Research in the History of Economic Thought and Methodology, Volume 25A: A Research Annual (Research in the History of Economic Thought and Methodology) ... History of Economic Thought and Methodology)

RESEARCH IN THE HISTORY OF ECONOMIC THOUGHT AND METHODOLOGY A Research Annual

RESEARCH IN THE HISTORY OF ECONOMIC THOUGHT AND METHODOLOGY Series Editors: Warren J. Samuels, Jeff E. Biddle and Ross B. Emmett Recent Volumes: Volume 23A:

Research in the History of Economic Thought and Methodology: A Research Annual; Warren J. Samuels, Jeff E. Biddle and Ross B. Emmett; 2005

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Research in the History of Economic Thought and Methodology: A Research Annual; Warren J. Samuels, Jeff E. Biddle and Ross B. Emmett; 2006 Volume 24B: Research in the History of Economic Thought and Methodology: Further Documents from F. Taylor Ostrander; Warren J. Samuels; 2006 Volume 24C: Research in the History of Economic Thought and Methodology: Documents From and On Economic Thought; Warren J. Samuels; 2006

RESEARCH IN THE HISTORY OF ECONOMIC THOUGHT AND METHODOLOGY VOLUME 25-A

RESEARCH IN THE HISTORY OF ECONOMIC THOUGHT AND METHODOLOGY A Research Annual EDITED BY

WARREN J. SAMUELS Department of Economics, Michigan State University, East Lansing, MI 48824, USA

JEFF E. BIDDLE Department of Economics, Michigan State University, East Lansing, MI 48824, USA

ROSS B. EMMETT James Madison College, Michigan State University, East Lansing, MI 48825, USA

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JAI Press is an imprint of Elsevier The Boulevard, Langford Lane, Kidlington, Oxford OX5 1GB, UK Radarweg 29, PO Box 211, 1000 AE Amsterdam, The Netherlands 525 B Street, Suite 1900, San Diego, CA 92101-4495, USA First edition 2007 Copyright r 2007 Elsevier Ltd. All rights reserved No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the publisher Permissions may be sought directly from Elsevier’s Science & Technology Rights Department in Oxford, UK: phone (+44) (0) 1865 843830; fax (+44) (0) 1865 853333; email: [email protected]. Alternatively you can submit your request online by visiting the Elsevier web site at http://elsevier.com/locate/permissions, and selecting Obtaining permission to use Elsevier material Notice No responsibility is assumed by the publisher for any injury and/or damage to persons or property as a matter of products liability, negligence or otherwise, or from any use or operation of any methods, products, instructions or ideas contained in the material herein. Because of rapid advances in the medical sciences, in particular, independent verification of diagnoses and drug dosages should be made British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN: 978-0-7623-1422-5 ISSN: 0743-4154 (Series) For information on all JAI Press publications visit our website at books.elsevier.com Printed and bound in the United Kingdom 07 08 09 10 11 10 9 8 7 6 5 4 3 2 1

CONTENTS LIST OF CONTRIBUTORS

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EDITORIAL BOARD

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REVIEW ESSAYS Meadowcroft’s THE ETHICS OF THE MARKET The Ethical Case for the Market Ayman Reda

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The Libertarian Fantasy of an Ethical Market Joseph E. Pluta

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The Virtues, Complexity, and Limits of Markets David Schmidtz

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Courgeau’s METHODOLOGY AND EPISTEMOLOGY OF MULTILEVEL ANALYSIS Methodological Holism and Individualism Confronted Warren J. Samuels

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Hardin’s INDETERMINACY AND SOCIETY The Problematic Problematization of Choice and Action Daniel W. Bromley

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Szenberg and Ramrattan’s REFLECTIONS OF EMINENT ECONOMISTS Essays in Autobiography William J. Barber

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Davis’s RICARDO’S MACROECONOMICS The Reinvention of Ricardo as an Applied Economist Terry Peach

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Evensky’s ADAM SMITH’S MORAL PHILOSOPHY The Wealth of Nations and the Morality of Opulence Jack Russell Weinstein

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Backhaus’s ELGAR COMPANION TO LAW AND ECONOMICS Complaining about the Companion Humberto Barreto

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Hamowy’s POLITICAL SOCIOLOGY OF FREEDOM Spontaneous and not so Spontaneous Orders Peter McNamara

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Ringman’s SURVIVING CAPITALISM How to Survive Capitalism Ayman Reda

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Augello and Guidi’s ECONOMISTS IN PARLIAMENT IN THE LIBERAL AGE and Maloney’s THE POLITICAL ECONOMY OF ROBERT LOWE Parliamentary Economists in the Liberal Age Warren J. Samuels

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Parisi and Rowley’s ORIGINS OF LAW AND ECONOMICS They May Not Be ‘‘Origins,’’ But They Are ‘‘Contributions’’ (For the Most Part) Nicholas Mercuro

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Jones’ CULTURES MERGING The Missing Cultural Foundations of Economic Globalization Jonas Zoninsein

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NEW BOOKS RECEIVED

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LIST OF CONTRIBUTORS William J. Barber

Department of Economics, Wesleyan University, USA

Humberto Barreto

Department of Economics, Wabash College, USA

Daniel W. Bromley

Department of Agricultural and Applied Economics, University of Wisconsin, USA

Peter McNamara

Department of Political Science, Utah State University, USA James Madison College, Michigan State University, USA; Michigan State University College of Law and James Madison College Michigan State University, USA

Nicholas Mercuro

Terry Peach Joseph E. Pluta Ayman Reda

Economics, University of Manchester, UK Department of Economics, St. Edward’s University, USA Department of Economics, Grand Valley State University, USA

Warren J. Samuels

Department of Economics, Michigan State University, USA

David Schmidtz

Departments of Philosophy and Economics, University of Arizona, USA

Jack Russell Weinstein

Department of Philosophy and Religion, University of North Dakota, USA

Jonas Zoninsein

James Madison College, Michigan State University, USA ix

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EDITORIAL BOARD William Breit Trinity University, USA

Abraham Hirsch Brooklyn College, USA

Bruce J. Caldwell University of North Carolina, Greensboro, USA

Alon Kadish Hebrew University of Jerusalem, Israel

A. W. Coats University of Nottingham, UK and Duke University, USA

S. Todd Lowry Washington and Lee University, USA Howard Sherman University of California, Riverside, USA

John B. Davis Marquette University, USA and University of Amsterdam, The Netherlands

Andrew S. Skinner University of Glasgow, UK

Craufurd D. Goodwin Duke University, USA

Vincent J. Tarascio University of North Carolina, Chapel Hill, USA

Robert F. He´bert Auburn University, USA

John C. Wood Edith Cowan University, Australia

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REVIEW ESSAYS

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Meadowcroft’s THE ETHICS OF THE MARKET THE ETHICAL CASE FOR THE MARKET Ayman Reda A review essay of John Meadowcroft’s The Ethics of the Market. New York, NY: Palgrave Macmillan, 2005. ix+173 pp. ISBN 1403921040. The Ethics of the Market presents an interesting and insightful discussion of the ethical dimension of markets. The book reviews the main ethical arguments that have been developed over time that are critical of markets. It then attempts to refute these arguments, and provide a thorough and positive ethical case for the market system. The book therefore adopts a defensive stance by countering the common ethical arguments posed against the capitalist system. But more importantly, it also adopts an affirmative attitude in favor of markets. The logical advantage of this approach is that it forces the other side of the debate to provide a defense of their arguments, or if applicable, their ‘alternative’ system(s). In the introduction to the book, Meadowcroft states that, ‘‘we no longer face a choice between two competing economic systems, but a choice between different regimes for the regulation of a market economyy’’ (p. 1). The current social objective is therefore ‘‘said to be the construction of a regulatory regime that imposes limits on the operation of markets necessary to preserve the social and moral fabric of society and ensure adequate provision of public goods without sacrificing the benefits of efficiency and A Research Annual Research in the History of Economic Thought and Methodology, Volume 25-A, 3–11 Copyright r 2007 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 0743-4154/doi:10.1016/S0743-4154(06)25001-6

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prosperity that only a market economy can achieve’’ (p. 2). In light of the above, the main objective of the book can be described as a critique of these ‘‘regulatory regime[s],’’ on the grounds that their declared, ethical reasons for existence are erroneous and unjustified, and thus, practically irrelevant. The book goes as far as arguing that such ‘‘regime[s]’’ can even be ‘unethical’, and therefore, counterproductive. In the following section, we will summarize the main arguments presented in the book on the ethics of markets. Then we will present a short discussion and critique of the book’s perspective, and conclude in the final section.

SUMMARY OF THE ARGUMENT Meadowcroft starts his discussion of the ethics of markets by stating that the primary feature of a market system is the right to self-ownership. The ownership of property is derived from the right to the fruits of one’s labor. This right to private property allows individuals to freely pursue their personal objectives, as it provides the unconstrained means to achieve one’s ends. The logic that follows is that only within a market system with private property is the right to individual self-ownership preserved. On the contrary, a non-market system fails to satisfy individual objectives because individual objectives depend on the objectives of others, and as such, the objectives of some may be ignored or superseded (pp. 12–19). Based on a system of private property, market economies have achieved astonishing levels of economic prosperity. This was primarily due to the advantages of specialization and the resulting economies of scale. Specialization has led to high levels of productivity and efficiency. However, a prerequisite for this efficiency is a mechanism that can coordinate the assortment of individual preferences such that meaningful exchange occurs. In a market system, this is achieved through price signals that contain information about preferences. The complex array of preferences could only be coordinated through prices, because any ‘‘deliberate or rational planning will fail because it must utilize less knowledge.’’ It is important to note though, that price signals exist because individuals are freely allowed to achieve their objectives via private property. Prices then transmit knowledge of personal preferences and allow individuals to respond to the wants and needs of others in the realm of markets (pp. 19–24). According to Meadowcroft, these positive attributes of markets, given by self-ownership, specialization, efficiency and prices, translate into a positive ethical case for markets. The power of a market to synchronize and transmit

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the preferences and decisions of numerous individuals makes it an ideal venue for the fulfillment of selfish and altruistic motives. Also, the efficiency of markets leads to high levels of production and as a result, a larger set of needs can be satisfied. In other words, markets have an important byproduct in that they allow individuals with altruistic motives to maximize their particular objective, even if through the pursuit of their personal interests. Essentially, markets and their price mechanisms allow us to satisfy the needs of ‘‘people of whom we do not have direct personal knowledge.’’ In the absence of such a system, individuals can only satisfy the needs of those that they do have some direct knowledge of, which is arguably a smaller set of individuals (pp. 24–32). This particular argument by Meadowcroft of the relative advantage of markets as opposed to nonmarket alternatives in satisfying altruistic motives is significant, as it plays a substantial role in the subsequent arguments of the book. One immediate implication is that markets can accommodate motives that are not necessarily selfish, and as such, they are not inherently ‘unethical’. In his discussion of the role of prices in a market system, Meadowcroft examines three critiques of the usefulness of prices. The first argument is that ‘‘prices do not reflect need, but rather the purchasing power of different individuals, which in turn reflects economic inequalities.’’ The second critique is that prices may be useful in appointing value to certain goods and services, but that this function cannot be applied to a wide range of human needs and wants because of their non-material nature. As such, these ‘services’ or ‘goods’ ‘‘cannot practically be priced.’’ Finally, prices also suffer from informational deficiencies. This is because prices do not contain all the relevant information about a good or service, due to the fact that some may find it in their self-interest to hide certain information so as to derive economic rent. Furthermore, individuals and firms may need to know, in addition to how prices change, why prices change. Also, since information can be costly to attain, this might encourage some to free-ride on the information that others collect, and the result is a market failure that can have grave consequences for the economy (pp. 33–42). In response to the above arguments, Meadowcroft reiterates the argument that prices ‘‘coordinate’’ the complex array of individual preferences, and transmit these preferences so that resources are efficiently allocated. This means that only in the presence of such a price system, can we succeed in helping others of whom ‘‘we have no direct knowledge.’’ As such, any ‘unacceptable’ economic inequality that manifests itself in a purchasing power inequality can be alleviated through the price mechanism. Also, if prices are to be dropped as the measure of value, then no alternative system seems

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capable of performing the complex task of prices described above. These same counter-arguments can also be presented as a response to the argument that prices cannot be a practical measure of the non-material value of many goods or services. Prices reflect our preferences and choices and as such, there is no reason why they should not extend to seemingly non-material things, if we can still express our preferences through prices. In fact, through prices, we get to reveal how much these ‘things’ mean to us, and therefore we can more efficiently achieve any particular objective we may have. Finally, the fact that prices present incomplete information is not a disadvantage of the price system, because the information it provides complements information obtained from other sources (pp. 42–54). In the next stage, Meadowcroft examines the arguments against markets in relation to the distribution of income and wealth. Markets are accused of creating large inequalities in income and wealth resulting in groups in a society suffering from poverty and ‘‘social exclusion.’’ Therefore, we are in need of institutions that can attend to these groups, or attempt to regulate markets and their negative consequences. Meadowcroft argues however that the outcomes of markets are not the result of deliberate planning by a specific group of individuals at the expense of society, but is rather the result of ‘‘voluntary’’ actions of many individuals interacting in a complex stage. As such, and building on Robert Nozick’s (1974) ‘‘entitlement theory of justice,’’ Meadowcroft is making the case that so long as individuals understand the rules of the market and are allowed to behave freely, the market outcome is justified. This means that any market outcome characterized by an unequal income or wealth distribution is the result of all the parties agreeing to the market exchange taking place. Therefore, the accusation of injustice is unqualified. The response sometimes posed is that even with a ‘fair’ system of rules and a general consent to the exchange taking place, the original distribution of rights or means of exchange may be unjust, and this leads to a corresponding inequality in the outcome. Meadowcroft responds by arguing that with regards to property rights for example, this is inevitable, as it is the result of a long period of development that is now irreversible. This renders the argument of little practical relevance (pp. 55–62). The argument has also been made that it is not enough that the rules of the exchange be ‘fair’ and agreed upon, but also that the outcome or final distribution be just. According to Meadowcroft, even if the outcome is ‘unfair’ in terms of the inequality it creates, alternative systems of exchange will not likely do better (pp. 63–67). Meadowcroft then goes on to discus the merits of a market system where inequality exists, relative to a society where equality is sought at the expense

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of economic prosperity. In other words, the choice is between ‘‘prosperous inequality’’ and ‘‘equal poverty.’’ The first point made is that a system that rewards individuals based on their effort would create enough incentive for innovation and productivity. Furthermore, different rewards ensure that resources are allocated efficiently to their best uses. Also, high-income groups that invest in their particular lifestyles do contribute in the long-run to the spread of these investments to lower income groups as competition drives prices down. To summarize these points, Meadowcroft states that, ‘‘equal starting points are not relevant because life is not a single race from a starting point to a single finish line, but multiple events all starting at different times from different starting points to different finish lines’’ (pp. 70–80). However, even with all the mentioned merits of market system, Meadowcroft admits that there is still the possibility for some members of a society to fall into poverty. This argument is linked to Amartya Sen’s (1985) observation that even under the full context of Nozick’s theory, this possibility for poverty exists. This therefore warrants the need for the ‘‘provision of a minimum level of social assistance’’ by the state (pp. 80–85). Also in the context of ‘social justice’, Meadowcroft examines the claim that markets exchanges are characterized by ‘‘coercion’’ and ‘‘exploitation.’’ This is due to the fact that many economic activities involve individuals making ‘use’ of others as means to their particular ends, such as the pursuit of profits. This can be by making ‘use’ of employees, such as the Marxist notion of ‘‘surplus value,’’ or customers, by influencing their preferences and purchases. In addition, the ‘‘asymmetries of bargaining power’’ that exist in most market exchanges will allow some parties to ‘‘exploit’’ others. Coercion also plays a role as individuals in a market face situations where their list of choices is very limited, and as such, are sometimes forced into making decisions that are not necessarily in their best interest (pp. 88–98). Meadowcroft responds to these arguments by first arguing that using other individuals so as to achieve our objectives is not necessarily ‘‘exploitative.’’ In fact, economic prosperity requires this, since the benefits of specialization can only be realized by relying on others to fulfill their respective tasks. Also, the satisfaction of the needs of others, even if profits are realized as a result, is itself an ‘ethical’ act. Many useful goods and services are provided through markets to individuals of whom we have ‘‘no direct knowledge.’’ Furthermore, with regards to the exploitative nature of asymmetric exchanges, Meadowcroft argues that individuals enter into transactions because they expect to gain more than lose. As such, in the aftermath of the transaction, the individual expects to be in a better position than

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before. This means that exchanges will, by construction, reduce the asymmetry that originally existed (pp. 98–108). In spite of all the aforementioned arguments in favor of markets, Meadowcroft contends that it still has to be proven that markets have a positive net effect on human well-being. In other words, the market should contribute to the overall happiness of humans, where happiness is more than a strictly material notion. Markets are accused of encouraging selfish personalities that increasingly indulge in satisfying material desires. This is exploited and reinforced through the aggressive advertising common in a consumer society. As a result, ‘‘the material prosperity that results from the efficiency of the market does not produce a corresponding improvement in well-being.’’ In response to the selfishness critique, Meadowcroft argues that markets are characterized by decisions and choices that take into account the preferences of other market agents. In other words, for any market exchange to be successful, even in a material context, it must be executed with other people’s preferences given their due consideration. This logically disproves the claim that markets foster a selfish nature (pp. 109–120). In addition, one need only look at the enormous developments in human wellbeing that have been created by economic growth. This is evident in the areas of education, health care and leisure activity (pp. 120–123). In the final analysis, Meadowcroft examines the argument that markets gradually diminish the role of the institutions that lend the market its legitimacy and efficiency. This is primarily based on the argument that markets nourish self-interested behavior, thereby weakening ‘‘society’s moral fabric’’ and consequently, ‘‘the traditional social structures and common life needed to mediate the social impact of the market’’ (pp. 131–133). Meadowcroft responds by stating that markets depend on virtuous behavior such as honesty and trust, which in fact increase market efficiency. In addition, even though competition is prevalent, firms and markets serve as avenues where individuals meet, socialize and cooperate. Also, firms as well as individuals, actively seek to create a lasting, positive reputation of quality, service and trustworthiness. And finally, ‘‘the market is part of civil society,’’ and as such, it is theoretically difficult and improper to treat negative social symptoms as exclusively due to markets (pp. 140–150).

DISCUSSION AND CONCLUSION Meadowcroft’s analysis of the ethical dimension of markets should be credited for its objective approach and interesting insights. The book

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presents both sides of the argument, allowing for a smooth debate to develop in each chapter. Meadowcroft’s arguments in favor of markets comprise of a thorough survey of the literature, complemented with an interesting and original perspective. This perspective, however, raises several questions that we will examine in this section. The book starts by stating that what is debated is not the existence of markets, but their size and scope. In other words, Meadowcroft’s intention is not to argue in favor of a market economy, but to argue in favor of a very lightly regulated market economy. The argument is thus more quantitative than qualitative. However, the case made is qualitative to an extent, which is understandable, since any argument in favor of why something should exist is also an argument as to why we should have more of it. This raises the question as to why should an activity or system that is evidently useful, be restricted at some point. But this notion is not strange to economists, since their discipline’s paradigm rests upon the assumption of diminishing marginal returns. In other words, can markets, after some point, result in a diminishing return to society? And if so, what is the optimal size of markets? The arguments surveyed in the book in favor of market regulation are essentially arguing that markets have exceeded their ‘optimal’ level. Meadowcroft states that, ‘‘maximizing profits ensures that resources are used to maximum efficiency and also enables individuals and firms to meet the needs of the greatest number of people of whom they have no direct personal knowledge.’’ Therefore, ‘‘a person faced with a choice between two alternative courses of action, one of which will bring a large monetary reward, while the other will bring only a small return, should altruistically choose the course of action that returns the largest possible monetary profit’’ (p. 28). This is one of the main arguments the book presents, and forms the basis for many of the other arguments presented. Efficiency and production can only be maximized within a market system fueled by the profitmaximizing motive. This means the satisfaction of needs will similarly be maximized within a market system. As a result, any motive, whether purely selfish or wholly altruistic, will be best fulfilled with the help of markets. The above argument appears to be conceptually logical, and theoretically appealing. If it is the case that markets allow us to achieve our most altruistic objectives in the best way possible, and if it is the case that any other objective is morally ‘inferior’, thus logically feasible, then markets constitute the optimal ethical domain. However, this argument and its underlying assumptions are to some extent questionable. Markets do provide an efficient basis for production, and efficient production is a prerequisite for the widest possible satisfaction of needs.

