old free market were necessarily really what one ought to consider socially optimal. Not all that surprising I suppose. By this time the industrial revolution had made some people fantastically wealthy but had kicked many people up and down the street and some people right off the end of the pier. Sort of like what information technology is doing today. Anyway, after what must have seemed an interminable series of novels about suffering street urchins and so on some people began to wonder if they might have missed some important ethical principle along the way. People were beginning to look askance at the prevailing social order based on free market ideology. The field of academic economics was in crisis!
Fortunately an Italian fascist named Vilfredo Pareto stepped into the breach along with a number of other like minded souls. The solution Pareto and others hits upon was to gut the concept of utility within economics by defining it in a way that made it irrelevant to ethical issues involving conflicts between the needs and desires of different people. That is to say, they switched from using utility to mean a measure of welfare one could compare across people to more of a subjective feeling one could only meaningfully investigate in the context of a single person. Comparing utility across people was recast as impossible in an (economic) utilitarian context but curiously enough not because they simply explicitly chose to redefine it that way but ostensibly at least because of practical measurement issues. (The argument was that one could reliably infer someone preferred A to B if that person was given a choice and opted for A, but there was no comparable method for inferring utility across different people.) The basic idea was that even if all outward appearances suggested one person might generate more utility from some resolution of some conflict of desires, say two people wanted a doughnut and one person was starving and really really needed the doughnut but someone else wanted the doughnut to hang on the dashboard of his or her horse and buggy, assuming such contraptions had dashboards, there was no way to tell which resolution was better based on utility because the subjective feelings of utility associated with the latter might very well be greater than the utility associated with the former. That is to say, the buggy man or woman in this case might have been one of those superconductors of utility whose passing whims are associated with more utility and are thus more important under this conceptualization of utility than the seemingly more pressing desires of lesser mortals. With this innovation the discussion of utility within economics and within serious ethical philosophy parted ways perhaps forever.
Economists had found a way to shut down pesky discussions of redistribution based on utilitarian concerns within the field of economics but had they thrown the baby out with the bath water? Did economic theory still have sufficient intellectual content to convince people of the superiority of the status quo free market system? Could they still establish interfering with the free market was always a big no no? Well, that’s an interesting question. They did and they didn’t. Or let’s say they did to a small degree that was enough to get some people thinking maybe they did to a much larger degree. What they established was if one is at a distribution that addresses all one’s ethical issues and so on, and certain conditions prevail (i.e. the well known conditions required for a so-called perfectly competitive market), and one does not currently have the institutions that go with a free market, then one can demonstrate using the stripped down version of utility with seemingly very little potentially divisive ethical content whatsoever that one should be able to improve upon one’s situation by moving to free market institutions. Of course, that wouldn’t necessarily hold true if adopting those free market institutions moved one to some other distributional result that did not adequately address one’s ethical concerns or even if one’s ethical concerns included the relative standing of different people (because the result is based on demonstrating that under these conditions one could make at least one person better off while making no one worse off in an absolute sense, which of course is entirely consistent with making one person worse off relative to another person).
To further confuse the hell out of everyone economists also developed this notion that they were no longer even talking about social ethics in general terms. They were simply talking as economists constrained by working with the peculiar stripped down version of utility we’ve been discussing and as such they didn’t have any basis to discuss the mysterious ethical concerns other people might have about how to resolve interpersonal conflicts and hence with distributional issues in general. They never explicitly suggested other people could not or should not discuss these important and ubiquitous ethical issues. To this day careful economists will always try to make clear that distributional concerns are outside their purview and if one has ethical beliefs relating to resolving interpersonal conflicts of desire then one should always feel free to redistribute to address those concerns.
But of course the devil is always in the details and in this case the details involved how economist spun their economic policy recommendations. The underlying conceit was that as a first approximation we should treat all free market results as equivalent and just concentrate on getting to any one. Once there we can then worry about adjusting for distributional issues as a second step. The problem is that’s not consistent with how the world actually works at all. Labor markets and distributional concerns are intimately mixed up with people’s feelings about what constitutes free market institutions and hence cannot really be separated out that way. It’s entirely unrealistic to imagine one can talk about optimal economic institutions without at the same time bringing up the ethical issues associated with distributional concerns such as who should be getting what.
The practical result of this unfortunate mishmash is that we have some conservatives and economists stuck in the eighteenth century with Adam Smith and his buddies talking about natural laws and clocks and so on, we have some conservatives and economists stuck in the nineteenth talking about how capitalism maximizes total utility and fretting about capitalism versus communism and so on, and we have yet other economists and conservatives stuck in the middle of the twentieth century talking about how we’ve demonstrated the social optimality of free market institutions in general all the while acknowledging and then promptly dismissing distributional issues with a wave of the hand. I think people in all three of these groups can very easily get the idea if things are going to be natural or socially optimal or whatever then we all need to act as much as possible like the simplified actors that feature in their economic models and respond and react only to the pecuniary and material considerations that are discussed in those models, in other words, that we all be greedy.