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However, this abundant production will only translate into an abundant satisfaction of needs if there is an explicit objective in this regard. How can we guarantee that the mere existence of huge levels of production will render the output accessible to most people, if not all? Those who purchase goods and services afford to do so. If this group refers to those ‘‘of whom we have no direct personal knowledge,’’ then what happens to the group who cannot afford to purchase, and therefore will never be ‘known’? What this means is that for many, true altruism is helping those that seldom participate in markets, simply because they lack the means. The act of producing and selling useful products to many individuals is arguably ‘good’, but only serves to ‘help’ those who can afford the products. Furthermore, if the rationale is that the huge profits generated in markets can be used to help the poor and needy, this presupposes that there is enough altruism in individuals for this to happen. The book fails to address in detail where these motives are created. Does the market create altruistic motives? If it does, how can we reconcile that with the profit motive and the self-interested nature of market agents? If not, then some other institution provides these motives. This leads us in a circular fashion back to the role of the state, family, religion, etc. The question of market regulation once again emerges. Motives and choices are arguably created by the collective impact of all institutions in a society. This means that markets, like other institutions, will contribute positively and negatively to the ethical preferences and choices of individuals. In particular, the material nature of markets has created in many individuals, the tendency to be materialistic over time. Any virtue induced by the market is essentially induced by the material gain involved. This logically means that in the absence of the material gain, the incentive to be virtuous disappears. Hence, as a society, we need morals from outside the market. As individuals, it is essential that our motives are not completely gauged in material terms, because in that case our morality becomes tied to market performance, or even business cycles. Markets are essential, but there is no ethical reason to believe that they supersede any other social institution. And just as markets need some independence from other institutions to survive, other institutions such as family, religion and the state also need some protection from markets and their negative consequences. Meadowcroft’s book offers a useful introduction to the ethical arguments surrounding markets. This book is significant to economics students and scholars, because it provides an ethical dimension to the models and assumptions the economics discipline takes for granted, and is rarely willing to

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question. The book stimulates a dynamic debate that will also be of interest to political scientists, sociologists and philosophers interested in the discourse on markets and ethics. The book successfully brings together in an accessible form, the vast and complex literature on the ethics of markets.

REFERENCES Nozick, R. (1974). Anarchy, state, and utopia. Oxford: Blackwell. Sen, A. (1985). The moral standing of the market. Social Philosophy and Policy, 2(2), 1–19.

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THE LIBERTARIAN FANTASY OF AN ETHICAL MARKET Joseph E. Pluta A review essay on The Ethics of the Market, John Meadowcroft, Houndmills, Basingstoke, Hampshire: Palgrave Macmillan, 2005. ix+173 pp. ISBN 1403921040. Written defenses of the market are as old as the written word itself. Sumerian literature on clay tablets dating to 2600 B.C. has provided the world with its oldest known written story which, among other things, favorably describes the performance of numerous product and resource, especially labor, markets (Kovacs, 1989). The Old Testament, most of which was originally authored more than a half millennium before the modern Christian era, contains several passages lauding the operation of grain markets (Amos 8: 4–6), the buying and selling of land (Leviticus 25: 14), and the ethics of market transactions (1 Corinthians 10: 25). Among the ancient Greeks, Xenophon and Aristotle offered respect and praise for market principles in the 4th century B.C. Modern defenders of the market including Milton Friedman, Friedrich von Hayek, Ludwig von Mises, Israel Kirzner, Ayn Rand, and others have produced numerous accounts which praise the powerful, logical, and efficient, even if impersonal, nature of market forces. In The Ethics of the Market, John Meadowcroft purports to offer a libertarian defense of the market by arguing that voluntary interactions in the marketplace produce results which achieve (vaguely defined and not

A Research Annual Research in the History of Economic Thought and Methodology, Volume 25-A, 13–23 Copyright r 2007 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 0743-4154/doi:10.1016/S0743-4154(06)25002-8

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always consistent) ethical and moral principles. As a result, the establishment of a morally just society, the reader is boldly and optimistically promised, ‘‘requires the expansion of market forces as broadly and as deeply as possible’’ (p. 7). The author is employed by the ultraconservative British think tank, the Institute of Economic Affairs, in London. This organization accepts corporate donations and refuses money from any government so that it is free to propagate corporate positions (without ethical conflict?) on various issues, especially those for which government can be labeled a potential culprit. Government subsidies to selected corporations have supposedly been sufficiently ‘‘laundered’’ so that they will not corrupt or pollute the purity of the ‘‘research’’ agenda. The positions taken in this book, therefore, should be considered in the context of the funding sources of its author. According to its website, the stated purpose of the Institute is ‘‘to explain free market ideas to the public, including politicians, students, journalists, businessmen, academics, and anyone interested in public policy’’ (Institute of Economic Affairs). Women in business are apparently excluded. So long as explaining can be defined as stating as fact controversial propositions which have not been proven, this book and its author have made their corporate sponsored employer proud. If, however, explaining involves stating as fact only those propositions which have been subjected to empirical testing, then the effort by Meadowcroft is woefully deficient in accurately explaining very much to anyone. The opening pages of the book suggest a similarity in approach to an earlier work by Francis Fukuyama (1992), which despite its now numerously noted flaws and overly hopeful conclusions, was more thoroughly researched, more effectively written, and infinitely less preachy than the work reviewed here. Meadowcroft, like Fukuyama, uses as his starting point the downfall of Communism in the former Soviet Union/Eastern Europe and the triumph of the market alternative. Unlike Fukuyama who considers various forms of market systems including market capitalism, planned market capitalism, and social market capitalism, however, Meadowcroft is more doctrinaire in advocating a rollback in the welfare state and in other democratically chosen government functions whenever and wherever possible.

METHODOLOGY AND ARGUMENTS The book is part political polemic, part loosely logical philosophy, and (very small) part economic analysis. Despite its dramatic prose, many of the

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author’s arguments are unconvincing, annoyingly redundant, very weak in their use of history, and highly selective in their empiricism. Stating what a chapter will do and then concluding at the end it has done so when the evidence in between is either weak or is based on circular reasoning is actually a common practice. Numbers are virtually non-existent despite many statements which suggest some quantitative work has been done. No empirical evidence, for example, is offered that more people can be helped through the market than by private acts of charity (pp. 26–27). This is merely alleged by referring to the obvious triumphs of technology in delivering cars and computers (both industries, by the way, have been heavily subsidized by government) to a wide audience. Further, the author does not even attempt to evaluate government policies to achieve charitable ends. Of course, government programs have brought mixed results. Frankly, specifically addressing those government efforts at providing charitable assistance which have been deficient, of which there have been many, would have strengthened the author’s argument. Instead, we are treated to cute, unsubstantiated rhetoric: ‘‘While it should not be said that ‘greed is good,’ it is the case that profit is good, while the benefits of charity may be relatively limited’’ (p. 30). The chapter entitled ‘‘Exploitation and Coercion’’ begins by claiming it will show that ‘‘activities such as using other people as a means of achieving one’s own endsyare in fact necessary features of any advanced economy and, moreover, have positive moral qualities’’ (p. 90, emphasis mine). This same chapter concludes ‘‘the outlawing of prostitution criminalizes a profession that offers many men and women the opportunity to earn substantially more than they could realistically hope to receive in alternative occupations’’ (p. 108). The author evidently has an unusually ‘‘progressive’’ view of morality. Although the chapter goes to great pains to define various terms central and even peripheral to its analysis, a definition of ‘‘moral’’ is mysteriously missing, perhaps conveniently so. The statement ‘‘both male and female prostitutes tend to be drawn from across the whole socio-economic spectrum, suggesting that such a choice is the result of a rational assessment of the personal costs and benefits involved’’ (p. 107) itself suggests that the author’s economic and logical skills are as tainted as his moral and ethical judgments. Facts such as the number of women illegally sold into sexual slavery and the number of women who ‘‘choose’’ prostitution as the only means of paying for an illegal drug habit nurtured by pushers in elementary school apparently have made no impression on Mr. Meadowcroft. The conclusions he reaches are drawn despite his admission that ‘‘it is not legitimate to murder or injury [sic] other people’’ (p. 107).

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The same chapter, in debunking the Marxist exploitation thesis, does little more than discredit the labor theory of value, which of course did not originate with Marx, although the author is apparently unaware of this. As such, one of the chapter’s allegedly key arguments is hardly a novel or path breaking analysis. The book’s description of Marxism is even shallower than its frequent misunderstanding of neoclassical economics. The author is at times critical of classical and neo-classical economic models (pp. 53–54), a position which apparently is part of his broader antiintellectual stance, while at other times he draws upon such concepts as marginal productivity theory to support selected ethical principles. For example: ‘‘y the unequal distribution of income and wealth y should nevertheless be considered just because it meets the only relevant moral criterion: procedural justice y unequal rewards that people receive y reflect the value of their economic contributions y’’ (p. 56). The procedural justice concept, of course, draws on the work of Robert Nozick (1974) who argues that, insofar as income distribution matters are concerned, whether or not the laws of the game are observed is the only valid ethical issue. That the laws of the game are often violated is conveniently dismissed as an occasional aberration from the more frequent morally righteous market behavior. In an apparent, although certainly not explicit, reference to the recent rash of corporate scandals involving Enron, Arthur Anderson, Chase Bank, and numerous other white collar criminals, Meadowcroft qualifies his moral position by telling the reader that ‘‘the positive moral quality belongs to the market process itself, rather than to market participants’’ (p. 70). Totally absent, however, from Meadowcroft’s analysis is any discussion of dissatisfaction with marginal productivity theory so prevalent both within and outside of the economics profession. While one would expect Meadowcroft to support those economists who favorably view the marginal productivity explanation for the distribution of income, the fact that he chooses to avoid the controversy weakens his analysis which, in effect, claims it is resting on a more solid foundation than it is. In another instance, the author demonstrates an unusually naı¨ ve acceptance of marginal productivity when he says: ‘‘y the value that the market process attaches to a person’s contribution is the result of a non-arbitrary mechanism not subject to conscious control’’ (p. 69). In a much quoted passage from The Wealth of Nations, Adam Smith (1981 [1776], p. 772) describes the consequences of the division of labor and repetitive work processes on the human psyche as inhibiting creativity and morale as well as generating ignorance and stupidity. (Incidentally, on p. 166, the author cites Smith’s classic as having been published in 1766!)

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Meadowcroft chastises Smith for his pessimism and, citing no evidence, boldly states: ‘‘it is empirically not the case that the great majority of the workforce now find their working lives reduced to the performance of one or two simple tasks. In fact, on the contrary, the development of market economies has created far greater opportunities for interesting and fulfilling work than have existed at any time in the past or in any alternative economic system’’ (p. 111). Once again, some statistics (or even examples) might have been nice. As it is, the reader is apparently supposed to believe that worker alienation, boredom, burnout, stress on the job, absenteeism, outsourcing, and other workplace problems simply do not exist in the capitalist utopia in which we all live and work. Gilded Age excesses including child labor, dismemberment and death due to industrial accidents, and horridly filthy working conditions in factories and sweatshops were also presumably the invention of collectivist historians. The author is only marginally aware of the range of critics of the market. His blind acceptance of the invisible hand, for example, ignores the objections raised initially by Thorstein Veblen and later echoed by others that this metaphor was merely asserted, never tested, and certainly never proven (Pluta, 2006b, p. 196). Veblen is never mentioned in the book and John Kenneth Galbraith is given only brief consideration in an area far removed from his most insightful criticisms of the market. Further, Meadowcroft takes Smith in directions where Smith himself would have proceeded cautiously: ‘‘the Smithian invisible hand not only guided people towards prosperity, it also guided them to behave as moral and virtuous citizens’’ (p. 143). Far too much of the book is devoted to defending Hayek (14 of his works are cited) from his critics, most of whom are chided for not understanding or inaccurately quoting Hayek. Name calling is rampant; one critique of Nozick is labeled ‘‘close to tyrannical’’ (p. 66). Elsewhere, the author repeats a number of familiar libertarian stances including the argument that in private markets individuals are free to exit from a transaction at any time, an option not available to them in the case of goods provided by government via mandatory taxation. Studies which document the key role played by government in promoting economic growth (e.g. Agell, Lindh, & Ohlsson, 1997) are flippantly repudiated as incapable of demonstrating that economic growth would have been more impressive if a large public sector had not acted as a drag on the economy (p. 20). Government provision of infrastructure such as roads and bridges as well as investment in human capital are widely documented as key factors in fostering economic growth. While other studies provide support for this position, Meadowcroft offers only an unproven assertion of alleged ‘‘drag.’’

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In his support of private property, Meadowcroft quotes Mises in admitting that much property today was acquired by seizure, from Native Americans and others, but quickly spurns the issue by concluding that ‘‘in most contemporary market economies, however, the origins of the private property rights that exist are untraceable and any attempt to remedy the wrongs of the past would simply heap injustice upon injustice’’ (p. 62). In addition to violating the procedural justice criterion the author so venerates, such a position is merely a cleverly cloaked rebuke of government efforts in several countries to address this matter. While such initiatives have barely scratched the surface of the total injustice wrought and will obviously never fully restore ownership either effectively or ethically, Meadowcroft’s total contempt for anything ‘‘politicians and bureaucrats’’ attempt cause him to reject the view that sometimes it is better to do something inefficiently than not do it at all, especially when the private sector has already failed to do it. The issue of world poverty is casually dismissed through the use of selective evidence. For example, the author states: ‘‘it is empirically the case that the prosperity generated by the market has effectively banished absolute poverty from contemporary capitalist societies’’ (p. 57), and ‘‘actual material deprivation (that is, absolute poverty) is zero (or very close to zero) in contemporary market economies’’ (p. 81). While this is a version of another long time libertarian argument that there will always be relative poverty, it nevertheless implies that the thousands of homeless people who grace American and other cities freely prefer life in the great outdoors and are not absolutely poor because they occasionally have access to modern technology such as telephones or radio. Furthermore, the author apparently has in mind advanced market economies, although he does not say this. Market economies exist in several nations of Latin America, Africa, and Asia where substantial poverty is still present, even in an absolute sense. The chapter on morality and commerce, which Meadowcroft modestly names ‘‘the penultimate chapter of this book’’ (p. 129), argues that ‘‘the market is one of a number of social institutions that actively contributes to the creation of a strong moral fabric’’ (p. 133) but actually contains some of the weakest and counterfactual arguments in the book. For example, we are told that ‘‘the market economy forces solitary individuals into society where bonds are formed that can be as real and as lasting as the ties that exist between family members’’ (p. 141) and ‘‘it is not the case that firms will hire and fire employees on the basis of the slightest economic fluctuation’’ (p. 142). What fantasy world could possibly have prompted the ‘‘observations’’ that the market can even cure loneliness and provide job stability? Even Friedman and the other free market advocates mentioned earlier laud

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market performance because it is impersonal and does not require familytype bonds. During the past decade, outsourcing of jobs has proceeded at a rapid pace as a cost cutting measure even when there has been no economic downturn. In addition, Japanese corporations have for some time backed off of their traditional policy of hiring workers with the promise of lifetime employment. Whether ethical or not, the market has long provided a harsh reality for working people across the globe. Meadowcroft defines ‘‘civil society’’ as ‘‘that part of society that is separate from the state’’ (p. 147). How can one have private property rights and respect for law, both of which he repeatedly praises, without the state? Meadowcroft acknowledges the rise in crime and imprisonment in post– World War II democracies but quickly blames this ‘‘decline of civility’’ and ‘‘decline of friendly societies’’ on the growth of the modern welfare state and the provision of social insurance. Reliance on the state (instead of ‘‘selfhelp’’) and perverse incentives have somehow (we are not told precisely how) converted upstanding moral specimens into dangerous criminals. The reader is later told that ‘‘morals and ethics have not been devised and imposed upon society from the top-down by political, religious, or some other collective authority, but have evolved spontaneously from the bottomup as an unintended consequence of the actions and experiences of generations of individual men and women’’ (p. 150). This statement ignores longstanding efforts by religious fundamentalists in the U.S. to legislate their brand of morality through the political process and the powerful influence this group has had in national as well as local elections. It also dismisses authoritarian doctrinal positions taken by less fundamentalist Christian groups, such as the Catholic Church and selected Protestant denominations, in adhering to long held moral and ethical positions on birth control, abortion, clerical celibacy, female priests, and homosexuality. Nearly 300 consecutive popes have been quite resistant to the setting of religious dogma by ‘‘bottom-up’’ methods. After offering negligible ‘‘evidence,’’ this ‘‘penultimate chapter’’ boldly concludes that ‘‘there is y no distinction between a market economy and a moral economy’’ (p. 154). Meadowcroft’s review and understanding of the social justice literature he purports to criticize is laughable. Besides the handful of works he cites, there is a vast literature including articles in the Review of Social Economy, International Journal of Social Economics, numerous philosophy journals, and other sources. For the author, ‘‘social justice’’ is merely a convenient label for a collection of scholarly work which is the least bit suspicious of anything other than a purely free market approach to addressing issues involving income distribution, wage differentials, poverty, and working conditions.

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Certain types of planning are also viewed in a caustically negative light in this book. ‘‘Any attempt to ‘improve’ upon the price mechanism by deliberate or rational planning will fail because it must utilize less knowledge; it is limited by what can be comprehended by the single mind or group of minds that have designed the ‘improvement’’’ (p. 23). Either the author is saying that the institution of the market is more intelligent than a group of human beings who study the issue in question or that markets produce a more ‘‘knowledgeable’’ result than planning because more people are involved in a specific market than the relatively small number of government planners. In either case, the author is conveniently ignoring the large amount of corporate planning which is vital to the success of modern industrial economies and which involves a relatively small number of corporate planners. But, of course, to the libertarian, corporate planners produce a better result than government planners because the former are motivated by self-interest while the latter are motivated by destruction of the market system or at least contempt for its success and a desire to reign in its unfettered advances. The author’s defense of advertising contradicts the professional literature on the subject. His brief treatment of the issue contains the following distortion: ‘‘If consumers really were as susceptible to advertising as is sometimes claimed, then no business would ever go bankrupt and no new product would ever fail. Rather than deceiving or misleading consumers, advertising plays a crucial role in providing people with information y (and) also contributes to the reduction of the unit costs of production, thus making possible price reductions for consumers’’ (p. 120). The key phrase here, of course, is ‘‘making possible.’’ As I have argued elsewhere (Pluta, 2006a), there is absolutely no guarantee that cost reductions achieved by attaining economies of scale will necessarily be passed on to the consumer, especially in the case of oligopoly firms. In addition, the claim that advertising is crucial in providing information ignores the fact that the informational content of most ads today is zero, if not negative. Historically, the record is far worse. Ads for cigarettes in the 1920s actually claimed their product was soothing for the throat while ads in the 1930s and 1940s showed African Americans in subservient occupations speaking in stereotypical uneducated black dialect (Marchand, 1985). What type of ‘‘information’’ was provided here? Most marketing specialists and advertising executives acknowledge the main purpose of ads is brand recognition which is more likely to be achieved by cute slogans and humorous or otherwise entertaining content. There is an enormous literature in the marketing and economics fields devoted to analyzing the effectiveness and informational content of ads and the results are consistently at odds

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with the claims in this book. The above quote from Meadowcroft on ads providing information obviously cannot be taken seriously by anyone who is either familiar with this literature or who occasionally watches television.

THE QUOTABLE MR. MEADOWCROFT Other statements of ‘‘fact’’ in this book are clearly even more suspect and certainly more difficult to prove empirically. Phrasemakers are often witty, sometimes clever, and generally accurate enough so that their prose is thought-provoking. Writers such as Friedman and Mises on the right as well as Veblen and Galbraith on the left have become known for more than a modicum of both wit and wisdom. In addition to the semi-accurate verbage cited earlier, a few of the more interesting and (in some cases, even) astounding of Meadowcroft’s direct quotes are noted below: 1. ‘‘prices communicate information that is beyond the comprehension of any single mind’’ (p. 39); 2. ‘‘Market prices do not reflect the objective moral worth of any good or service because no good or service has an objective moral worth’’ (p. 52); 3. ‘‘The problems of industrialization and urbanization y have been largely ameliorated by the increasing wealth of industrial economies’’ (p. 6); 4. ‘‘the market is an important ‘school for virtue’’’ (p. 7); 5. ‘‘The price mechanism is irreplaceable because it is able to communicate incomplete and imperfect information’’ (p. 49); 6. ‘‘whereas the political process can only utilize knowledge that can be verbally articulated and intellectually comprehended by political actors, the market utilizes more knowledge than any single individual or group of people working together could possibly comprehend.’’ (p. 53); and 7. ‘‘The fact that non-material goods and services such as healthcare and education may be provided by the market is obscured by the fact that markets are frequently prevented or crowded out from the provision of these very goods and services by government intervention’’ (p. 123). How many of these quotes become ‘‘classics’’ remains to be seen. Most are controversial at best, factually inaccurate at worst. None are proven empirically by the author or any of the sources he cites. The author enjoys reasoning at the margin but his application of economic concepts is often unclear. At times, he invents new economic terms in the marginalist tradition: ‘‘The salient question y is not whether those exchanges deemed to be exploitative or coercive involve harm, but whether they constitute a net

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harm’’ (p. 103) while at other times the market, by virtue of some creative logic, is even preferable to democracy (p. 118). While admitting that the state must provide a safety net to guarantee that no one is subjected to permanent destitution, the author still goes on to argue that ‘‘y only the distribution of income and wealth arising from the impersonal workings of the market can be considered just y’’ (p. 9). Far too many arguments are couched in simple terms, notably market economies vs. the rest of the world. For example, ‘‘non-market economies during the twentieth century witnessed dramatic (absolute and relative) declines in almost all measures of well-being during that period’’ (p. 122). This statement may be accurate if it refers to the Soviet bloc including North Korea but not if it includes Scandinavian countries, all of which did quite well over this period. It is not clear of which countries the author is speaking. While most writers would count Sweden, Denmark, and Norway as examples of (social) market capitalism, Meadowcroft may not do so. On occasion, weakness of argument is evident in an unwillingness to acknowledge qualifications to reasonably accurate statements. Consider the following: ‘‘Economic growth also brings increased life expectancy and better health during that lifetime as a result of better nutrition and increased access to high quality healthcare. Growth also leads to improved education’’ (p. 121). Few would disagree that economic growth provides the potential for such things as better nutrition, health care, and education. Growth in itself, however, is more likely a necessary but not a sufficient condition for these quality of life improvements. Nutrition in the American diet is highly suspect, our healthcare system leaves much to be desired and leaves out far too many people, while our educational system is becoming increasingly uncompetitive globally for reasons far more complex than the simplistic explanation offered by Meadowcroft that too much of it is provided by the public sector. A strong case can be made that the arguments in this book would be strengthened, not weakened, by mentioning these issues and even addressing them head on rather than simply implying direct cause and effect between growth and assorted desirable results. Put somewhat differently, the connection is not as automatic as Meadowcroft infers it is. Finally, there is this: ‘‘the market does not produce a ‘lowest common denominator’ culture in which the most base and shallow cultural products predominate, but creates a wide array of cultural products from the very highest to the very lowest forms’’ (p. 110). The statement itself, especially the second part, has some validity but exactly how or why it constitutes an argument for the market being ethical is puzzling, especially given the fact that fairly detailed space is given to this topic.

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CONCLUSION The market has made significant contributions to economic progress both in ancient times and since the Industrial Revolution. Had the author chosen to focus on such rich historical examples, his argument would have been stronger. As it stands, the book is poorly researched and an embarrassment to the cause it supposedly is defending. In brief, it may be described as an exercise in selective empiricism and, where facts do not exist, beliefs can easily be substituted. More importantly, the book is neither a contribution to the history of economic thought nor to scholarly methodology. It adds little or nothing to the vast array of far more eloquently articulated conservative defenses of the market or to the body of literature which surveys and/or interprets the works of the great masters. Methodologically, not only is there nothing new here but the approach is often based on limited evidence, questionable logic, and weak analysis. Libertarians bring a unique perspective when writing about the ethics of the market because they begin with the premise that anything the market does is positive while anything government does is negative. How can one possibly expect an objective and unbiased analysis of the market (or anything else, for that matter) from someone whose premise is inherently subjective and biased? Those who already genuflect at the altar of the market will find in the unsupported assertions of Meadowcroft many statements they would like to believe. The book, however, will bring few converts to its narrow point of view, certainly none among the intellectuals its author so proudly despises.

REFERENCES Agell, J., Lindh, T., & Ohlsson, H. (1997). Growth and the public sector: A critical review essay. European Journal of Political Economy, 13(1), 33–52. Fukuyama, F. (1992). The end of history and the last man. New York: Free Press. Institute of Economic Affairs. About the IEA. www.iea.org.uk/ (accessed on July 28, 2006). Kovacs, M. G. (1989). The epic of Gilgamesh. Stanford, CA: Stanford University Press. Marchand, R. (1985). Advertising the American dream: Making way for modernity, 1920–1940. Berkeley: University of California Press. Nozick, R. (1974). Anarchy, state, and utopia. Oxford: Blackwell. Pluta, J. E. (2006a). Small trees in the large forest. Redding, CA: CAT Publishing. Pluta, J. E. (2006b). The story of economics (2nd ed.). Boston: Copley Publishing Group. Smith, A. (1981 [1776]). An inquiry into the nature and causes of the wealth of nations. Indianapolis: Liberty Press.

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THE VIRTUES, COMPLEXITY, AND LIMITS OF MARKETS David Schmidtz A review essay of John Meadowcroft’s The Ethics of the Market. Hampshire, UK: Palgrave MacMillan, 2005. ix+173 pp. ISBN 1403921040. Meadowcroft’s Ethics of the Market is a defense of markets. It is a work of probing, circumspect scholarship. There is little cheerleading. Although Meadowcroft wants to give readers a plethora of reasons to appreciate markets, he is not shy about acknowledging market imperfections. Meadowcroft never says space considerations prevent him from going into what would have been the clinching argument. One gets the impression of having seen the argument, in fair detail. Meadowcroft has done as well as he could, perhaps about as well as anyone could, in making a case for being realistically thankful that we live in market societies, warts and all. Meadowcroft asks questions such as: Is market wealth justly distributed? Are market transactions truly voluntary? Do market profits actually make for better lives? Do markets undermine moral motivation by encouraging greed? And he asks these questions seriously, not expecting easy answers. The book is not easy or quick reading. (There is some repetition, but much of it welcome. In particular, chapter summaries provide consistently accurate and helpful reviews.) For the most part, though, every sentence has to be read thoughtfully, for the debate over the ethics of the market has a long and immensely complex history, and Meadowcroft wants his discussion to be sensitive to all the nuances, including those he does not explicitly discuss.

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Meadowcroft closes with a thought that ‘‘This book has aimed to make a modest contribution to changing the intellectual climate by setting out a positive ethical case for the market and by showing that the market offers the best prospect for the attainment of prosperous, peaceful and free societies’’ (p. 158). In one sense, this is exactly right. A certain modesty does indeed permeate the book. Meadowcroft realizes there is no such thing as a conversation-stopping argument, and realizes that those who attack what he is defending have at times done so for good reason. He grapples with their observations and arguments, seldom claiming decisive victory. At the same time, the book is stunningly ambitious in terms of how comprehensive it aims to be. In successive chapters, Meadowcroft takes up topics such as self-ownership, profit, the price mechanism, poverty, distributive justice, equality and equal opportunity, exploitation, coercion, consumerism, culture, economic growth, and social capital. Incredibly, for such a thin volume, most of these discussions are quite successful. I sometimes wished there were more citations, especially citations of primary statistical sources, but suffice it to say Meadowcroft gives readers a lot to think about, with few missteps important enough to dwell on.

DIVISION OF LABOR MADE US RICH, BUT NOTHING WAS GUARANTEED Imagine walking into a pizza parlor, then buying a slice of pizza. You acquire that slice of pizza in exchange for some amount of your labor, let’s say fifteen minutes worth. There is something altogether amazing about this mundane event. Part of what is amazing is precisely how mundane this event is. It is hard not to take it for granted. Yet, if you were on your own, truly on your own, you would not be able to produce a slice of pizza in a lifetime. You could not get started. (Getting started would involve, say, building a smelter and mining iron ore to make an oven. You would presumably need at least a shovel to do that, but if you truly were on your own, and had not yet begun to mine the iron to make it, where would the shovel come from, if not from trade?) We owe virtually all of our ability—all of our positive freedom—to the opportunity to trade. In turn, we owe almost everything to the division of labor that trade makes possible. The division of labor, Adam Smith noted so eloquently, makes each one of us thousands of times more productive in concert than we otherwise would have been. If anything, Smith was understating his point. Some critics talk about how the market ‘‘atomizes’’ community, consuming social capital without replenishing it. Other critics (oddly, there is

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some overlap) stress the extreme interdependence of market agents, suggesting that credit for the market’s vast and pervasive contributions to our quality of life is impossible to individuate. Adam Smith presumably would have had no quarrel with the latter claim, holding as he did that the enormous contributions markets had already made to quality of life even in Smith’s day were a product of the division of labor, which is to say, a product of many individuals working together—the more, the better. Meadowcroft summarizes in a striking way: ‘‘Prosperity cannot be founded on self-sufficiency’’ (p. 98). An advanced division of labor is a prerequisite of economic prosperity (p. 20). Moreover, international trade facilitates economies of scale and specialization on a global scale (p. 21). Adam Smith explained how expanding markets frees people to move into previously undreamt of market niches. In a village, one makes a living as, say, the village teacher, and this is already a long way down the road toward the kind of division of labor that we see manifest in a modern economy. In a global village, though, a teacher can specialize in teaching courses on the ethics of globalization to students working on Master’s degrees in Business Administration. It would be great to reflect every day on how many reasons we have to be grateful to be living in communities that make this kind of life possible. However, there is also something good about the fact that we need not depend on the people around us to realize how grateful they ought to be. Millions of people drag themselves out of bed in the morning, hating that they have to work for a living, fantasizing that without capitalism, they could lie around eating grapes all day. Such people are fools. They make themselves miserable for nothing. Yet, even these people, so long as they keep dragging themselves to work, still make the rest of us better off.

MARKETS ELIMINATE POVERTY Critics of market society used to argue that socialist central planning was vastly more efficient than capitalism. The 20th century made it too tragically obvious that the opposite is true (p. 1). Critics beat a strategic retreat, hoping to retain some of the moral high ground. They now fall back on claims that poverty still exists, and is in fact increasing. Are they right? It depends on how we define poverty. If we define the poverty line as the average income, then the facts are compatible with the claim that poverty is increasing. But if that is how we define poverty, then being impoverished is also compatible with being rich in absolute terms, in a society where

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absolute levels of wealth continue to skyrocket. Meadowcroft says, ‘‘actual material deprivation (that is, absolute poverty) is zero (or very close to zero) in contemporary market economies’’ (p. 81). Why? Not because people have a right to be fed. In a market, little is guaranteed. People have to be alert, they have to take risks, and they have to get a bit lucky. There is no denying that market forces have a history of being upsetting, rendering obsolete ways of life with which we had become quite comfortable. ‘‘Over time, however, the gains in well-being produced by the free operation of markets are universal and indisputable’’ (p. 129). Meadowcroft sees no evidence in real market economies of polarization: rich getting richer while poor get poorer (p. 77). The real world is not zerosum. The way to get rich within the rule of law in a market economy is to make large numbers of customers better off. Rawls was right that society can be a cooperative venture for mutual advantage. (Rawls is wrong only insofar as he had an idiosyncratic conception of mutual advantage. He thought of a just society as one that would allow only a certain kind of pareto-superior departure from equality. That restriction is a recipe for preventing society from making pareto-superior departures from here and now.) Life here and now is not a race. No one has to win. There is no need and in fact no empirical tendency in a western economy for one person getting richer to result in anyone else getting poorer. There are competitive elements in a market economy, but in general people win by helping their customers win. The purpose of a race is to measure relative performance. In a race, it is crucial that contestants start on an equal footing. Society is not a race, though. It has an altogether different purpose, namely to put people in a position to live well together—to flourish in peace. Because society is not a race, equal opportunity does not matter in the way that equal opportunity would matter in a race. What matters to a society is that citizens have good opportunities, not that they have equal opportunities. A market economy cannot provide equal opportunity, but it can provide more and better opportunity (p. 80).

THE PRICE MECHANISM IS A PILLAR OF A FREE SOCIETY Meadowcroft holds that any attempt to improve on the price mechanism must fail because such an attempt inevitably must involve making policy decisions on the basis of vastly less information than is already implicit in the price mechanism itself (p. 23). In practice, such attempts typically result

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in observers scorning the stupidity of the interveners, and wanting to throw the bums out and somehow make sure that future interveners are less ignorant. But that ignores the real problem: the real problem is that intervention is relatively ignorant in principle. The price mechanism is the best means of organizing human commerce not because it is perfect or because traders never make mistakes but precisely because human agents make mistakes all the time. The price mechanism is a teacher. If you are trying to sell a kind of health insurance that costs more than customers are willing to pay, you learn within a few months that your product does not work, and you adjust. In a marketplace, it pays to learn from your mistakes. By contrast, in a bureaucracy—a government bureaucracy and perhaps a corporate bureaucracy as well, at least in the short run—it pays not to learn from your mistakes, because you do not pay for your mistakes. You pay (you stop collecting your salary) only if you have to shut down the program and find something else to do.

MARKETS GENERATE SOCIAL CAPITAL To be a successful seller in a market economy, within the constraints of the rule of law, one has to be persuasive, not just powerful (p. 133). The point of a market is to put people in a position where their own interest is best served by finding ways of making other people better off. The point of the rule of law is to steer people in that mutually advantageous direction by minimizing opportunities and incentives to enrich oneself at other people’s expense. The rule of law cannot do everything, though. It is merely a framework. For a society to be a good place to live, people must be able to trust in the rule of law, and the rule of law must in turn embody a willingness to trust citizens to make good use of opportunities they have within that framework. At some point, it has to be left to the entrepreneurial insight of individual citizens to discover or invent ways of interacting for mutual gain. Mutually advantageous entrepreneurial activity creates community, not just money. Market economies consist to a large extent of people depending on each other in the marketplace, or ultimately entering into long-term collaborations that minimize the cost of transactions that predictably will be repeated. Market participants thus are induced to develop enduring relationships by market forces themselves, because enduring relationships reduce transaction costs (p. 141). Markets reward good reputation, as many commentators have noted, and therefore reward what people do to achieve and maintain good reputations.

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Meadowcroft goes on to say, though, that when relationships are more anonymous and where the shadow of the future is shorter, there is less reason for optimism (p. 144). In particular, there would be far less reason for optimism if we were talking about a kind of market where sellers and buyers never meet, where they are separated by hundreds or thousands of miles. There would of course be even less reason for optimism if shoppers had no right to inspect each item before buying but were instead given partisan sound-bite predictions of the eventual contents of two quite similar shopping carts full of mostly unwanted items, and were then told to choose (or worse, vote for) one or the other, price to be determined by the seller. Unsurprisingly, as Meadowcroft says, ‘‘It is where preferences are satisfied primarily via the political process—such as healthcare, education, and transport—that there are high levels of discontent’’ (p. 153). Meadowcroft concludes that, ‘‘A free market economy not only holds the promise of prosperity, it also offers people an unprecedented degree of personal freedom. Only in the marketplace can each individual have the option to exit from those transactions they do not wish to participate in’’ (p. 156). What Meadowcroft means by freedom is not a matter of having an option of getting rich by manufacturing buggy whips. We are not free to do that. The reason is that we are free not to buy buggy whips. We gain the freedom not to waste our money buying other people’s buggy whips in exchange for not being free to force other people to waste their money subsidizing our buggy whips. (We have no such freedom in the polis, democratic, or otherwise. In democracies, people vote to waste our money as a matter of routine. The freedom to say no is a big part of what makes markets work, and also a big part of what makes civil society civil.) Meadowcroft says capitalist societies do not polarize into separate classes (p. 77). Today’s supermarkets lack express lanes for noblemen. Lower class motorists do not pull to the side of the road to let upper class motorists pass. You could be greeting the President of the United States, yet the proper form of greeting would be a handshake, not a bow. In this respect, Meadowcroft holds, it won’t do to characterize the transition from feudalism to capitalism as wholly or even significantly negative. Before capitalism, one’s place in life was far more predictably set at birth by the social class into which one was born. Moreover, there is no historical record of decline in the associations of civil society. ‘‘Atomism’’ is fiction. It is a matter of historical record that the opposite happened—civil associations proliferated (p. 135).

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THERE IS A PLACE FOR REGULATION Individuals can be mistaken about what is in their interest, but Meadowcroft says this has no particular implications. First, it is not only in market societies that people are mistaken (p. 128). Second, Meadowcroft could have added, if people truly do not know what is in their own interest, putting them in charge of deciding what is in everyone else’s interest is no solution. Regulators and other ‘‘czars’’ have a history of being spectacularly mistaken (and not caring) about what is in other people’s interest. Nevertheless, health and safety regulations are legitimate, not to prevent exploitation or coercion, but to prevent harm due to ignorance, carelessness, or stupidity (p. 108). Passing seat belt laws seems to have significantly increased people’s propensity to wear seat belts. Goalies in hockey once treated wearing a mask as a mark of cowardice. Once masks were made compulsory, goalies all put their masks on, and were better off. Self-regulation, though, should be the first option, to be superseded only as a last resort. Interestingly, Meadowcroft has no quarrel with those who advocate a guaranteed minimum income, although Meadowcroft thinks the guarantee should be national rather than global.

MARKETS MINIMIZE EXPLOITATION One traditional Marxist criticism is that in a market society, people’s choices are so limited that we may as well say they are being coerced (p. 88). According to Meadowcroft, Allen Wood once spoke of capitalism’s social order as possibly the most exploitative the world has ever seen. Obviously, the butcher, brewer, and baker use customers as means to their end of earning a living (p. 91). At least as obviously, customers use bakers and brewers in turn. Buyers and sellers transact for mutual advantage. Some do so respectfully, even joyfully. Others do so resentfully, hating the thought of making their already-happy trading partner even happier. What Kant called the categorical imperative asks us to avoid using others as mere means, not to avoid using others as means per se. The qualification is crucial. Being means to each other’s ends—making each other better off—is great. By contrast, furthering our ends at the expense of other people is not great, or even good. There is a world of difference. Marx’s model of exploitation was not a model of exploitation in a competitive market, but rather, exploitation in a monopsony, an economy where for all practical purposes there is only one buyer of labor services; that is,

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Marx was modeling labor relations in the absence of market competition. It was the expansion of commercial society and consequent burgeoning of the division of labor that changed this—that vastly expanded the range of alternatives available to ordinary people. Olsaretti (cited at p. 96) offers an interesting variation on the ‘‘work in the coal mines for a pittance or starve’’ theme, saying that even if there are many alternatives to this job, there still are no acceptable alternatives to being a worker. We may suspect that if the worst crime a capitalist could be accused of consisted of offering the opportunity to earn a living to people who otherwise would starve, capitalists would concede the point with enthusiasm. A multinational corporation does more good by offering low wages in Thailand than by offering much higher wages in Ohio. This is to say, it does the most good precisely by moving into areas where there are no acceptable alternatives, situations where starvation really will happen if the corporation does not move in and hire people. The situation is not voluntary in Olsaretti’s sense, and will not become voluntary until a second corporation moves in and begins to compete for workers, or until the best and bravest of the first company’s employees have learned enough about the business to risk going into business for themselves. Markets evolve. A situation that once was involuntary becomes voluntary in Olsaretti’s sense, as markets expand. Marx thought history was on the side of communism. Meadowcroft, with the benefit of 20th century experience, sees history as on the side of the market, not in the sense that the triumph of the market is historically inevitable, but in the sense that the market is a moral imperative. To Meadowcroft, history shows that market society gives people more choice, and not just in the marketplace (although that in itself counts for a great deal) but in one’s broader community life as well. As a matter of empirical fact, obvious empirical fact, members of market society have a wider range of choices than people in any other system (p. 107). Indeed, the fact is so obvious that some critics have resorted to lamenting people having so many choices. Overall, my impression is that Meadowcroft’s book is not exactly trying to be persuasive. It does not aim to drag market critics reluctantly into the camp of market supporters. Neither does it preach to the converted, for it makes concessions to market critics that many converts will find unnecessary at best. The book, as I read it, is trying simply to represent state of the art thinking about what markets can and cannot do for us. As such, I come away satisfied. It is an honest and learned reflection on where we are, on where we might realistically hope to go from here, and on the role markets realistically might play in helping us get there.

Courgeau’s METHODOLOGY AND EPISTEMOLOGY OF MULTILEVEL ANALYSIS METHODOLOGICAL HOLISM AND INDIVIDUALISM CONFRONTED Warren J. Samuels A review essay on Daniel Courgeau’s (Ed.), Methodology and Epistemology of Multilevel Analysis: Approaches from Different Social Sciences. Boston, MA: Kluwer Academic, 2003. xi+235 pp. ISBN 1402014759. This is a remarkable and unusual volume. It is written by practitioners about practice, but their common focus is on the array of methodological difficulties and limitations of practice. These are confronted directly and neither ignored nor finessed. Among the deepest and most vexing problems in economics are the definition of units—parts and wholes; part–whole relations and the meaning and relationships between methodological holism and methodological individualism; the interjection of mid- or intermediate-level entities and analyses between wholes and individual units on various levels; the confluence of methodological individualism and holism with normative individualism and holism (collectivism in this context); the conduct of analysis simultaneously along concrete and virtual lines (or what George Shackle (1967, p. 294) calls the concrete world of ‘‘‘real’ objects, persons, institutions and events’’ and the abstract world of logical or mathematical constructs in A Research Annual Research in the History of Economic Thought and Methodology, Volume 25-A, 33–37 Copyright r 2007 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 0743-4154/doi:10.1016/S0743-4154(06)25004-1

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a ‘‘system of mere relations amongst undefined thought-entities’’); and, inter alia, considerations of time, i.e., the different lengths of time necessary for different variables to come to fruition (as in Alfred Marshall’s period analysis). As this collection makes clear, the foregoing problems arise in all of the social sciences. (The contributors, by the way, are multinational. Three are from France; one from the United States; three from Great Britain; one from Belgium, and one from Australia. Their fields, indicated below, are wide ranging.) Also ubiquitous are the difficulties encountered in dealing with these problems, e.g., letting conclusions selectively reached with regard to parts represent wholes or larger, intermediate parts; subsuming methodological holism and individualism under the perceived selective, and shifting, requirements of normative holism and individualism; letting conclusions selectively reached with regard to a-institutional abstract entities apply to both actual institutions and problems of institutional change; the use of primitive terms generally, with each reader selectively providing his or her own content; and so on. These problems and their attendant difficulties derive from the nature of the material and from the necessities of practice. The vastness and complexity of materials requires that all methods must render the number of variables manageable. Theories can be specified differently, applied to different social spaces (or data), and combined with different rules governing acceptance or rejection (falsification). The result is that all work is abstract (or virtual), selective and fictional. Yet these problems and their attendant difficulties, along with numerous historiographic problems and issues, are generally either ignored or finessed by practitioners. And this, too, is largely inevitable. No study can cover everything relevant. Studies, for example, of legislative decision-making, i.e., the exercise of legislative discretion, in matters of enacting criminal law, need not consider prosecutorial, judicial or jury discretion. The contributors to this volume seek to develop an approach to the partwhole or holism-individualism problem. Their approach comprises a variety of syntheses of individual and society at intermediate levels. Among other things, their approach helps avoid extreme, fundamentalist formulations and enables consideration of the influence of individuals on the group and of the group on individuals. Reciprocal relations, cumulative causation, overdetermination—call it what you will, it is a substantively rich and promising approach, rich too in its ability to cope with various methodological assumptions.