However, more careful economists and liberals know that’s not what we’re really talking about at all. For one thing, even if one wants to muck about with the type of utility discussed in economic theory no one ever said that type of utility only arises from money or goods and services. One could theoretically derive utility from anything including following one’s ethical beliefs about not being greedy. Economic models address economic matters and thus concentrate on things like money and goods and services but the issues typically addressed in those models do not represent the totality of human experience. For another thing, as I just finished discussing the ethical considerations one can imagine might serve as counterparts to greed fall into the category of ethical issues relating to distributional concerns and thus are explicitly not addressed within the context of economic theory.
Oh hell, let’s just have a practical example. Let’s say one could make a buck putting desperately deprived kids to work in the old coal mine. (Hey, I’m just trying to make it interesting by setting up a situation where there are some plausible countervailing ethical issues to making a buck.) However, one has some moral reservations. One thinks kids should really be sitting around on couches playing video games. Does economic theory establish one has an ethical obligation to society to be greedy and haul the kids off to the mine? No, it doesn’t. One may get more utility from following one’s own ethical theories relating to what kids should be doing than from selling a boxcar of coal. What about the unmet demand for coal and the fact that society was apparently willing to pay for coal but was not actually offering up anything to have kids sitting about playing video games? Well, for one thing under the strictures set up within economic theory one can’t really compare the utility of the decider in this case to that of anyone else or any combination of anyone else so there’s no way to tell if the sort of utility discussed within economic theory would be higher if the kids play video games or work the old mine. Second, all one really has is an indication that people value coal. One doesn’t have information relating to the potential utility other people might derive from living in a society where kids are not working in coal mines. That’s not a product one buys on the market. One might be able to get at that issue indirectly through the political system maybe by seeing what sorts of labor market regulation people are willing to adopt. And notice I’m not even talking about the utility of the kids because I wanted to abstract away from that issue. (Yes, assuming the kids share one’s belief they should be playing video games rather than working in coal mines that would represent yet another of those pesky distributional issues I’ve been discussing.) So does economics establish that greed is good in this example? No, not at all. Put briefly, the institutions we tend to call the “free market” or in the case of pugnacious old timers “capitalism” and extol based on the very limited demonstration of the optimality of those institutions in modern neoclassical economic theory does not really involve anyone necessarily being greedy nor does it recommend anyone be greedy.
But the story doesn’t end there although like you I rather wish it did as I’ve already written considerably more than I intended. We also have the complicated collision of the scientific and ethical elements of economic theory or in the parlance of that old time philosophy I still feel makes a lot of sense, the positive and the normative. The quasi-ethical stylings of welfare economics is really only one aspect of the field of economics. Today there are many scientifically minded economists who think all they’re really trying to do with their models is predict behavior. They’re not interested in trying to convince anyone that anything in particular is socially optimal. Now according to the assessment of these people their models tend to work well enough to suggest we can think of people as behaving like the actors in those models. In other words, according to many of these economists, economic theory establishes not that people should be greedy but that they are in fact greedy. Now of course this by itself doesn’t support any ethical conclusions relating to greed. Maybe the world would be a better place if economic models didn’t work so well. However, I can imagine people thinking something along the lines of maybe people just can’t help being greedy so why fight it? Or maybe everyone is doing it so what’s the big deal? Indeed, I read about a study a little while ago that found exposure to economic theory was associated with an increase in greedy behavior. But now I’m just talking about psychological issues like framing what one considers normal behavior. I’m not talking about justifiable ethical conclusions relating to greed because of course there is no reason to suppose that even if one is in fact greedy one must remain greedy or that it is good for one to be greedy. Again, economics interpreted as a modern social science does not and cannot establish that greed is good.
I suppose I’ve been going on long enough. Let me just summarize and close it out. Greed in the sense of preferring more to less if there are no ethical considerations involved seems unobjectionable. And if it gets one off the couch then I suppose we can say greed is good in that particular context. Greed in the sense of elevating the pursuit of material gain to a position of ethical preeminence is not necessarily good depending on how one feels about whatever other considerations we’re talking about. Economic theory properly interpreted does not imply or rely upon people being greedy. If one wants to follow the old timers and associate the free market institutions discussed within economic theory with something called “capitalism,” then capitalism also does not imply or rely upon greed. Personally I’ve never seen much use for such an ambiguous and ill-defined term as capitalism given the limitations of the conclusions relating to free market institutions one can actually derive from modern economic theory. I prefer to say if the necessary conditions hold (and they sure as heck don’t always) and no other ethical considerations are involved (by which I mean distributional issues that may be associated with one’s ethical beliefs be they utilitarian, rights based, or what have you, and there often are such issues) then free market institutions seem fine. If the proper conditions don’t hold or one has ethical concerns then I suppose one might feel the need to change some things up. Do we really need a term for that? How about common sense-ism? Get real-ism? Whatever. In other words, there might be a lot of greed about right now but there doesn’t have to be. We can get along just fine without it. On a more personal level let me just say I like to make a buck as much as the next guy but I think I have to agree with the Pope on this one: the unfettered pursuit of money is indeed the dung of the Devil if one wants to get all medieval about it. And you know the Pope and I don’t always see eye to eye. So that’s something.