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As might be expected from a collection of articles seeking to enrich our analytical and interpretive capabilities, several of the contributions report on at least some substantive analysis while others are programmatic. Some readers will be disappointed that some basic econometrics is either out of sight or not used; a few (I would hope many), that the basic multilevel model is only linear. Many economists (and others) might object that much multilevel analysis is already undertaken. It is not necessary to be ontologically overly aggressive. It is not necessary to assume, for example, that the state ‘‘originates in the demands of human nature’’ or is prior to the family and the individual ‘‘since the whole is of necessity prior to the part’’ (p. 4; the second quotation is from Aristotle). It is preferable to avoid setting such logical priorities (p. 21). It is also not necessary to assume that people are bad or recalcitrant, only that institutions for social control and/or for collective decision-making are perceived to be necessary, so that the substance thereof can be worked out. Much better is the approach that postulates, ‘‘The origin of social facts must be sought in the formation of the social environment in which they occur’’ (p. 5), that ‘‘an observed social fact is the cause of a given social effect’’ and of other social facts (p. 6), and ‘‘an interdependence of social facts in a given social structure’’ (p. 7)—and to do so without precluding change of social structure as either cause or consequence, though not necessarily in the same model. An especially attractive feature of this book is the avoidance of neologisms, esoteric stylized terminology that encapsulate more or less ambiguous and often question-begging analyses. The basic approach is presented in a General Introduction (pp. 1–23) and General Conclusion (pp. 199–213) authored by the editor. Chapter 1, by Harvey Goldstein, uses massive educational and demographic data with cross-classified and multiple membership models to explore different aggregation levels. Chapter 2, also by the editor, presents a history of demographic thought, showing, first, that the increased availability of detailed data had led to longitudinal and individual analyses and now to multilevel ones; secondly, that the multilevel approach enables the solution of problems that arise under other approaches; and, thirdly, that Bayesian probability theory has renewed potential. Chapter 3, by Ana Diez Rouz, discusses multilevel analysis in epidemiology and general public health. She stresses problems due to complex chains of causation, non-linear structural relationships, and fallacies (going from the group to the individual or from the individual to the group). It is striking that she finds it necessary to remind us that models are not complete pictures

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of the world. Chapter 4, by Mark Tranmer, David Steel and Ed Fieldhouse, deals with small area population structures. Like the other contributors, they point to potential strengths and their modifying limitations. Chapter 5, by Bernard Walliser, brings together varieties of weak and strong forms of holism and individualism, and combinations thereof in economics. Although the principal objects of attention are organizational levels and time scales, especially important is his showing—quite correctly— that economics employs methodological holism even though methodological individualism is much more conspicuous and canonical. Still, his discussion of economic epistemological positions (as much ontological as epistemological) would have been more helpful if he had examined in more detail combinations such as institutional individualism. I would fault his attention to ‘‘perfect individualism’’ if so many economists knew and practiced anything else. Chapter 6, by Robert Franck, examines aspects of causation, multiple causation and substitutes for causation; reciprocal, interactive systems; the nature and emergence of levels and systems; and their overdetermined result, namely, the influence of factors on emerging systems and of systems on emerging factors. As I was reading this book, I came across a newspaper article that described the activities and hopes of a large group of libertarians seeking to move to a felicitous location (possibly Wyoming or New Hampshire) and establish a ‘‘free state’’ with little if any government and maximum possible human liberty. Quite aside from the normative issues, my expectation is that law would still be necessary and would become—through population growth and increased density and interaction, if for no other reason, and there are many—even more necessary over time. Whether their or my expectations materialize, the substantive meanings of the individual, of intermediate-level groups, and of the whole—once one gets beyond primitive terms—will change. (An example of a common linguistic problem is that libertarianism is so honorific a conception that its putative analytic equivalent, nihilism, is rarely applied to their programs.) The strengths of this book reside in the contributors’ efforts to avoid extreme, fundamentalist positions on holism and individualism; their midand multilevel approach, operationalizing details at intermediate levels; in proceeding along Shackle’s third world, that of linking the real-world elements with the abstract conceptual entities; their obvious deep and practical sense of limitations; and their ubiquitous attention to ontological and epistemological problems. The collection, accordingly, says much about modeling methods but, appropriately, much more about methodology.

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My expectation, alas, is that fundamentalists reviewing this book will apply myopic vision and find fault accordingly, thereby rehashing the very fundamentalist arguments that the contributors are trying to overcome.

REFERENCE Shackle, G. (1967). The years of high theory. New York: Cambridge University Press.

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Hardin’s INDETERMINACY AND SOCIETY THE PROBLEMATIC PROBLEMATIZATION OF CHOICE AND ACTION Daniel W. Bromley

A review essay of Russell Hardin’s Indeterminacy and Society. Princeton: Princeton University Press, 2003. 192 pp. ISBN 0691123926. It would be difficult to deny the claim that contemporary economics is one of very few disciplines to be defined less by its subject matter (the ‘‘economy’’) than by its method—the maximization of some objective function by rational agents choosing among limitless means while being subject to particular constraints. In this formulation of our discipline, the autonomous maximizing agent is seen as the fundamental unit of analysis. In essence, contemporary economics reifies in its approach and its methods the modernist triumph of the sanctity of the individual over any other plausible social entity. Methodological individualism is more than a short-hand term for our methods. It is a term for our view of the world as it is and as it ought to be if aggregate well being (welfare) is to be maximized. It was not always thus (Cooter & Rappoport, 1984). But when Lionel Robbins (1932) set out to rescue economics from some conjured—and

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apparently quite dissolute—future, he was not in doubt about what economics ought to be. The marginalists provided the necessary dues ex machina and it was not long until questions of value, of the causes and consequences of the wealth of nations, of the social and economic implications of alternative institutional arrangements, and of worrying about those left behind by aggressive capitalism, were summarily dismissed as metaphysical and therefore unscientific—if not meaningless. Few accusations can trump the professional insult and stigma associated with the charge that one is being ‘‘normative.’’ With positivism at its pre-crash apogee in the early years of the 20th century, aided and abetted by Robbins’ confident hectoring, there was no alternative if one wished to have a career as a practicing economist. Never mind that philosophers had abandoned positivism about this time. In our counter-cyclical discovery of truth about truth we were not inclined to notice. Even today positivism appears to enjoy widespread devotion—even if most economists are confused as to what positivism, in fact, entails (McCloskey, 1983). Because economics now tends to be defined by its methodological approach, it follows necessarily that there is little stomach for challenging that constitutive method. To have doubts about the method is to subject oneself to suspicion that you are no longer an economist. Perhaps you are a sociologist or a political scientist? Ironically, that particular threat of ex-communication carries little meaning lately because both sociology and political science are becoming quite colonized by economics. Some say this shows the power of our method. Others suggest that it is testimony to the intellectual insecurity of their practitioners who—like economists from the 1940s onward—hold few wishes as gripping as to be thought rigorous and thus ‘‘scientific.’’ My interest here concerns what some members of these other disciplines manage to do with the concepts from economics they somehow imagine to be useful. Russell Hardin is a prolific contributor to a literature that spans economics, philosophy, and political science. He has written on rational choice, collective action, arms control, contracts, morality and reason, ethics, public choice, democracy, constitutionalism, and, apparently, his university’s yacht (Hardin, 1994). A recent contribution to his legacy concerns indeterminacy and society (Hardin, 2003). Here he is concerned to plumb a number of moral (and economic) theories to see what they have to say about rules for choice in the face of what he calls indeterminacy. By indeterminacy Hardin means choice characterized by the inability of the choosing agent to be sure that the specific intention that gives rise to the specific choice will indeed produce the intended specific outcome in the future that was the specific

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reason for the specific intention and the implicated specific choice. He ends this brief book with the observation that: A problem with rational choice accounts of behavior is that people often do not understand how different strategies affect their interests. This should not be surprisingy. Strategic and stochastic thinking are hard. Indeed, they are hard even for those who are sophisticated theorists of them. However, people are not especially good at understanding causal relations either, and yet they manage to get through life most of the time. Our task in explaining their successes and failures is often the task of understanding how they choose to deal with indeterminacies that often swamp reason. (pp. 136–137)

One gets the impression from this that it is the world’s fault that individuals cannot make the right (correct) choices. And it is the world’s fault that ‘‘good’’ theories of choice are difficult to construct. Just imagine, strategic and stochastic thinking are hard—even for the sophisticated theorists of strategic and stochastic choice. And, mere mortals are not very good at causal relations either, yet people manage to get through life most (most?) of the time. Moreover, for the theorists of these manifold successes and failures of mere mortals it is necessary to continue the very difficult work of understanding how ordinary folk somehow manage to confront the real world and its indeterminacies that defeats their capacity for reason. Imagine that—the ‘‘real world’’ defeats reason. Figuring out how to get people to make choices the way they ought to—as decreed by our theory—will most assuredly occupy the best theorists for a very long time. It need not be that way. Human choice is ‘‘hard and mysterious’’ primarily because of how economics—and now apparently political science—have chosen to problematize human choice and action. Before confronting that problematic problematization, let us see what Hardin managed to accomplish. Hardin’s interest in indeterminacy arises because it (indeterminacy) is disruptive of ‘‘pristine social theory’’ and yet—possibly to preserve the alleged purity of that theory—it has been ignored (‘‘swept under the rug’’). Hardin recognizes that the theory is flawed because indeterminacy is real. The task he sets himself in this book, therefore, is to explore indeterminacy, to discuss its importance in the context of collective choice, to show how some grand theories ignore it, and how some theories are centered on indeterminacy. Hardin reminds us that when individuals choose (act) so as to obtain the very best outcome for themselves they rarely succeed because the world around them—and the actions of others—constantly imperil the very best intentions and the very best plans. Individuals can choose only strategies, not outcomes. Complexity is, after all, now understood to be an ineluctable aspect of life (Brock & Colander, 2000).

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The issue under discussion here is indeterminacy resulting from strategic interaction. He notes that indeterminacy is not a failure of reason by the chooser—despite claiming at the end of the book that (as quoted above) ‘‘indeterminacy swamps reason’’—but emerges from the ineluctable mismatch of the preferences of all those in the interaction when any one individual undertakes choice. There is another debilitating interaction—the stochastic nature of outcomes even with strategic interaction not present. That is, agents do not have clear ideas about what their intentions and associated actions will produce in the way of outcomes. Hardin claims that the principle he is adopting is the: principle of melioration rather than maximization, which is inherently undefinable [sic] for many contexts. I will take melioration to be the modal advantage, which is expected advantage to all ex ante, although it may commonly happen that not all gain ex post. For social choice and for moral judgment of aggregate outcomes, the principle for which I will argue is, when it is not indeterminate, mutual advantage. (p. 7)

We see that ‘‘social indeterminacy is a problem of set-theoretic choice rather than of physical possibilities. The central problem is indeterminacy of reason in the face of strategic interaction’’ (p. 8). That is, reason fails us (is indeterminate of what is best to do) because of the reality of the context of choice. Notice the use of the word reason here. It seems that Hardin uses reason to denote a perfect mapping between the intentions of an agent and the realization of those intentions (outcomes) once choice has been made. That is, he seems to wish reason to connote a process in which there is perfect correspondence between intentions, actions, and outcomes. When that mapping is not perfect, reason appears to have failed the agent—or the agent’s reasoning was faulty, deficient, inadequate. But what if Hardin had started with the idea that the fundamental purpose of reason in choice is to contend with the fact that the world is indeterminate? That is, imagine one starts not with the idea that indeterminacy defeats reason, but with the idea that reason defeats indeterminacy? The reason we reason is precisely because as evolved sapient agents we have good reason to believe that the world is not a machine but is, instead, stochastic both on its own (nature is indeterminate), and because others are out there doing their own reasoning and choosing and acting—the aggregate of which means that the future changes in the very process of us seeking to go there. Is that not the plausible purpose of reason? Indeed if there were no indeterminacy we would hardly need reason at all—we would merely need to calculate in order to know the best thing to do. But to calculate is not to exercise choice. Calculation is the stuff of deterministic machine processes.

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I find problematic the central hypothesis that indeterminacy swamps (or defeats) reason. My concern is motivated by the fact that to hold this position is to problematize choice as a machine process in which right (good, perfect) calculations are necessary and sufficient to produce right (good, perfect) outcomes. This idealized vision of choice is precisely where rational choice thinking in economics has done so much mischief. If choice is merely calculation over probabilistic outcomes then we should stop using the word choice and recognize that individuals act not by choosing but by doing what is necessary on the basis of their flawless calculations. As Tony Lawson puts it: if real choice means anything it is that any individual could always have acted otherwise. And this is precisely what contemporary ‘‘theorists’’ are unable to allow in their formalistic modelingy. Instead, individuals are represented in such a way that, relative to their situations, there is almost always but one preferred or rational course of action and this is always followed. Despite some suggestive rhetoric, human doings, as modeled, could not have been otherwise. (Lawson, 1997, pp. 8–9)

If ends are given, and therefore all that remains is for the individual to compute the most efficacious means to achieve those ends, this is not choice but mere calculation. Individuals who can only calculate are not choosing among alternative actions—they are calculating to find the ‘‘best’’ means. Notice that this route leaves the individual, once the calculations are completed, with no choices to make. As long as the individual could not ‘‘rationally’’ have done other than what the calculations revealed to be the rational choice, the agent did not exercise choice (Lawson, 1997). It is here that G. L. S. Shackle enters the picture. He insists that: Conventional economics is not about choice, but about acting according to necessityy. Choice in such a theory is empty, and conventional economics should abandon the wordy. The escape from necessity y lies in the creation of ends, and this is possible because ends, so long as they remain available and liable to rejection or adoption, must inevitably be experiences by imagination or anticipation and not by external occurrence. Choice, inescapably, is choice amongst thoughts, and thoughtsy. are not given. (Shackle, 1961, pp. 272–273)

It seems that Hardin sees reason as nothing but the correct use of epistemic premises to get us exactly what we set out wanting (the volitional premise). But few students of choice consider this an accurate depiction of choice. Indeed isn’t a realistic depiction precisely one that Hardin finds menacing to the application of reason? Why, exactly, is indeterminacy so threatening to theory? Is it that theory was crafted with a machine in mind? The bulk of the book is devoted to an extensive discourse exploring the implications of indeterminacy for the theories of Kant, Pareto, Hobbes, Locke, Hume, Bentham, Mill, Sidgwick, Moore, Edgeworth, Pigou, Hayek,

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Arrow, Harsanyi, Coase, Posner (in his immature Coasean phase, but certainly not in his mature pragmatist phase), Rawls, Dworkin, and Nozick. Those interested in the way in which these different theorists addressed indeterminacy would find these chapters to be of interest. There is a constant reference to different ‘‘moral theories,’’ and those interested in such things will find the treatment here thorough, if not very satisfying. We are again reminded that all moral ‘‘theories’’ are dissatisfying precisely because they are contrived stories that their creator hopes will become the ruling dogma for the rest of us. Philosophy and, to a certain extent, prescriptive (welfare) economics have both devoted much effort to this quest for authoritative assertions according to which the rest of us are told how to live our quotidian existence. The honor roll above reveals but a small set of those who have devoted much of their adult life to instructing the rest of us about what is right to do. Pragmatists find all of it pretentious, preachy, wrong headed, dreary and in the nature of a malevolent Dickensian headmaster out to remake schoolboys into perfect prigs. Hardin seems to share my distaste for such activities when he calls attention to a quote from a renowned admirer of Kant (W. I. Matson) who nonetheless found it necessary to ridicule Kant’s ‘‘repellant fanaticism’’ against telling lies that would plausibly preclude grievous harm befalling innocent people (think of Oskar Schindler who told many useful lies to Nazi goons in order to carry out his noble work of saving many Jews from the gas). Matson admits that Kant’s implacable opposition to ANY lie shows what can happen when one has ‘‘lived too long as a philosopher.’’ But this is not entirely fair to philosophers. One can ‘‘live too long as a philosopher’’ only if one’s philosophy is of the ruling, authoritarian, repressive, prescriptive kind perfected by Kant (with all of his imperatives)—a view bequeathed to Kant and most of modernist philosophy by Plato, the would-be autocratic (philosopher) king. Happily, there are philosophers who have managed to break out of Plato’s prison and for these ‘‘free spirits’’ (in Nietzsche’s terminology), it is impossible for them to live (or to have lived) too long. Plausible candidates here would be Nietzsche, Wittgenstein (the mature rather than the youthful version), Peirce, Dewey, Quine, Joas, Bernstein, Brandom, and Rorty. Hardin shares my concern here and points out that Kant’s extreme ‘‘morality’’ is indecent and if this is what morality entails then we ‘‘should tell the moralists to leave us alone while we tend to more important matters’’ (p. 85). Or, to paraphrase John Lennon, life is what happens while moral theorists are making plans for us. Don’t get me wrong. ‘‘Moral’’ rules are fine for pre-sapient agents—children, the thick and the dull, and pets. For the rest

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of us, ‘‘moral’’ rules are impossible to reconcile with getting on in life, and those who insist on such absolutes are simply seeking a way to impose their particular vision of the ‘‘good and the right’’ on everyone else. When pressed, a good philosopher—indeed, even an average one—can show us that there is not one single ‘‘moral absolute’’ that cannot be found wanting under a few quite plausible life situations. And it is precisely this that I find both odd and depressing about the lifework of those smart fellows discussed here by Hardin. The end result, I believe, of Hardin’s treatment shows just how little good has come from any of it. And we pragmatists would not be surprised. For pragmatists (and here I criticize Hardin’s sloppy use of ‘‘pragmatic’’ and ‘‘pragmatism’’), all of this ruling down by authoritative elites is officious and quite unnecessary. Hardin is correct to notice that the Coase theorem is necessarily embedded in an extant institutional structure in which options are limited yet well defined, and the ‘‘theorem’’ is only pertinent at the margin of these institutionalized settings. Hardin also shows us that there is no way to justify the margins at which Coase works his magic, except, as Hobbes might, by insisting that the costs to all of us from changing that status quo ante would be too cataclysmic. In other words, the status quo ante has nothing at all to recommend itself to us—aside from the fact that all others are infeasible to contemplate. While Wicksellian economists (for instance James Buchanan) may take great comfort in the thought that the status quo is thereby justified by its eminent practical good sense, the same logic could be invoked to convince the prisoner that he is quite well off where he is because seeking to escape would surely result in his death—and that the costs would thereby appear to be greater than the benefits. Some benediction on the status quo. Despite the emphasis here on moral rules (emerging from so-called moral ‘‘theories’’), Hardin has a good eye for how the world seems to get by in their absence. He notes: ‘‘What the judge actually does in the common law when a case arises in a new context is to establish a rule to guide future actors while treating the present litigants as though the rule had been in place when they acted’’ (p. 47). This is precisely the point stressed by (the mature) Posner in his recent book Law, Pragmatism, and Democracy (Posner, 2003). In other words, we see that moral theory is easy and non-problematic in the world ruled by a few despots. Morality is nothing more than what they say it is, and the rest of us better do what we are told. There is no room in such a world for moral contemplation. Moral theory is only problematic in a post-enlightenment democratic world where we have been led to believe that individuals matter, and we suppose that others might wish to hear what we think. Small wonder that moral ‘‘theory’’ is now in an advanced state of

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incoherence. The sooner we let it die the better, and then those philosophers still earnestly engaged in such pursuits might actually become useful again. Hardin observes that: ‘‘In personal contexts we simply live with indeterminacy, and the passage of time renders personal choices determinate after theory failsy. In both personal and social contexts, we therefore often do not achieve theoretical determinacy, but only mechanical determinacy’’ (p. 121). We see here that ‘‘theoretical determinacy’’ means a priori (ex ante) prescriptive certitude. And we see that mechanical determinacy is a term Hardin applies to realized outcomes that were not exactly (precisely) intended by antecedent action. But, in a world of thoroughgoing indeterminacy, all outcomes were not exactly (precisely) as intended and so theoretical determinacy is a chimera. All outcomes are mechanical—by definition. Hardin insists that ‘‘It is not my purpose here to discuss moral theory per se. The point of the discussion has been to focus on rules as a device for simplifying the world by ignoring its indeterminacies’’ (p. 99). And here we see precisely why the ‘‘moral rules’’ industry is losing market share. If the purpose of ‘‘moral rules’’ is to simplify the world by ignoring life’s indeterminacies then sapient beings would have learned, over the millennia of evolution, that moral rules have little survival value. After all, if the world is indeterminate then the best strategy is to craft decision rules in the light of that indeterminacy, not to seek universal rules that do not fit any of the particularities of the necessity to cope. Here I can do no better than to quote a fellow (and quite recent) pragmatist: The first and perhaps most fundamental thesis of philosophical pragmatism,y is that Darwin and his successors in evolutionary biology were correct that human beings are merely clever animals. Mind is not something a benevolent deity added to the clay. Body is not a drag on the mind, as Plato thought (Inverting Plato is generally a reliable method of generating the main propositions of pragmatism). Body and mind coevolved. Being thus adapted to the ancestral human environment, human intelligence is better at coping with practical problems, the only thing that preoccupied our ancestors 50,000 years ago, than at handling metaphysical entities and other abstractions. That is, our intelligence is primarily instrumental rather than contemplative. Theoretical reasoning is continuous with practical reasoning rather than a separate human faculty. (Posner, 2003, p. 4)

The crafting of ‘‘moral rules’’ is hard work indeed. And there is a good reason why it is hard. Our brains have evolved to solve practical problems, not to entertain us at rest as we contemplate moral theories—and moral absolutes. How can we possibly be surprised that coming up with moral absolutes is hard work? How can we be surprised that there is no market for such output? The claimed ‘‘problem’’ of choice elaborated here by Hardin is nothing but the inevitable entailment of the way in which economics has chosen

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to problematize choice. And that problematic problematization follows necessarily from how contemporary economics has come to be defined. If economics were seen as the study of how societies organize themselves for their provisioning, we could escape the logical trap of methodological individualism and all that it entails. As Shackle reminds us, choice is choice amongst thoughts, and thoughts are not given but created in the context of choice. We work out what we think we want as we work out what we think we might have (get). Outcomes of action in the future have no objective descriptions because, ‘‘not having done that before,’’ we have no way to describe to ourselves what it is we expect from our choices now. We create— but we do not discover—those outcomes that seem to be what it is we thought we wanted when we undertook choice. And it is precisely here that Hardin would have been better served had he resisted the temptation to start with a bogus notion of choice. That is, rational choice is incoherent precisely because individuals cannot possibly know about outcomes in the future (Shackle, 1961). To suppose that individuals can know the exact (precise) outcomes they imagine they desire is to let earnest wishes for a theory of choice interfere with the ineluctable nature of nature. On this tack, Hardin’s lamentations about indeterminacy seem quite misplaced. Indeed pragmatism offers a promising theory of choice and action that starts with an honest recognition of indeterminacy (Bromley, 2004, 2006; Joas, 1993, 1997). By starting there, pragmatists find no reason to denounce indeterminacy as if it were some unwelcome and uninvited guest at an otherwise glorious party. With indeterminacy present at the beginning, pragmatists insist that reason is simply the name for a process whereby individuals undertake thought that will help them to learn about what it is they imagined they wanted when they first found themselves in need of making—in the particular context of—a choice (Joas, 1997). And reason is but another word for sapience—discernment and deliberation. As Joseph Raz has put the matter, deliberation is not a process of discovering what we want, but a process of reflecting upon what there is the most reason to want (Raz, 1997). This turns indeterminacy from an enemy of reason into an essential friend of—an advocate for—reason. Isn’t that a better way to problematize human choice and action?

REFERENCES Brock, W. A., & Colander, D. (2000). Complexity and policy. In: D. Colander (Ed.), The complexity vision and the teaching of economics (pp. 73–96). Cheltenham, UK: Edward Elgar.

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Bromley, D. W. (2004). Reconsidering environmental policy: Prescriptive consequentialism and volitional pragmatism. Environmental and Resource Economics, 28(1), 73–99. Bromley, D. W. (2006). Sufficient reason: Volitional pragmatism and the meaning of economic institutions. Princeton: Princeton University Press. Cooter, R., & Rappoport, P. (1984). Were the ordinalists wrong about welfare economics? Journal of Economic Literature, 22(2), 507–530. Hardin, R. (1994). My university’s yacht: Morality and the rule of law. In: R. E. Barnett & I. Shapiro (Eds), NOMOS 36, the rule of law (pp. 205–227). New York: New York University Press. Hardin, R. (2003). Indeterminacy and society. Princeton: Princeton University Press. Joas, H. (1993). Pragmatism and social theory. Chicago: University of Chicago Press. Joas, H. (1997). The creativity of action. Chicago: University of Chicago Press. Lawson, T. (1997). Economics and reality. London: Routledge. McCloskey, D. N. (1983). The rhetoric of economics. Journal of Economic Literature, 21(2), 481–517. Posner, R. A. (2003). Law, pragmatism, and democracy. Cambridge, MA: Harvard University Press. Raz, J. (1997). Incommensurability and agency. In: R. Chang (Ed.), Incommensurability, incomparability, and practical reason (pp. 110–129). Cambridge, MA: Harvard University Press. Robbins, L. (1932). An essay on the nature and significance of economic science. London: Macmillan. Shackle, G. L. S. (1961). Decision, order, and time in human affairs. Cambridge, UK: Cambridge University Press.

Szenberg and Ramrattan’s REFLECTIONS OF EMINENT ECONOMISTS ESSAYS IN AUTOBIOGRAPHY William J. Barber A review essay on Michael Szenberg and Lall Ramrattan’s (Eds) Reflections of Eminent Economists. Cheltenham, UK: Edward Elgar, 2004. xv+459 pp. ISBN 1 84376 628 0. Commissioning and publishing autobiographical sketches by prominent economists has become something of a cottage industry at the Lubin School of Business at Pace University where the senior editor, Michael Szenberg, is based (Szenberg, 1992, 1998). This volume is the third major exercise in this genre. The first—entitled Eminent Economists: Their Life Philosophies—appeared in 1992. Some 22 outstanding economists (nine of whom were Nobel Laureates) contributed in this round. A second volume, published in 1998 under the title Passion and Craft: Economists at Work, solicited essays from economists a generation or so younger who were asked to write about how they practiced their profession. Twenty responded to this invitation. The volume under review returns to the ‘‘philosophy of life’’ theme and reports the responses of 26 contributors. A fair number of the essays in each of these volumes appeared originally in The American Economist, a journal edited by Szenberg. The editors acknowledge that their decisions about those who qualify as ‘‘eminent’’ will not necessarily be universally accepted. As working criteria, they looked to scientific awards and election to leadership positions in A Research Annual Research in the History of Economic Thought and Methodology, Volume 25-A, 49–52 Copyright r 2007 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 0743-4154/doi:10.1016/S0743-4154(06)25006-5

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learned societies. They express general satisfaction with the positive response rate among those invited to become autobiographers. In the 1992 iteration, a number of potential contributors begged off on grounds of other commitments or because of health or age. One economist from Eastern Europe initially accepted, but subsequently declined for a valid reason. In the turbulence accompanying the fall of the Berlin Wall, he regarded it as prudent to keep his innermost thoughts about his life philosophy to himself. In the 1998 exercise, a number of invitees in the younger generation declined because of professional duties in the Clinton administration. The yield of acceptances to invitations for the 2004 volume is not reported. Several features of the three volumes are noteworthy. In 2004, 9 of the 26 were born outside the United States (though three of them elected to pursue their professional careers in America). For 1992, 12 of the 20 selected were foreign-born and seven of them carried on their life work in the U.S. In the 1998 iteration, 2 of the 20 were born outside the United States and both later chose to live there. As a comment on the changing makeup of the profession over time, comparisons of the number of women among the selected are instructive. In the original cast of 1992, there were none. Five women were among the more junior who were identified for inclusion in 1998. Four women make it into the 2004 line-up (with no repeats from 1998). Each of the four women writing in the volume under review allude to awkward, and sometimes painful, episodes in their lives as professional women. Irma Adelman reports on difficulties in keeping a marriage alive when it is important for the partners to have appointments within reasonable geographical proximity. Barbara Bergman laments the gender discrimination she experienced as an employee of the Bureau of Labor Statistics. Graciela Chichilinsky comments on a successful struggle with administrators at Columbia University with regard to gender discrimination in salarysetting for women. Carolyn Shaw Bell writes at some length about her battle with the Department of Labor in the late 1960s and early 1970s and its presumption that the ‘‘typical family’’ consisted of a husband with a wife at home and two children, when the reality was quite different. While the contributors were asked to address the broader issue of ‘‘life philosophies,’’ treatment of this topic turns out to be far from uniform. This reflects an editorial decision to allow contributors substantial interpretive latitude with regard to this matter. Thus, some tend to ignore it; some reflect narrowly on the methodology they have adopted in professional practice; and some speak revealingly about influences that have shaped their personal view of the world. Notable in the latter category are those who address the impact of religion in their life experience. Irma Adelman, for example,

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comments on the formative effect of being a Jewish student at a French Catholic nun’s school in Romania. Her early education left her ‘‘with a mammoth sense of primordial guilt’’ and she observes that ‘‘the expiation of this guilt through the only mechanism it can be expiated—service to humanity—has been a driving force in my life.’’ G. C. Harcourt describes himself as a ‘‘Jewish Methodist Democratic Socialist’’ who views ‘‘economics as very much a moral as well as a social science and very much a handmaiden to progressive thought.’’ E. Malinvaud’s religious convictions— which are reflected in his role as chair of the Pontifical Academy of Social Sciences—have led him to conclude that ‘‘there should not be any fundamental conflict between ethics and economics and that ‘‘economists have, in modern societies, a responsibility for the progress of ethics.’’ There are some arresting personal testimonies here concerning the considerations that led to the choice of economics as a career. The role of chance in this decision-making comes through with considerable force. (The case of Mark Perlman—who seemed predestined to follow in his father’s footsteps—is very much an exception.) Richard Easterlin, for example, attributes Harvard Business School’s rejection of his application as careerdetermining factor. He enrolled instead at the business school of the University of Pennsylvania which—by contrast with the Harvard structure—is integrated with the Department of Economics. In this setting, he got his first exposure to economics—something that otherwise might not have happened. Mark Blaug was led into the field by his curiosity about the doctrines of Henry George and Marx. For a time, he was a member of the Communist Party, but was expelled for associating himself with a position that ran counter to the party line. This set him on the path toward mainstream economics. Bela Belassa’s experience as a refugee from the failed Hungarian revolution of 1956 was crucial in conditioning his stress on the properties of free and competitive enterprise. Martin Bronfenbrenner, who completed an undergraduate degree in 1934, then decided to pursue a doctorate at the University of Chicago because the alternative seemed to be unemployment. Roger W. Garrison, trained as an electrical engineer, read Ayn Rand while in the Air Force in the Vietnam period. As job prospects for electrical engineers seemed dim when he left the service, he took up the systematic study of Austrian economics. In a foreword to this volume, Kenneth Arrow speaks about the contributions that this type of material can make to the work of future generations of historians of economics. This point is well worth emphasizing. A reader can only wish that more contributors had felt more comfortable with being less inhibited and more forthcoming about what makes them tick.

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An interesting twist of fate with one of the essays is worth noting. The concluding piece in this volume is contributed by Alan Walters and it was originally published in The American Economist in 1989. Walters was then the economic adviser to Margaret Thatcher, the British Prime Minister. In his autobiographical sketch, he remarked on his skepticism with regard to British participation in the European Monetary System (a view at odds with the thinking of the Chancellor of the Exchequer). The Financial Times in London reported this schism and it sparked a political firestorm in the United Kingdom. In the fallout, both men felt compelled to resign. Sometimes the contributions of eminent economists to the raw material for future historians of economic thought can themselves make economic history!

REFERENCES Szenberg, M. (Ed.) (1992). Eminent economists: Their life philosophies. Cambridge, UK: Cambridge University Press. Szenberg, M. (Ed.) (1998). Passion and craft: Economists at work. Ann Arbor: University of Michigan Press.

Davis’s RICARDO’S MACROECONOMICS THE REINVENTION OF RICARDO AS AN APPLIED ECONOMIST Terry Peach A review essay of Timothy Davis’s Ricardo’s Macroeconomics: Money, Trade Cycles, and Growth. Cambridge: Cambridge University Press, 2005. 328 pp. ISBN 0521844746. Timothy Davis has produced a well researched, well written and scholarly piece of work that merits serious attention by historians of economic thought. His principal aim is to reassess Ricardo’s credentials as an ‘‘applied economist,’’ and to that end he devotes a couple of very useful chapters to a blowby-blow account of the UK’s turbulent economic history between 1815 and 1825, four chapters to Ricardo and, also usefully, a series of appendices relating to the vital economic statistics of the period. The Ricardo that emerges from this study is (almost) a paragon of ‘‘applied virtue.’’ Ricardo was, we are told (repeatedly), fully conversant with the available empirical evidence, his writings were directed to concrete economic problems (except for the Principles, apparently) and, most importantly of all, his empirical analysis was ‘‘exemplary’’ and fully ‘‘validated’’ by events. The only real blemish was his law-of-markets based assumption of full employment at a time of general economic ‘‘distress,’’ leading him to reject all proposals for ‘‘relief works,’’ which Davis finds ‘‘particularly unsatisfactory’’ and ‘‘remarkable’’ (he might well have said ‘‘inexplicable’’) in view of Ricardo’s A Research Annual Research in the History of Economic Thought and Methodology, Volume 25-A, 53–60 Copyright r 2007 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 0743-4154/doi:10.1016/S0743-4154(06)25007-7

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(supposedly) keen appreciation of economic reality. All in all, however, Ricardo’s ‘‘applied’’ credentials are rather impressive. To some, perhaps, Davis’s message may seem almost revolutionary. Thus, according to the blurb on the dust-jacket, the post-Davis world will be one in which ‘‘Commentators will no longer be able to read Ricardo as an accomplished abstract theorist, but nothing more’’ (William J. Barber); and, on the same theme, there will be ‘‘no further excuse’’ for treating Ricardo as ‘‘the pure theorist operating in an empirical vacuum’’ (Samuel Hollander). It would seem to me, however, that the overwhelming majority of commentators have never treated Ricardo as anything of the sort. It has always been generally accepted that he was deeply involved with economic reality (the Bullion Controversy, the Corn Laws, the return to gold, the weight of taxation and the burden of the national debt, etc.). Indeed, all his pamphlets were addressed to ‘‘applied’’ questions and (pace Davis) even the Principles was related to contemporary issues (after all, the central chapters on distribution were basically a reworking of the argument in the earlier Essay on Profits, designed to expose the folly of the Corn Law). We therefore do not really need Davis (or his supporters) to tell us that Ricardo was not a ‘‘pure theorist.’’ Nor, with respect, is it an earth-shattering revelation to be informed that Ricardo was an avid reader of newspapers and other sources of contemporary information. The real debate concerns the manner in which Ricardo treated empirical reality, not whether he was aware of it. Thus, the complaint has been not so much that Ricardo was disengaged from reality as that he was too engaged by applying the results of his ‘‘abstract’’ (or ‘‘unrealistic’’) models to the direct analysis and solution of ‘‘real world’’ problems, without making proper allowance for (or even much caring about) the ‘‘real world’’ complications (the ‘‘Ricardian Vice,’’ as Schumpeter was to coin over a century’s worth of similar criticism). It is as a challenge to the ‘‘Ricardian Vice’’ accusation that Davis’s book ultimately stands or falls. Even in this regard, however, Davis’s case is not entirely original, having been anticipated by the supervisor of his doctoral thesis (from which the book has evolved) and dust-jacket supporter, Samuel Hollander. Where Davis does strike out on his own is in making a bolder case even than Hollander’s for Ricardo’s ‘‘applied’’ skills, to the point of occasionally chastising his ex-supervisor for his timidity. It is in this respect that Davis’s book is positively unique, there being no other example (to my knowledge) of Hollander standing accused of understating his case. I turn to the substance of Davis’s argument, beginning with his commendation of Ricardo for a remarkable prescience in the anticipation of economic recovery. As related by Davis, Ricardo was ‘‘proved correct’’ and

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his predictions ‘‘validated’’ by the upturn of 1817; and, following the slump of 1819–1820, ‘‘Britain’s economy recovered quickly y just as Ricardo anticipated’’ (pp. 143–149). However, before we rise to applaud Ricardo’s empirical achievements, it is worth remarking that his ‘‘model’’ predicted nothing other than recovery; or, to be more precise, it ‘‘predicted’’ virtually never-ending economic growth, with allowance only for strictly ‘‘temporary’’ glitches in particular markets as a result of producer-miscalculation. Ricardo’s ‘‘model’’ would always be ‘‘validated’’ by the resumption of growth and could never be invalidated except in circumstances of eternal depression. The salient point is not that Ricardo could predict economic growth, but that his model was unable to predict anything else. The theoretical basis for this stunningly optimistic view of economic prospects came (as is well known) from the ‘‘Law of Markets,’’ according to which producers have near-perfect knowledge and react swiftly to market conditions, all income is spent, and consumer-desires are insatiable. The only possible barriers to growth are a fall in the rate of profit below a minimum level acceptable to capitalists, or a level of taxation so high that capitalists would prefer to pull up sticks and relocate overseas. As to the former barrier, it was Ricardo’s belief that the rate of profit would never fall with a free trade in corn and, even without it, he was far from predicting an imminent decline into economic stasis; and, as to the latter barrier, he was (mostly) optimistic that the UK’s ‘‘natural advantages’’ would tend to retain capital within the country, overseas’ attractions notwithstanding. It might with more justice be said, therefore, that any protracted slump or widespread economic ‘‘distress’’ is evidence of the failure of Ricardo’s model. To be sure, when economic crises did occur, as happened repeatedly in the post-Naopleonic period, it was incumbent upon Ricardo to tender some (ex post) explanations for their (unpredicted) existence. On one level, this was almost childishly simple, because the root cause of all crises was the same: a misallocation of capital arising from errors on the part of producers.1 So, in the agricultural crises, it was the farmers who were producing too much (capital should be reallocated to other sectors), while the commercial crises were attributed to various causes, ranging from the transition from war to peace to sheer perversity. Regardless of the precise reasons for capital-misallocation, however, the producers (whether farmers or manufacturers) were confidently expected by Ricardo to pull themselves together in ‘‘one or two years’’ at most2 by producing the ‘‘right’’ things in the appropriate quantities. As it seemed to one contemporary observer: ‘‘strongly entrenched behind principles which he thinks has demonstrated, [Ricardo] is content to witness, silent and unmoved, the storm which he sees raging

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around him, assuring us that it must, at last, be succeeded by sunshine and genial weather.’’3 To borrow the metaphor of the anonymous critic, just as we would be unlikely to congratulate a meteorologist who always predicted ‘‘genial weather’’ for the eventual arrival of a sunny day, so I can find little reason to join with Davis in his generous and repeated applause for the ‘‘validation’’ of Ricardo’s predictions of recovery. As for Ricardo’s explanations (i.e., his ex post rationalisations) of ‘‘crises’’ (which, to repeat, turned invariably on the reasons for capital-misallocation), I can find nothing original or remarkable in his accounts (encompassing the war-peace transition, the effects on agriculture of bumper harvests, imports from Ireland and the Corn Laws, and a decidedly minor role for monetary contraction) save in two respects: first, his habitual, theory-generated tendency to underestimate their duration; and, secondly, his evident bewilderment at the scale and duration of the commercial crisis of 1819–1820/1821, which led him briefly and uncharacteristically to blame capital export (allegedly resulting from a low rate of profit as a consequence of the 1815 Corn Law, and high taxation) and ultimately to blame the capitalists themselves for their ‘‘folly’’ and ‘‘delusion’’ in continuing to produce the ‘‘wrong things.’’4 What seems more remarkable is the peculiar contradiction in Davis’s own position, for it is the very same ‘‘Law of Markets’’ on which Ricardo based his opposition to relief works, of which Davis is uniquely critical, and provided the basis for Ricardo’s predictions of recovery, of which Davis is effusively positive. Davis would deny the contradiction by invoking a distinction between two versions of the ‘‘law’’: the ‘‘equality version,’’ allowing for periods of capital misallocation, on the basis of which Ricardo is said to have analysed crises and predicted recovery; and the ‘‘identity version,’’ where capitalmisallocation is absent and recourses fully employed, which is allegedly implied by Ricardo’s 1819 argument against public works. The argument seems to be that had not Ricardo slipped (uncharacteristically) into using the ‘‘identity’’ version he might have been more receptive to proposals for Government intervention; and, indeed, Davis claims to find ‘‘fragments’’ in Ricardo’s writings that would have justified a Government policy of fiscal expansion. However, the ‘‘identity’’ versus ‘‘equality’’ distinction is beside the point, since it was Ricardo’s presumption that private individuals are always better able than governments to (re-)direct their capital, and this stands regardless of whether the economy is experiencing a period of capitalmisallocation (hence, also, it follows that Ricardo’s statements do not necessarily imply the full employment of resources). As for the ‘‘fragments,’’ far from being ‘‘adamant that debt-financed government spending’’ could

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increase aggregate demand, as Davis claims (p. 183) Ricardo was (characteristically) very sceptical, although this is concealed (unintentionally, no doubt) by Davis’s partial quotation from a misidentified source (p. 168).5 Monetary policy provides Davis with a further broad area in which he finds much to commend Ricardo, particularly on ‘‘discretionary monetary policy’’ and the resumption of cash payments. Here, too, I find Davis’s position unpersuasive. In order to prosecute his case, he must first establish what he comes to describe as Ricardo’s ‘‘sensitivity’’ to the short-run effects of changes in the money supply (p. 196). Yet, time after time, Ricardo stressed that any ‘‘real’’ effects of changes in the money supply would be ‘‘of temporary duration,’’ ‘‘trifling’’ or very ‘‘seldom’’ encountered. That was his representative position—it runs throughout the entire corpus of his writings—and to describe it as ‘‘sensitivity’’ to monetary effects is an abuse of language. As for Ricardo’s ‘‘discretionary monetary policy’’ (which occasionally becomes his policy for ‘‘managing the money supply’’), this turns out to be a prize damp squib if ever there was one, since the only ‘‘discretion’’ allowed for by Ricardo was in order to keep the real money supply constant, as dictated by his overriding policy objective (or straightjacket) of price stability. This brings us to Ricardo’s position on the resumption of cash payments. According to Davis, it is because of his (apocryphal) ‘‘sensitivity’’ to shortrun monetary effects that Ricardo recommended the resumption of cash payments at the current market price, with only a gradual transition ‘‘to the ancient par [i.e. the mint price]’’ (p. 196). However, when asked to ‘‘state any particular time at which you think it preferable that the bank should undertake to pay in coin or bullion at the mint price?’’ Ricardo’s highly revealing answer was as follows: It is difficult for me to define strictly at what time, but I have not much apprehension of any ill consequences from their doing it in a few months; at the same time I acknowledge there will be some little difficulty in it, but a difficulty which does not appear to me very formidable, and one for which we would be more than compensated by the possession of a currency regulated by a known and fixed standard. (Ricardo (1951–1955) Works V, p. 396, emphasis added)

It would seem that Ricardo’s sensitivity had deserted him. What is true, however, is that he did come down in favour of a longer (two year) period of transition but, as he explained, ‘‘I am only reconciled to a further Length of Time by a Consideration of the Fears which I think many People very unreasonably entertain’’ (Ricardo Works V, p. 451). Hence, the proposal of a gradual transition was not a reflection of Ricardo’s ‘‘sensitivity’’ to the

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effects of monetary contraction; rather, it was a pragmatic concession to ‘‘the Fears of even the most timid’’ (Ricardo Works V, p. 551). The above remarks are from Ricardo’s evidence to parliamentary committees on the resumption of cash payments, held in March 1819. This evidence is extremely interesting and, one might think, particularly germane to the assessment of Ricardo’s ‘‘applied’’ qualifications. Now, according to Ricardo’s ‘‘model’’ a contraction in the money supply should result in a lower (domestic) price of gold; indeed, this very same mechanism was meant to achieve Ricardo’s policy objective of equality between the market and mint prices of gold. The embarrassing fact was, however, that the money supply had contracted but the market price of gold had risen. Time after time, Ricardo was invited by committee members to explain this ‘‘perverse’’ behaviour, to which his repeated answer was that ‘‘countervailing causes’’ were in operation. But which causes? he was pressed. He replied, ‘‘The facts are not sufficiently within my knowledge, to give any plausible explanation of them’’ (Ricardo Works V, p. 376). Here, if for nothing else, Ricardo scores high marks for frankness, but this hardly catapults him into the ranks of the great applied economists. Ricardo was advocating a real-world policy with real-world consequences, based on a theory that was apparently contradicted by events for which he could (by his own testimony) offer no plausible explanation. Not, however, that this made one iota of difference to his deflationary proposals; as he assured his interlocutors, a contraction of the money supply must reduce the market price of gold, ‘‘provided it be sufficient in degree y whatever countervailing causes may contribute to oppose it’’ (Ricardo Works V, p. 377). Are these really the words to be expected from a ‘‘practical, competent economist’’ (p. 211)? There was a further problem. The year 1819 was marked by widespread commercial ‘‘distress,’’ and it was against such a background that Ricardo was plying his policy of deflation.6 Was he ‘‘aware that there is at present a considerable stagnation in trade, and y a great reduction of prices in consequence?’’ he was asked by a committee member, to which he replied: ‘‘I have heard so; but I am not engaged in trade, and it does not come much within my own knowledge’’ (Ricardo Works V, pp. 384–385). He was pressed again: ‘‘Might not the reduction in prices y consequent on a reduction of the issues of the bank, be particularly embarrassing, if it took place at a period when there appears to have been so great a reduction of prices in consequence of other causes; namely, the excess of speculation, and the stagnation resulting from that?’’ But the answer was the same: ‘‘of this matter I do not profess to know much; I have very little practical knowledge upon these subjects’’ (Ricardo Works V, p. 385).

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The parliamentary evidence is a serious challenge to Davis’s interpretation. As he puts it himself, in a remarkable understatement, it ‘‘obscures’’ the ‘‘empirical aspect of Ricardo’s position’’ (Davis: p. 149). However, rather than considering the evidence in its totality, Davis confines his attention to the statements reported in the previous paragraph, described by him as ‘‘curious.’’ Happily for the integrity of his interpretation, it turns out (for rather murky reasons) that Ricardo had merely ‘‘feigned ignorance’’ (p. 152). Whether he was also ‘‘feigning’’ in his professed ignorance of the ‘‘counteracting influences’’ on the price of gold is unmentioned. As an alternative to explaining away Ricardo’s pronouncements as rare outbreaks of knowledge-suppression, I would suggest that he knew his own limitations very well and was therefore understandably reluctant to be drawn onto ‘‘empirical’’ ground of which he was unsure. If this is not as we would expect from the ‘‘applied economist’’ of Davis’s construction, then the fault should be attributed to the construction itself, not to Ricardo’s insincerity. To draw this discussion to a conclusion, Davis must be congratulated for producing a spirited case for the defence of Ricardo against the charge of the ‘‘Ricardian Vice.’’ But I, for one, am not persuaded by his evidence. I can agree that Ricardo was motivated to shape economic policy and that he was a close observer of events. Yet, in the end, ‘‘reality’’ was never allowed to cloud Ricardo’s theoretical vision, or lead him seriously to qualify its practical relevance, with all discrepancies explained away as ‘‘counteracting causes,’’ ‘‘intervals’’ and ‘‘temporary’’ phenomena of no great significance. Ricardo’s confidence in the relevance of his economic theory is truly remarkable, and that is one reason why he remains such an awesome historical figure.

NOTES 1. ‘‘In all cases a good distribution of the produce, and an adaptation of it to the wants and tastes of society are of the utmost importance to the briskness of trade and the accumulation of capital. The want of this is in my opinion the only cause of the stagnation which commerce at different times experiences. It may all be traced to miscalculation, and to the production of a commodity which is not wanted instead of one which is wanted.’’ (Notes on Malthus, Ricardo Works II, p. 415, emphasis added). 2. As Ricardo wrote to his friend Hutches Trower (26 September 1820, Ricardo Works VIII, p. 257). 3. Anon [(1822)] in Peach (2003, vol. 1, p. 291). 4. See his letter to Malthus (9 October 1820, Ricardo Works VIII, p. 277). 5. Davis quotes only part of Ricardo’s comment in Notes on the Bullion Report (misidentified as Notes on Bentham) relating to the Report’s claim that a loan of

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Exchequer bills had relieved the distress of 1793. Unquoted by Davis, Ricardo had added, crucially: ‘‘Perhaps after all that confidence was on the point of being restored at the very moment that recourse was had to this boasted measure’’ (Ricardo Works III, p. 349). Clearly, he was far from ‘‘adamant’’ in agreeing with the Report’s claim. 6. He was also recommending a once-and-for-all repayment of the national debt in the same circumstances: ‘‘He was one of those who thought that it could be paid off, and that the country was at this moment perfectly competent to pay it off’’ (Parliamentary speech of 16 December 1819, Ricardo Works V, p. 34, emphasis added). As Piero Sraffa noted, this ‘‘was regarded as a ‘wild sort of notion’ even by his own friends’’ (Ricardo Works V, p. xx).

REFERENCES Anon. (1822). Causes and remedies of agricultural distress. The Farmer’s Magazine, xxiii, 200– 222. Reprinted in Peach (2003), Vol. 1. Peach, T. (2003). David Ricardo: Critical responses, Vols. 1–4. London: Routledge. Ricardo, D. (1951–1955). The works and correspondence of David Ricardo. Cambridge: Cambridge University Press.

Evensky’s ADAM SMITH’S MORAL PHILOSOPHY THE WEALTH OF NATIONS AND THE MORALITY OF OPULENCE Jack Russell Weinstein A review essay of Adam Smith’s Moral Philosophy by Jerry Evensky. Cambridge: Cambridge University Press, 2005. 256 pp. ISBN 0521852471. Edward J. Harpham (2001, p. 139) once began an article by writing that ‘‘many Adam Smiths are presented to us in the secondary literature.’’ The new wave of Smith scholarship is so varied that one’s reading of the 18thcentury Scot is bound to change significantly as one switches secondary sources. While recent scholarship on Smith is, in fact, diverse in both its methodology and its overall picture of Smith’s system, Harpham is wrong. There aren’t many Smiths. Essentially, there are just two: one that adopts a certain caricature bending A Theory of Moral Sentiments (hereafter TMS) into irrelevance, and one that regards him as a moral philosopher with a theory of political economy fully integrated into his ethics. In his book Adam Smith’s Moral Philosophy, Jerry Evensky calls these two Smiths the ‘‘Chicago Smith’’ and the ‘‘Kirkaldy Smith.’’ The former is named after the famous Chicago School of economics; theorists such as Frank Knight, Theodore Schultz, George Stigler, Milton Friedman and Gary Becker who begin ‘‘with the assumption that humans can be represented as homo economicus, beings driven by a single motive: personal utility maximization’’ (p. 245). They rely on mathematics to describe human A Research Annual Research in the History of Economic Thought and Methodology, Volume 25-A, 61–69 Copyright r 2007 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 0743-4154/doi:10.1016/S0743-4154(06)25008-9

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activity and view the historical comments in The Wealth of Nations (hereafter WN) as digressions (pp. 246–247). Smith, these economists argue, established the foundation for homo economicus, and ‘‘thus made the economic approach to human behavior possible’’ (p. 245). The alternative Smith is named after his place of birth, a town he returned to repeatedly throughout his life, including when he was writing his most famous treatise. This Smith ‘‘does not assume that we are one dimensional in our motives, does not see history as a ‘digression’ in his analysis, and does not offer a deductive analysis that ‘cries out for mathematical formulation’’’ (p. 247), Evensky explains: Kirkaldy Smith sees humankind as a uniquely complex realm of nature that does not lend itself to reductionismy. This complexity derives from the nexus of human reason and human frailty that puts humankind in a peculiar and problematic position. Our reason gives us dominion over the earth and the ability to transform nature into material wealth far beyond our requirements for survival. But that reason, when wedded to frailty, can lead to destructive interpersonal conflict; for if unbridled, self-interest drives each of us to seek a larger share of the human bounty for ourselves, and our society degenerates into a ‘rent-seeking society.’y This dynamic is especially problematic in a liberal society where freedom of choice simultaneously unleashes both productive capacity and opportunities for rent-seeking (p. 247).

The Kirkaldy Smith offers a compelling solution to the dilemma of liberal society through his ‘‘civic-humanist voice extolling ‘active duty’’’ (p. 212), and is both more accurate and more useful than the Chicago Smith. Most of Adam Smith’s Moral Philosophy is dedicated to the articulation and defense of the Kirkaldy Smith, beginning, importantly, with Smith’s lesser-known writings on the history of the astronomy. Evensky does so to emphasize specific elements of Smith’s writing: the role of the imagination in philosophical inquiry and the impact of history on human development. Imagination is essential for both the scientific enterprise and development of moral judgments. But such conclusions are guides not mandates (p. 4) since, according to Evensky, ‘‘Smith appreciates that he is not describing Truth, but rather he is offering his best approximation of what he imagines Truth to be’’ (p. 6). History—and here Evensky usefully distinguished between Smith’s conjectural history and recorded history (p. 17)—is important because through its examination, Smith develops his understanding of how y particular parts interact in a general dynamic system. Unlike Marx who gives priority over the material, there is no priority of place in Smith among the dimensions of his analysis. His is a simultaneous system in which all dimensions—social, political, and economic—are codetermined and constantly co-evolving. Thus to fully appreciate Smith’s moral philosophy, it must be examined

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through the general frame he used to represent that dynamic simultaneous system: the natural selection/evolution limit frame (p. 26).

Unifying the book’s discussion is an account of the role of ‘‘universal opulence’’—what it is and how it develops. Smith uses this term to describe that society in which the lowest economic classes experience good material conditions (WN Book I.i.10). Evensky concludes that for Smith, human progress converges on ‘‘the liberal plan of equality, liberty, and justice’’ and that this ‘‘ideal society is one in which the least of the working class are ‘tolerably well fed, clothed, and lodged’.’’ He elaborates that for Smith, ‘‘the liberal plan is the best constitution for the working class because it produces the greatest wealth for the nation and distributes the wealth most justly’’ (pp. 12–13, 213). This is so because, ‘‘independence is a key to human dignity and personal maturity,’’ and ‘‘the ideal of human life is not tranquility in the face of oppression, it is secure tranquility, that piece of mind that one enjoys along with peace of body’’ (p. 15). Adam Smith’s Moral Theory has two chapters devoted to universal opulence by name (Chapters 5 and 6), but, in fact, it is the entire second part of the book, over 130 pages, that constitutes the whole of the discussion. This includes accounts of progress, capital, moral principles, Smith’s critique of mercantilism, and the place of a limited government in economic justice. Discussions of Smith’s government are often misleadingly filtered through a laissez faire interpretation of Smith’s conception of liberty, but Evensky focuses on its positive roles, articulating Smith’s belief that although ‘‘government can be a destructive instrument y progress is only possible where government functions as a constructive instrument (p. 157).’’ Ultimately, he endorses James Buchanan’s interpretation; that ‘‘Smith stressed [the] y properties [of the market] that allow for self-interested behavior of persons and yet generally socially beneficial results require an environmental setting of appropriate ‘laws and institutions’’’ (p. 268). Along the way, Evensky tackles familiar issues. He addresses the Adam Smith Problem (pp. 20–23), Smith’s personal belief in God (p. 23–25) and the role of religion in his system (Chapter 4), the lack of a priori dogma and the debate on relativism in Smith’s work (pp. 56–58), controversies in the history of economics such as labor, price, and the role of stock [capital] in WN (pp. 113–30), the invisible hand (pp. 162–66), and education and its relationship to the market (pp. 225–33). However, unlike many recent commentators on Smith, Evensky is an economist, not a philosopher, and he therefore adds several chapters on Smith’s relationship to controversies in his own field including theoretical concerns and issues related to the

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economics classroom (Chapters 11 and 12). These conversations are not always connected—Chapter 4’s discussion on religion seems less integrated than most, and his comments on economics pedagogy seem incongruent with the rest of the book—but given contemporary scholarship, it is easy to imagine why he wanted to include this material. As Evensky writes in his conclusion of the chapter on religion, Smith’s own faith is his source for ‘‘hope for humankind and the motivation for his life as a moral philosophy, a life committed to representing the invisible connecting principles that can lead humankind toward that benevolent prospect with which the deity had endowed humankind: ‘the liberal plan of equality, liberty, and justice’’’ (p. 108). We will return to this point below. And, since economists’ neglect of Smith is largely the result of the dominance of the Chicago notion of homo economicus, Smith can never be accurately understood if the classroom does not adequately represent him. Given Evensky’s successes, his readers can allow him some latitude in what he might regard as relevant. Overall, this is a very good book. More important, perhaps, it is the right book for the right time. The success of Charles Griswold’s Adam Smith and the Virtues of the Enlightenment (1999) put Smith’s TMS back onto center stage, but James Otteson’s widely read response in Adam Smith’s Marketplace of Life (2003) threatened to move Smith studies back to a time when the Adam Smith Problem was not appropriately dismissed (see Berry, 2003; Weinstein, 2004). In contrast, Evensky manages to place both of Smith’s published works on an equal playing field, and does so by highlighting the economic strand without delegitimizing the moral components within Smith’s system of political economy. Samuel Fleischacker (2004) tried to do something similar in his ‘‘philosophical companion’’ to WN, but Evensky’s book is more sophisticated and offers a more convincing narrative thread in his argument. Given the introductory nature of Fleischacker’s book, it is less likely to change tenacious minds. In contrast, Evensky’s account is persuasive enough that long-time proponents of the laissez faire Smith might actually be willing to rethink their views of the role of morality and justice in Smith’s economic theories. The book is not perfect. There are moments when Evensky’s discussion artificially limits Smith’s claims. For example, his account of sympathy, the central component in Smith’s account of moral judgment, is too simplistic. He offers Smith’s definition (‘‘our fellow-feeling with and passion whatever’’ (p. 34)), and gives a general account of its connection to sentiments in general (‘‘affections of the heart, from which any action proceeds’’ (p. 35)), but he pretty much leaves it at that. Smith’s commentators are not usually satisfied with this minimalist account. Sympathy is wrapped up with Smith’s

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empiricism, it has roots in Hume’s theory, and it is not always clear whether sympathy is a capacity or a process (Weinstein, 2006). Additionally, Evensky’s account of education is too narrow. While he offers an important discussion of the relationship between formal education and the market, he neglects to address the fuzzy lines between institutional education and socialization—he distinguishes education, socializing, and following another’s example in a way that may not be entirely representative of Smith’s account of learning (p. 42). For Smith, again due largely to his empiricism, it is not always clear where the boundaries are between what gets taught in school and what the community teaches. It is for this reason that Smith spends a great deal of time in both books describing the role of the government in maintaining the arts, public social gatherings, and education of all ages (see Weinstein, 2006, 2007). Institutional education and lifelong learning are interrelated processes. Next, the claim that ‘‘the invisible hand is for Smith the hand of the deity that designed the oeconomy of nature’’ (p. 163) is too controversial to remain undefended. Yet, Evensky offers no real argument in support of his assertion. He does cite an oft-quoted reference to the ‘‘invisible hand of Jupiter’’ in Smith’s History of Astronomy, but there is no reason to suppose that Smith’s historical account of early religions is applicable to the commercial stage of society, especially since so much changes in society as economic structures change. As we will see shortly, the lack of joint usage of the term ‘deity’ in TMS and WN has been fodder for the resurrection of the Adam Smith Problem in the past, and Evensky does us no service by glossing over the issue. Naturally, other scholars will find other shortcomings in the work. I certainly have additional quibbles, but I don’t want my criticisms to overshadow my compliments. Evensky moves Smith scholarship forward in a variety of important ways, including providing very specific responses (intentional or not) to contemporary Smith scholars. Consider first, James Otteson’s argument that WN puts forth a singular self-interested motivation that all people share to ‘‘better their own condition’’, whereas TMS offers more complex, more altruistic motivations (Otteson, 2003, p. 169).1 This is a key element in Otteson’s articulation of what he calls ‘‘the real Adam Smith Problem’’ (Otteson, 2003, p. 168). Evensky challenges Otteson’s approach by arguing against the claim that there is a singular notion of self-interest present in any of Smith’s work. He writes that there are ‘‘three broad categories of sentiments in Smith’s representation of human nature: self-love, justice, and beneficence’’ (p. 35) and he later adds a fourth, ‘‘resentment,’’ to the list (p. 60). He then offers an

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account of how the progress of society, along with the evolution of government structures, intertwines these sentiments: Government authority emerges to establish order in society, but government is neither the original source of order nor the locus of control that establishes order in the ideal state. Order begins and ends with the individual citizen. In the beginning, a rude order is established by retribution based on a self-defined sense of justice. In the end, in the limit, a refined order is established by common acceptance of social norms, civic ethics, among citizens with self-command, the self-government, to enforce those norms about themselves. Between this beginning and this end, in the course of humankind’s evolution from the rude state towards the ideal, the internal and external systems of governance—norms and positive laws respectively—share one another as systems of justice evolve (pp. 60–61).

The power of this quote is in the way its summary incorporates all of the elements of Smith’s system. One could not make sense of this integrated approach if one began with the Adam Smith Problem’s assumption that TMS and WN are incompatible, at least in part, because both offer complementary accounts of the development of justice. ‘‘Positive law serves as an active tool for the inculcation of value,’’ Evensky explains, ‘‘so the maturation of the citizenry and the maturation of positive law go hand in hand’’ (pp. 62–63). This leads him to conclude, contra Otteson, that, ‘‘indeed, everything in Smith’s analysis goes hand-in-hand because in his moral philosophical system, these social, economic, and political dimensions form a simultaneous, evolving system’’ (p. 63). Evensky also offers a useful response to Samuel Fleischacker, who argues that ‘‘there is nothing particularly normative, if that means ‘moral,’’’ about what Smith says on either real price or natural price’’ (Fleischacker, 2004, p. 123).2 This is an important point related to both the moral core of WN and the non-relative nature of market measures. Fleischacker opposes any connection between Smith’s economic account of price and medieval just price theory. But Evensky challenges this notion by understanding normativity, not just in terms of morality, but in terms of reason and nature as well. He writes: Smith’s purpose in defining the natural price is to establish a conceptually normative frame of reference for further price analysis. The key to the frame he is constructing here is the phrase, ‘where there is perfect liberty.’ This is Smith’s shorthand for the freedom and thus the fluidity of movement of people and resources that exists in a liberal society—his ultimate norm’’ (p. 120).

For Smith, the ideal case of perfect liberty is most certainly normative in the moral sense. This is why universal opulence is so important. As we have already seen, a central justification for his commercial system is the equity

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that imposes upon all members of commercial society. As Evensky elaborates a few pages later in his discussion of wages: Smith’s metric of a good society is how the least among the working class are doing, so where this asymmetry of power leads to artificially low wages, he considers it a distortion that undermines the distributive justice he envisions for the ideal case. Not only is this a distributive injustice, it is also economically inefficient y poverty animates no one, diminishes the health of all who suffer it, and ‘is extremely unfavourable to the rearing of children’ (p. 123).

According to this argument, the ideal liberal society is the limiting case ‘‘set by the deity,’’ and, once again, most certainly has a moral component. Evensky’s comments can also be used to challenge Peter Minowitz’s claim in Profits, Priests, and Princes that The Wealth of Nations offers a ‘‘secular account of individual, society, and cosmos that tries to reorient humanity to a godless universe’’ (Minowitz, 1993, p. 9), a claim that can be shortened to assert that ‘‘in [TMS], God is almost omnipresent; in [WN], God is never mentioned’’ (Minowitz, 1993, p. 8). This too has significant impact for Smith scholarship, both in understanding Smith’s personal beliefs and in exposing Smith’s often obfuscated account of the relationship between nature and its creator. We have already seen that Evensky regards the invisible hand as the working of the deity and the ideal liberal society as the limiting case set by the deity. So, immediately, we know that, at least in Evensky’s understanding of Smith’s corpus, the divine is omnipresent. Minowitz’s argument that God is not present in WN is therefore, from his position, prima facie untenable. Yet, there is a further point that helps counter Minowitz’s version of the Adam Smith Problem. As Evensky writes, ‘‘the logic of Smith’s moral philosophy does not require a deity’’ (p. 23). If we accept, as Evensky would have us do, that the progression of society is a co-evolution of people’s self-government and the institutions that govern society, and if we adopt his approach to socialization as the supplement to the progress of universal opulence, then there is no reason that one needs the deity in the unfolding of society, morality, or economic life. Smith was well informed by Hume’s Dialogues Concerning Natural Religion, Evensky reminds us (p. 23), so he might not have been inclined to postulate a necessary God at the core of his theory. Nevertheless, at the same time, Evensky insists that ‘‘the prospect of human progress that [Smith] envisions was thanks to the benevolence of the deity; a benevolence in the deity’s design’’ (p. 240). If this is true—a big if, I am well aware—then even if a designer God is essential to the system, it need

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not ever be mentioned in WN because the divine is already sewn into the guiding history of human experience. It is worth mentioning, though, that this conversation falls short of what Evensky needs to fully settle the discussion of Smith’s alleged deism; it didn’t have to. In asserting God’s absence from WN, Minowitz is simply mistaken. The treatise does not ignore the topic. It simply recasts it as a problem of education or, as Smith writes, ‘‘the institutions of instructions of People of all Ages’’ (WN Book V.i.g). In WN, Book V, Smith offers a lengthy discussion of religion highlighting the dangers fanaticism holds for the state. He also argues that religion serves an important role in educating adults who are no longer of schooling age. This is the very topic of Evensky’s Chapter 4, the Section I suggest that seems unconnected from the rest. Had Evensky offered a more unified narrative, he could have been clearer about the place of the divine in WN. His readers would then be clearer as to why he chose to discuss religion in the first place. For Evensky, the role of religion can be used to further advance the discussion he sees as central to his account: the progress of universal opulence in human society. It is his account of the moral core of the free-market system that may be Evensky’s most important contribution to the field. His deliberate and grounded account of the factors that contribute to the growth of universal opulence helps to put the Chicago Smith to rest once. Government plays an important role in society, and human beings are not singularly motivated homo economicus. To continue preaching laissez faire doctrine in the name of Adam Smith is to misrepresent the systematic nature of his work. It is to ignore the true genius of the philosopher from Kirkaldy, Scotland and to condemn contemporary economics to a caricaturish prison of its own design.

NOTES 1. Evensky addresses Otteson directly only once, in a footnote, suggesting, against Otteson’s claim that all of Smith’s theories can be subsumed under a market model, that ‘‘socialization is better than ‘exchange’ as an analytic frame for understanding moral development in Smith’s analysis’’ (pp. 38–39, fn). Of course, Otteson’s argument is much more detailed than the elements mentioned in this review. 2. Full disclosure demands that I acknowledge that Fleischacker is responding to my own comments in On Adam Smith (Weinstein, 2001), and that he explicitly mentions and opposes my position during this discussion (Fleischacker, 2004, p. 123; fn 2, 3).

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REFERENCES Berry, C. (2003). Review of Adam Smith’s marketplace of life, by J. R. Otteson. Journal of Scottish Philosophy, 1(2), 184–186. Fleischacker, S. (2004). On Adam Smith’s wealth of nations: A philosophical companion. Princeton: Princeton University Press. Griswold, C. L. (1999). Adam Smith and the virtues of enlightenment. Cambridge: Cambridge University Press. Harpham, E. J. (2001). Enlightenment, impartial spectators, and Griswold’s Smith. Perspectives on Political Science, 30(3), 139–145. Minowitz, P. (1993). Profits, priests, and princes. Stanford: Stanford University Press. Otteson, J. R. (2003). Adam Smith’s marketplace of life. Cambridge: Cambridge University Press. Weinstein, J. R. (2001). On Adam Smith. Belmont: Wadsworth. Weinstein, J. R. (2004). Review of Adam Smith’s marketplace of life, by J. R. Otteson. Mind 113(449), 202–207. Weinstein, J. R. (2006). Sympathy, difference, and education: Social unity in the work of Adam Smith. Economics and Philosophy, 22(1), 79–111. Weinstein, J. R. (2007). Adam Smith’s philosophy of education. The Adam Smith Review, 3.

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Backhaus’s ELGAR COMPANION TO LAW AND ECONOMICS COMPLAINING ABOUT THE COMPANION Humberto Barreto A review essay of Ju¨rgen Backhaus’s (Ed.), The Elgar Companion to Law and Economics, 2nd ed. Cheltenham, UK: Edward Elgar, 2005. xiv+763 pp. ISBN 1845420322. The Edward Elgar publishing house offers over a hundred reference books in the social sciences. Their web site says: These books are authoritative and original works, including handbooks, companions, dictionaries and encyclopedias in key areas. Our original reference works offer an authoritative and comprehensive account of key areas within the social sciences. Leaders in their field, each editor formulates a userfriendly indispensable book with a broad range of issues at the forefront of research. These books—each with internationally renowned contributing authors—are a one-stop resource for scholars and students and a must for any good library.

In 1999, The Elgar Companion to Law and Economics was published, comprised of 23 papers and 26 short biographical entries. Three years later, a paperback version was issued. In 2005, a second edition came out, claiming (on the book jacket) that: This thoroughly updated and revised edition of a popular and authoritative reference work introduces the reader to the major concepts and leading contributors in the field of

A Research Annual Research in the History of Economic Thought and Methodology, Volume 25-A, 71–80 Copyright r 2007 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 0743-4154/doi:10.1016/S0743-4154(06)25009-0

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HUMBERTO BARRETO law and economics. The Companion features accessible, informative and provocative entries on all the significant issues, and breaks new ground by bringing together widely dispersed yet theoretically congruent ideas. Students and scholars interested in a comprehensive and rigorous overview of the field of law and economics will find this volume to be a unique and welcome resource. The Companion will also have a broad appeal amongst industrial economists and historians of economic thought.

Reference books are not cheap. The second edition of the Companion is listed at £180 and it is available in the United States through Amazon.com for $310. What exactly does a purchaser get from the ‘‘thoroughly updated and revised’’ second edition? Ten papers and two biographies have been added, but the rest of the book remains essentially the same. A side-by-side comparison of the common entries in the two editions found only two papers (Central Bank and General Norms and Customs) and two biographies (Hayek and Plato) with substantive changes. The organization of the book into eight parts remained unchanged. I concur with a reviewer of the first edition who said, ‘‘the division of Parts I to VIII (pp. 1–270) is uneven and it is not clear to the reader what is the fundamentum divisionis underlying the book’s improbable organization.’’ (Coderch, 2001, p. 2). The comparison also revealed more typographical errors in the second edition (e.g., missing footnote on the Coase quotation on p. 30 and the shearing of all first letters from each line on the last paragraph on p. 398). The index of the first edition is markedly superior, containing about a third more entries (even though the first edition has less content). Nowhere is the shoddy workmanship of the second edition clearer than in the very first paragraph of the introduction to the volume itself. In an attempt to explain that the ground covered by the Companion is different than its competitors, the editor states: In particular, the Companion does not intend to duplicate the ambitious New Palgrave, which aims to balance its pointedly formal focus by emphasizing institutional economics (Newman, 1998). The comprehensive set of chapters in the Companion, mainly in the Chicago tradition of law and economics (Posner & Parisi, 1997), allows us to focus on other mainly European aspects of law and economics and the historical sources of law and economics research, which explains its structure (Brouckaert & De Geest, 1999).

The latter sentence in the quotation above makes little sense. It appears to state that the Companion has papers primarily based on the Chicago tradition and, in addition, a focus on European aspects of law and

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economics. The Brouckaert and De Geest citation (to the Encyclopedia of Law and Economics) is incomprehensible. What is the editor actually trying to say? The introduction to the first edition (p. 1) tells us: In particular, this work does not aim at duplicating the ambitious New Palgrave in Law and Economics, which aims to balance the pointedly formal focus of the New Palgrave by emphasizing institutional economics.2 A comprehensive set of articles, mainly in the Chicago tradition of law and economics,3 allows us to focus on other mainly European aspects of law and economics and the historical sources of law and economics research. This explains the structure of the Companion.4 2 Peter Newman (ed.), The New Palgrave in Law and Economics, London: Macmillan/ New York: Stockton, 1998. 3 Richard E. Posner and Francesco Parisi, Law and Economics I-III, Cheltenham: Edward Elgar, 1997. 4 Boudewjin Brouckaert and Gerrit De Geest (eds.), Encyclopedia of Law and Economics, Cheltenham: Edward Elgar, forthcoming.

Although no model of clarity, at least the introduction to the first edition communicates a coherent message. Since the New Palgrave focuses on institutional economics and Law and Economics I–III emphasizes the Chicago tradition, the Companion will concentrate on European and historical perspectives on law and economics. The Encyclopedia, forthcoming at the time of the first edition of the Companion, is not given a subfield. I suppose the change in citation style triggered the jumbled mess of words in the introduction to the second edition, but you would think that of all the papers in the volume, the lead paper—by the editor himself—would be proofed more carefully. In fact, while the Companion does cover ‘‘European aspects of law and economics and the historical sources,’’ it also has papers on the Chicago tradition and institutional economics. Unfortunately, the papers do a poor job of explaining these subfields in law and economics. After evaluating the Chicago-style and European contributions, the last section of this review will explore the biographical papers.

CHICAGO LAW AND ECONOMICS For a book claiming that it ‘‘introduces the reader to the major concepts,’’ I was quite disappointed by the papers devoted to the application of economic reasoning to legal rules. No one directly defined the core of

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the Chicago approach. There were no quotations from Becker about the ‘‘economic way of thinking’’ and no mention of Posner’s famous claim that ‘‘the common law bears the stamp of economic reasoning.’’ This section provides examples from three papers to illustrate the lack of a clear presentation of the meaning of the economic analysis of the law, as defined by the Chicago school. The opening article, Coase theorem and transaction cost economics in the law, by Francesco Parisi, tells a tangled story of Coase’s contributions to both the property rights literature and transaction cost economics. Parisi does not take advantage of the invariance principle as a way to motivate a crucial aspect of the Coase Theorem, which is the idea that a judge’s ruling does not set in stone the final allocation of resources. The National Football League, for example, does not charge what the market will bear for the Super Bowl because it does not want a ‘‘wine and cheese’’ crowd at the event (Krueger, 2001). Can the NFL control who is in the stadium? Not if the tickets can be resold. This is the Coase Theorem in action. Perhaps an even better example involves baseball. Many believed that the advent of free agency in the 1970s, in which baseball players could sell their services to the highest bidder, would signal the end of domination by a few elite teams, e.g., the New York Yankees. But that did not happen. To be sure, there has been a redistribution of gains from owners to players, but the final result, big market teams win and small market teams lose, remained invariant under free agency. This example has the added twist that it was clearly enunciated by Rottenberg (1956), several years before Coase’s celebrated article. (For a review of the literature on the application of Coase’s signature insight to sports, including European examples, see Szymanski (2003).) In ‘‘The economics of tort law,’’ by Giuseppe Dari Mattiacci and Francesco Parisi, the authors present the material reasonably well and the bibliography is useful, but they miss an opportunity to explain the core idea of optimization. In discussing the Hand formula for establishing the level of due care, they say (p. 90): In the original formula, (P) indicates the magnitude of risk; (L) indicates the gravity of the loss; and (B) indicates the burden of prevention (that is, the cost of adequate precautions). According to the Hand formula, conduct is negligent if the cost of adequate precautions is less than the cost of the injury multiplied by the probability of its occurrence, that is, if (B)o(PL).

As Brown (1973) pointed out, the correct statement for the cost-minimizing solution involves marginalism. In other words, care should be taken until

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min TC = 12 1000 + 5X X X

100 90

Total Cost

80 70

Cost of Prevention

60 50 40 30 20 Expected Damages

10 0 0

5 5.85 7.37

10

15

20

Level of Care (X)

Fig. 1.

Choosing the Level of Care to Minimize Total Costs.

the additional cost of precaution (DB) equals the additional decrease in expected damages (DPL). Fig. 1 shows that the Hand formula based on a simple comparison of costs of prevention and costs of expected damages yields too little care, 5.85, compared to the optimal solution, 7.37. Once the optimization problem and its initial solution are well understood, comparative statics analysis—the hallmark of the economic approach—can be applied. Consider the fact that ‘‘special care,’’ meaning a level of carefulness beyond the ordinary, is the legal standard when handling a gun. The economic analysis of this legal rule is obvious: since the loss if an accident occurs is much higher, the Expected Damages curve shifts up, which shifts Total Cost up, and the cost-minimizing level of care increases. Unlike the two previous examples, where the authors did not take advantage of an opportunity to explain the core concepts clearly, Giovanni B. Ramello’s Intellectual property and the markets of ideas leaves the reader confused. After discussing the advantages of trademarks in lowering search costs and stimulating production of high quality goods, Ramello worries about anti-competitive aspects of trademarks. He concludes (p. 136): Then the result is an intractable economic dilemma, which has thus far received very little attention: on the one hand, intellectual property rights can have the beneficial effect of stimulating the production of new ideas and competition, through the promise of temporary supraprofits; but on the other hand, because they introduce a monopolistic slant to the markets—to a greater or lesser extent depending on the conditions—they

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This ‘‘intractable economic dilemma’’ is nothing more than the tension inherent in any optimization problem. As Landes and Posner (1987) showed, the economic analysis of trademark law is simply an application of the economic theory of the emergence of private property rights. A trademark can be interpreted as a private property right to a word, symbol, or mark. It carries the twin key rights of action that separate private from communal rights: alienability and excludability. The latter means that the owner of a trademark can prevent others from using that trademark. Thus, a word or combination of letters is privatized and taken out of the common pool that anyone may freely use. While trademarks enable owners to appropriate gains from investment in a brand and lower search costs for consumers, they are not costless. An important cost of using trademarks is the competitive advantage held by the owner. Since competitors cannot use the trademark, they are forced to communicate with their buyers with longer, more costly phrases. Landes and Posner (1987) give examples of how legal rules reflect the weighing of the costs and benefits of trademark. When the costs of trademark are higher than the benefits, economic theory predicts that trademark will not be used. The law makes clear that broad, common words, such as ‘‘hamburger,’’ cannot be trademarked. The competitive disadvantage of rivals, who would have to advertise with circumlocutions such as ‘‘ground beef patty,’’ is too great. Supporters of the claim that the law is driven by economic logic point to the legal rule that strips the owner of the private property right if the trademark becomes generic. This is a straightforward application of comparative statics analysis. At first, super glue, escalator, and light beer, were all trademarked. The gains from privatizing these words (enabling their owners to block rival firms from using these words) outweighed the costs (the competitive disadvantage of rivals in marketing their versions of these products). But the words became common, increasing the cost of the private ownership until it became uneconomic to trademark these terms. Interpreting legal rules (such as the ban on trademarking generic words) as the product of underlying economic forces is the core of the law and economics movement associated with the Chicago school. Ramello’s failure to place the gains and costs generated by intellectual property rights in an optimization framework confuses the reader.

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This section has reviewed three papers. Parisi’s paper on Coase needs much more emphasis on the invariance principle. Mattiaci and Parisi’s entry on tort law would be improved by focusing on optimization and comparative statics applied to due care standards. Ramello’s article on trademark could use the fundamental idea of trade-off to discuss the costs and benefits of intellectual property rights. The Companion contains several other papers on Chicago-style law and economics. None clearly explained the essential logic of ‘‘the economic analysis of the law,’’ as that phrase is used by members of the Chicago school. This is a serious drawback for a book purporting to introduce the reader to the major concepts in law and economics.

EUROPEAN ASPECTS OF LAW AND ECONOMICS While I was disappointed by the Companion’s treatment of the Chicago tradition in law and economics, the papers on what is called European law and economics left me puzzled. I confess to not being as familiar with the European literature, so I was looking forward to accumulating a little knowledge. Unfortunately, like the Chicago school entries, no one ever explicitly states what the European perspective is all about. A simple definition would be based on geography: European law and economics occurs whenever the content deals with Europe. Elisabetta Croci Angelini’s paper on The European Union’s Institutional Design would clearly qualify and many of the biographical entries are on Europeans. But such a country-studies-approach would lead to a variety of geography-specific law and economics and that does not appear to be the way ‘‘European’’ law and economics is understood. By eliminating papers that are clearly Chicago-style law and economics and transaction costs economics, the remaining papers are scattered over a wide landscape of topics, including, for example: constitutional law, regulation, environmental policies, labor economics, and taxation. Could this be European law and economics? If so, it has neither a core nor easily discernible boundaries. Many of the papers in this volume, such as those on central banking, tradable emissions rights, the rise of norms and customs, and inheritance would apparently fall under the vast umbrella of something called European law and economics. In my opinion, nothing this broad could possibly be meaningful.

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In the previous section, I complained because I know the definition of Chicago law and economics and wish the Companion did a better job of explaining it. In this case, my criticism stems from frustration: I suppose European law and economics must represent something, but my reading of the Companion did not reveal its meaning.

THE INTELLECTUAL HISTORY OF LAW AND ECONOMICS Having been disappointed by the content in the first two-thirds of the book, I was looking forward to Part IX: Classical Authors in Law and Economics, which includes biographies of 28 people. I am a historian of economics and enjoy intellectual history. I knew some of the names listed in the table of contents, but others were new to me. While this was my favorite part of the book, I still have some criticisms. The biographical entries in the Companion are, like the rest of the book, an uneven, unorganized, and unsystematic collection. Page length ranges from 3 (Otto von Gierke) to 26 (Pietro Trimarchi). The papers are arranged in alphabetical order and there is no explanation of how or why these particular writers were selected. While Commons, Hale, Stigler, and Veblen were born in the United States, the rest of them are European. The ‘‘Classical’’ label in the title to Part IX is meaningless. While most are from the 18th and 19th centuries, the list includes Plato, several others who died in the 20th century, and Trimarchi, alive when the second edition went to press. Taken as a whole, the biographies force consideration of the fundamental question: What subject matter can be characterized as law and economics? What exactly do you have to write about or do to be considered under the heading of law and economics? The Companion’s filter seems to be almost nonexistent. Anyone who ever mentioned the law, in any context, is eligible. I submit that this is not helpful. In the conclusion to the entry on Plato, Wolfgang Drechsler says (p. 639): The Nomoi are historically the primary document of the school of thought that law and economics is today—or, better, of one way of pursuing this kind of thought and ‘method’—and also the first formulated and detailed legal system that generally, and not incidentally, operates on law and economics principles.

How can Plato’s Nomoi, separated by a chasm of millennia and language, be ‘‘the primary document of the school of thought that law and economics is

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today?’’ Exactly what school of thought is law and economics today? What are ‘‘law and economics principles?’’ Answers to these questions would greatly improve the Companion. I enjoyed reading the biographical entries in the Companion. I believe, however, that a structured selection of entries, grouped under coherent headings, would have been more useful. I also would have commissioned different choices, e.g., biographies of Posner, Calabresi, and Williamson would be most welcome.

CONCLUSION Overall, I was disappointed by the Companion. In the areas in which I am familiar, Chicago and transaction costs law and economics, I was not impressed by the papers in the volume. In my opinion, they simply failed to convey the essential concepts for the introductory reader. From the perspective of intellectual history, the Companion needs an introduction that explains the research area that we call law and economics and, within that field, European law and economics. It would be improved by an explanation of the biographical entries and a framework for organizing the selections. The Companion has strong competition in the law and economics reference book market, including: Newman’s New Palgrave in Law and Economics (1988), Posner and Parisi’s Law and Economics (1997), and Brouckaert and De Geest’s Encyclopedia of Law and Economics (1999). The last of these, also published by Elgar, is freely available on the web (users.ugent.be/gdegeest/). There are plans for a 2008–2009 edition of the Encyclopedia (which will be a book series with 12 separate volumes with separate editors, and approx. 8,000 pages). That version will not have a free electronic mirror image, but authors will be allowed to publish their entries online. Finally, the Legal Scholarship Network (www.ssrn.com/lsn), part of the Social Science Research Network, offers thousands of working papers in law and economics.

REFERENCES Brouckaert, B., & De Geest, G. (Eds) (1999). Encyclopedia of law and economics. Cheltenham: Edward Elgar. Brown, J. P. (1973). Toward an economic theory of liability. Journal of Legal Studies, 2(2), 323–349. Coderch, P. S. (2001). Review of The Elgar companion to law and economics, edited by J. G. Backhaus. www.indret.com/pdf/043_en.pdf (accessed September 26, 2006).

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Krueger, A. B. (2001). Seven lessons about Super Bowl ticket prices. New York Times, February 1. www.krueger.princeton.edu/02_01_2001.htm (accessed September 26, 2006). Landes, W. M., & Posner, R. A. (1987). Trademark law: An economic perspective. Journal of Law and Economics, 30(2), 265–309. Newman, P. (Ed.) (1998). The New Palgrave in law and economics. London: Macmillan. Posner, R. E., & Parisi, F. (Eds) (1997). Law and economics. Cheltenham: Edward Elgar. Rottenberg, S. (1956). The baseball player’s labor market. Journal of Political Economy, 64(3), 242–258. Szymanski, S. (2003). The economic design of sporting contests. Journal of Economic Literature, 41(4), 1137–1187.

Hamowy’s POLITICAL SOCIOLOGY OF FREEDOM SPONTANEOUS AND NOT SO SPONTANEOUS ORDERS Peter McNamara A review essay of Ronald Hamowy, The Political Sociology of Freedom: Adam Ferguson and F. A. Hayek. Cheltenham, UK: Edward Elgar, 2005. xviii+265 pp. ISBN 1845421086. The Political Sociology of Freedom: Adam Ferguson and F.A. Hayek collects a number of insightful and finely crafted essays written by Ronald Hamowy over a period of three decades. The collection will provide a very valuable resource for scholars interested in Friedrich Hayek, Adam Ferguson, the Scottish Enlightenment, the rule of law, and the idea of spontaneous order. While it is true that Hamowy covers a lot of ground in this book—he has, for example, interesting things to say about Bernard Mandeville and Richard Price among others—Ferguson and Hayek are his major concerns. What links these two thinkers? Most conspicuously, it is the idea of spontaneous order, that is, the idea that order is possible without an orderer or designer through the independent actions of individuals. To some extent this linkage is the result of Hayek’s own explorations into the history of economic and political thought. It was Hayek who emphasized spontaneous order as the critical insight of the Scottish Enlightenment, in general, and Ferguson, in particular. Beyond this, there are a number of other important connections between Hayek and Ferguson. Both men attempted to elaborate a broadly liberal A Research Annual Research in the History of Economic Thought and Methodology, Volume 25-A, 81–88 Copyright r 2007 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 0743-4154/doi:10.1016/S0743-4154(06)25010-7

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political agenda without recourse to a doctrine of natural or transcendent rights. Instead, both emphasized customary rights and the rule of law as central to achievement of a liberal order. What is the significance of Hamowy’s studies of Ferguson and Hayek? As we will see, Hamowy has a number of important things to say with regard to scholarship on these two figures. Perhaps Hamowy’s most important and controversial argument in this regard is his contention that Ferguson’s doubts about civilization and progress were limited and that, consequently, it is incorrect to regard Ferguson as some kind of Eighteenth Century classical republican. As for Hayek, Hamowy’s essays are, given his admiration for Hayek, surprisingly critical of a number of Hayek’s key ideas. In addition to these implications for the history of political thought, these essays have a contemporary and practical significance which Hamowy points to but does not dwell on but which I will take up in my conclusion.

ADAM FERGUSON AND THE IDEA OF SPONTANEOUS ORDER While David Hume and Adam Smith have tended to steal the Scottish Enlightenment limelight, Hamowy treats Ferguson as an equal player on this stage. One simple indicator that this attention to Ferguson is appropriate is the extraordinary popularity Ferguson enjoyed in Great Britain, on the continent, and, somewhat surprisingly, in North America during his own lifetime. Ferguson’s An Essay on the History of Civil Society (1767) went through seven English editions in his own lifetime, as well as being translated into French, German, Italian and Russian. In the United States between 1777 and 1813, the Essay could be found in over one-fifth of catalogues and booklists. Ferguson’s popularity in North America is surprising in that he opposed the American Revolution. In fact, he was paid by the British government to write in opposition to it. The Americans, he argued, did not have a good cause. They wished to escape paying for services, notably defense, that the British government was rendering to them. This is not to suggest that he was anything but sincere in his opposition. His position towards the colonists flowed naturally from his political principles. Ferguson rejected, for reasons similar to those of Smith and Hume, the standard theoretical doctrines of the radical Whigs from Locke onwards. There never was any such thing as an original ‘‘state of nature’’ as posited by Locke and many Americans. Mankind had always lived in groups. Nor did

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society and much less government arise out of a social contract based on consent. Government evolved over time in response to changing circumstances, chiefly economic circumstances. Laws evolved to curtail abuses of already existing social hierarchies. Ferguson did suggest that providing the Americans with better representation might be a good idea, but in his thinking there was no justification for an appeal to the ‘‘laws of nature’’ from the laws of Great Britain. The Americans mistook their mere interests for their rights. The French revolutionaries made even graver errors under the influence of an abstract doctrine of rights. Hamowy quotes Ferguson as describing the French Revolutionary forces as ‘‘the Antichrist himself in the form of Democracy & Atheism’’ (p. 176). Yet Ferguson was no reactionary. He was not even a Burkean. Indeed, as Hamowy is at pains to point out, Ferguson was a firm believer in progress. This is an important argument for scholarship on Ferguson and the Scottish Enlightenment as a whole. Against the attempt to infuse into the Scots a sense of foreboding and even doom about the progress of commercial society and a compensating admiration for so-called classical republicanism, Hamowy tries to show that Ferguson (along with Hume and Smith) carefully weighed the costs and benefits of commercial progress and came down decisively on the side of progress. He argues that too many scholars have mistaken Ferguson’s careful sifting of the costs of progress for the whole of his argument. Hamowy gives Ferguson the honor of being the first to think through the social costs of the division of labor. (In what became a lengthy personal dispute, Smith bitterly accused Ferguson of stealing his ideas on this subject, a charge which Hamowy provides compelling evidence to refute.) Ferguson noted the possible harmful effects of the division of labor on the moral sentiments and the intellect. He also expressed a fear that if left unchecked a rigid social stratification might follow on the confinement the larger part of society to repetitious manufacturing pursuits. But against these dangers, he believed, must be balanced the advantages of the division of labor, especially the stimulation of mental faculties that comes with living a diverse economy in which diverse natural talents may be utilized. Hamowy usefully contrasts Ferguson’s critical but balanced approach to commercial society and the division of labor with that of Richard Price who harbored extreme Jeffersonian-like fears of manufacturing and who urged that America remain a nation of ‘‘plain and honest farmers’’ (p. 174). More generally, Hamowy portrays Ferguson as an optimist on the subject of the possibility of human progress. Man’s true ‘‘state of nature’’ is a state of continual progress towards perfection. Man, according to Ferguson, is a ‘‘progressive being’’ (p. 8). Drawing on Ferguson’s less famous Principles of Moral and

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Political Science (1792), Hamowy concludes that Ferguson’s predictions of unlimited progress for mankind were ‘‘unambiguous’’ (p. 9). Thus Hamowy rejects the idea that somehow Ferguson was a believer in the cyclical theory of history. He is particularly critical, perhaps excessively given Ferguson’s penchant for not completely following through on his arguments, of those scholars who focus on Ferguson’s remarks about the decline in martial virtue that accompanies the progress of commerce. Coupled with Ferguson’s praise of parties and factional conflict, some have concluded that Ferguson believed that a certain martial fervor and even ferocity was necessary for the preservation of freedom. Hamowy disagrees. Martial fervor is not the same as public spirit, the quality necessary for the preservation of liberty, and which is not as threatened by commercial progress. This is not to say Ferguson did not see a problem here as well. It would be a challenge to preserve a level of martial virtue adequate to the defense of society and public virtue sufficient to preserve liberty. According to Hamowy, Ferguson saw these effects of commercial progress as, in the first place, balanced by certain advantages and, second, to the extent the costs are not balanced by benefits, he saw them as problems to be managed. Hamowy puts Ferguson’s advocacy of a militiabased military in this light. Here Ferguson’s studies in the history of civil society provide a guide to solving such problems rather than being prophecies of decline. This brings us to what Hamowy describes as Ferguson’s ‘‘most significant and lasting contribution’’ to the social sciences, ‘‘his formulation of the theory of spontaneously-generated orders and the application of this theory to a whole range of complex social phenomena, including law and language’’ (p. 27). Hamowy describes the idea of spontaneous order as the ‘‘most spectacular contribution to social philosophy’’ of the Scottish Enlightenment. In brief, the theory is able to provide an explanation for complex social phenomena without recourse to descriptions requiring the presence of a designer or coordinator. Regularities and orderly social arrangements in the social sphere need not be the deliberate product of human design. Rather, the theory provides that the complex organization inherent in our social institutions can be, and indeed most often is, the result of countless individual actions, none of which is intentionally aimed at contributing to any preconceived plan. Society is not formed from any rational calculation, but spontaneously; its institutions are the outcome of men’s actions that have as their objects more immediate private ends. (p. 16)

Ferguson was not the first to formulate the idea of spontaneous order. Mandeville and Hume had elaborated essential features of the idea prior to Ferguson, but according to Hamowy, Ferguson is of note because his ‘‘applications of the doctrine are, for the most part, much clearer and less

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ambiguous’’ (p. 19). Furthermore, Ferguson, while clearly favoring a free market, showed little interest in economics and does not seemed to have based his thinking on what is usually regarded as the paradigmatic example of a spontaneous order, the market. Ferguson, perhaps more than any other Scottish Enlightenment thinker, presented the idea of spontaneous order as an alternative to the idea of the legislator as an origin of social order. Ferguson’s most quoted statement from the Essay on this subject bears repeating. Every step and every movement in the multitude, even in what are termed enlightened ages, are made with equal blindness to the future; and nations stumble upon establishments, which are indeed the result of human action, but not the execution of any human design. (p. 61)

While there need not be and likely never was a Lycurgus for each society, the development of societies is not random. Ferguson shows instead that the development of society follows a predictable path from a ‘‘savage,’’ propertyless and, therefore, egalitarian state, through a ‘‘barbarian’’ state where inequality becomes pronounced and customary laws necessarily emerge to preserve property, and, finally, into a commercial state where property is carefully protected by law. With the changes in society and property arrangements come closely linked changes in the form of government. The original savage state is a kind of democracy, whereas the barbarian state is a kind of monarchy where force and kinship protect property from internal and external threats. As the threat from outside abates with the growing strength of a society, internal competition and conflict intensify between different property owing groups in society. It is this rivalry that gives shape to government and it is the balance established between the competing factions that secures individual property holdings. As noted earlier, Ferguson did not accept the doctrine of natural rights. Largely as a result, he defined liberty as the security a citizen has in their person and property under an established system of laws. Throughout the development of society, instinct and short-term self-interest are the motives for change. The order that emerges is unintended but nevertheless an ‘‘order’’ in that it is both beneficial and predictable.

F. A. HAYEK Hamowy begins his treatment of Hayek with a biographical essay written for the centenary of Hayek’s birth. The essay reviews Hayek’s major accomplishments in economics and in political philosophy and, most interestingly, provides a number of personal reminiscences of Hayek as a mentor.

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Hamowy’s observations on Hayek’s willingness to listen, his formality, and his Anglophilia provide insights into Hayek’s character that are missing in recent, otherwise very impressive, biographies of Hayek. In the same vein, Hamowy includes an essay on Hayek and Jews clearing Hayek, rather convincingly, of the charge of anti-Semitism. The bulk of the Hayek section is, however, taken up with three surprisingly critical assessments of important areas of Hayek’s thought. Hamowy argues that Hayek’s preferred form of government is impractical. He argues also that Hayek’s concept of law is inadequate to the task of protecting liberty. Finally, Hamowy takes issue with Hayek’s history of the common law. I will focus on the last of these essays because of its importance to the idea of spontaneous order. While Hamowy does not accept the entirety of Hayek’s history of liberal thought, he does accept Hayek’s contention that the idea of spontaneous order was the central insight of the Scottish Enlightenment and, furthermore, Hamowy believes that Hayek’s recovery of this idea in the Twentieth Century was his preeminent insight. Hayek’s emphasis on the idea of spontaneous order placed him at odds with some of the most powerful trends in the modern world, especially the belief that increasing technical and scientific control of nature could be extended to society. According to Hayek, it had become almost inconceivable to modern man that there were things of value in the world that were not of his own making. The result was the dangerous temptation to believe that we have the knowledge to remake the world. Hayek believed that the market and many received systems of law, government, and morality ought to be accepted because they represent the result of the unplanned but successful efforts of many generations to cope with circumstances. The market represented perhaps the best example of an institution that while it had evolved without deliberate design surpassed the capacity of any other kind of arrangement for the achievement of its goals. These notions did not make Hayek a conservative, as he was quick to point out, but they did require a significant change in the liberal outlook. Instead of creating change, liberals ought to let it happen within the framework of the rule of law. They must foresake the goal of managing society, so as to let individuals more completely manage their own lives. Hamowy’s essay on the common law has a particular significance for the idea of spontaneous order. Hayek argues in a number of places that the English common law is an example of a spontaneous order and, furthermore, that the common law acted as a bulwark against tyranny. He distinguishes the common law, which he describes as an outgrowth of customary law made explicit by judges, from laws made either by legislatures or by monarchs.

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Because it represents the response of many different individuals, courts, and judges to particular circumstances, Hayek prefers it to other forms of law. Hamowy takes issue with this account in a number of areas. First, he notes that historically the English common law and common law courts were inflexible and could not cope with the transformation of society. By the Fourteenth Century, Hamowy observes, ‘‘The numerous artificial restrictions with which the common law was tied down, many of its own making, made it impossible to adequately treat a large number of legal relations, particularly those having to do with trade’’ (p. 249). The common law grew up to meet the needs of a pre-modern society. Hamowy’s second point completely turns Hayek on his head. What kept the common law relevant was not its slow evolution but injections of new ways of thinking from outside, such as the law merchant, and institutional changes forced on the courts by the various monarchs. Hamowy also challenges Hayek’s account of role played in defending liberty by the great common law jurists of the Seventeenth Century such as Edward Coke. It was not that Coke did not defend liberty, but, according to Hamowy, that he did so not by preserving the ancient role of the common law but rather by transforming its meaning. Hamowy’s other essays contain similarly honest and thoughtful assessments of some of Hayek’s broader claims. Hamowy does not engage in any extended evaluation of the strengths and weaknesses of Hayek’s thought, but it is clear that the deficiencies he found do not lead him to dismiss Hayek. Indeed, Hamowy believes that ‘‘At the time of his death, [Hayek] was unquestionably the world’s preeminent spokesman for classical liberalism and its most important thinker’’ (p. 183). In the case we were just examining, it is easy to see why Hamowy’s critique is not fatal to Hayek’s more general argument. The English common law and its associated court system did at times act as a spontaneous order. More importantly, a corrected history of the common law might be incorporated into broader Fergusonian story of competition between interests and factions (court systems, branches of government, different economic interests, etc.) in which liberty was preserved without, for the most part, any particular group or individual intending to act in the public interest.

POLITICAL SOCIOLOGY The difficulties with Hayek’s argument about the common law do, however, point to a more general problem or question about the idea of spontaneous order. Neither Hayek nor Ferguson held to the view that all spontaneous

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orders are benevolent. Nor did they believe those orders that are mostly benevolent are not capable of improvement. And of course, there are political situations that involve unavoidable breaks with the past and where something substantially new must be done. How is the idea of spontaneous order relevant to such situations? Indeed, the great question which Hamowy’s book points to is that of how to govern what Hayek termed the ‘‘great society,’’ the large modern commercial society, as distinct from older, smaller communal societies. What ought its governing ideology be? Hayek was clear that he believed that the insights of the Scottish Enlightenment, particularly the idea of spontaneous order, ought to be the key part of the great society’s governing ideology. Similarly, Hamowy offers the ideas of Ferguson and Hayek because of the ‘‘immensely important contributions these two thinkers have made to the sociology of freedom’’ (p. xiv). (He also describes their ideas as contributions to ‘‘theoretical sociology’’ (p. xii).) When writing on the Scottish Enlightenment and the idea of spontaneous order, Hamowy observes that, with regard to the idea of spontaneous order, ‘‘Proponents of a liberal society are thus particularly attracted to this doctrine since, under it, social order and political liberty are apparently perfectly compatible’’ (pp. 40–41). Furthermore, in a number of places, Hamowy observes that one advantage of Ferguson’s studies in the history of civil society is that they provide a guide for current practice. This is an important point. Unless this is the case, the implications idea of spontaneous order would be highly conservative rather than progressive and liberal. But just how does it provide such a guide? Is there a science of spontaneous order? Or perhaps particular sciences such as economics, sociology, and so on? Maybe so. But this possibility would seem to violate the spirit, if not the letter, of a significant premise of the idea of spontaneous order, namely, that we do not possess the information necessary to control events. It is interesting to note the title of Hamowy’s book is the ‘‘Political Sociology of Freedom.’’ Unfortunately, just what is entailed in political, as distinct from theoretical, sociology Hamowy does not elaborate. He seems to mean the political dimension of theoretical sociology, the theoretical sociology of politics. What would seem to be needed, however, is not simply a sociology of politics but rather an applied sociology or what one might call a political sociology that would show just how, given the limits of our knowledge, the insights of the idea of spontaneous order might be used in practice. One of the many advantages of Hamowy’s book is that it both leads us to ask and helps us begin to answer these difficult questions.

Ringman’s SURVIVING CAPITALISM HOW TO SURVIVE CAPITALISM Ayman Reda A review essay of Erik Ringman’s Surviving Capitalism: How we Learned to Live with the Market and Remained Almost Human. London, UK: Anthem Press, 2005. 300 pp. ISBN 1843311763. The title of Erik Ringman’s book immediately puts forward two suppositions. The notion of ‘‘surviving capitalism’’ supposes that we are, in some way or another, at odds with the system of capitalism or at least some aspects of the system, so as to warrant the need for survival. Furthermore, the need to survive supposes the unavailability or insufficiency of other options or systems. As such, we are faced with an inescapable system, and our only strategy of defense is trying to survive. These two suppositions provide the starting foundation upon which Ringman bases the book’s subsequent arguments. Ringman characterizes the friction we experience with capitalism as the ‘‘inhumanity’’ of the system, and describes its inescapable nature as its ‘‘inevitability’’ (p. 4). The ‘‘inevitability’’ and ‘‘inhumanity’’ thus raise the logical question: how to survive the negative personal and social consequences of capitalism? In this regard, Ringman engages in a detailed analysis of the various methods of defense that he terms ‘‘protective arrangements.’’ Ringman discusses the role of families, unions and associations, and the state in providing protection against the ‘‘inhumanity’’ of capitalism. This protective role is discussed in a comparative framework between the European context on one hand, and the Asian context on the other. Ringman also assesses the

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history of these ‘‘protective arrangements,’’ and their effectiveness in the future as the ‘‘inhumanity’’ of capitalism becomes even more intense. In the following section, we will review Ringman’s arguments on the ‘‘inevitability’’ and ‘‘inhumanity’’ of capitalism. The third section will address Ringman’s discussion of the role of ‘‘protective arrangements.’’ In the fourth section, we will present our thoughts on the book’s arguments and a brief conclusion.

CAPITALISM’S INEVITABILITY AND INHUMANITY Ringman starts by asserting that humans have been interacting in markets for centuries. However, in the modern era, markets are increasingly characterized by a structure of perpetual competition, where efficiency is the standard of measurement, and rationality dictates the actions of its agents. This structure has led to unprecedented levels of economic prosperity and phenomenal advancements in many essential goods and services (pp. 3–4). Ringman then states that ‘‘capitalism is a source of social progress and as such it is inevitable.’’ Thus, the controversy surrounding markets and the system of capitalism is with regards to the particular evolution of markets, and not their very existence. Facing this ‘‘inevitability,’’ and in order for us to survive in this new era, we are forced to succumb to the market and its tendencies. We are forced to become even more rational, more productive, and more efficient. This is because if all humans perform their respective tasks, the ‘‘social experiment’’ will succeed, and ‘‘capitalism will bear its greatest fruits’’ (p. 3). However, the success of capitalism is costly. And it is particularly costly on humans. Ironically, the factors credited for capitalism’s success are the same factors responsible for its negative impact. The first of these that Ringman discusses is specialization. With specialization, individuals can more efficiently utilize their unique skills and knowledge and the final result is magnified levels of output at low costs of production. Individuals benefit by employing their particular skills more efficiently, firms benefit through larger profit margins, and society benefits through larger output and product variety. However, as capitalism continues evolving, a necessary input to this process is increased specialization. This means that the inevitability of specialization will follow from the inevitability of capitalism, and humans will be unable to resist change, even if they desire to. The end result is a state of ‘‘alienation,’’ where humans experience ‘‘feelings of rootlessness and

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anxiety’’ (pp. 8–9). Individuals will feel disconnected from their families, communities, cultures, and even labor (pp. 9–11). In addition to the impact of division of labor, Ringman also considered the negative consequences of commodification. More and more goods and services are being included within the reach of markets and exchanged using prices as measures of value, determined in the interplay of demand and supply. The reason for this is the efficiency that markets perform in the distribution of resources. This means that things that have a certain degree of ‘‘sacredness’’ or ‘‘sanctity’’ will eventually fall within the grips of the market system, leading to what Ringman calls, ‘‘a gigantic shopping-mall.’’ Things that have fallen, or may controversially fall into the realm of the market, include body parts, babies, sexual services, and labor (pp. 11–13). The final argument presented by Ringman is a common argument posed against globalization that argues that individuals, societies, and cultures are gradually converging toward a one-dimensional picture in which differences are minimal, uniqueness is muted, and creativity is imitated. Competition encourages imitation, and eventually we all come to resemble each other, and the outcome is a society of consumers, rather than citizens. Imitation will also take place at the institutional or societal level as nations compete for mobile investments. In the end, only the ‘‘profitable’’ cultures, languages, and personal traits will ‘‘survive,’’ resulting in an ‘‘odorless world’’ (pp. 14–15).

PROTECTIVE ARRANGEMENTS Given the ‘‘inhumanity’’ of capitalism that emerges as a by-product of specialization, commodification, and convergence, the impending question thus becomes: what should our response, as humans, be? And in this regard, Ringman argues that humans have always ‘‘devised various strategies for protecting themselves’’ (p. 17). According to Ringman, these strategies, that he labels ‘‘protective arrangements,’’ have two main functions. On one hand, they ‘‘protect people from market forces’’ by providing them with an alternative, non-market domain, where they can rest from the chaotic world of persistent competition. Within these domains, such as families, relatives, friends, associations, labor unions, clubs and the state, individuals have a chance to recuperate their identity, reaffirm their personalities, and engage in cooperative, rather than competitive behavior. On the other hand, these arrangements also ‘‘prepare [humans] for their encounters with market forces.’’ The self-confidence we gain and the socializing we engage in allow us to be well-prepared to face the tough competition in the market domain.

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In this way also, we can more easily manage any market resentment we may feel, and as such, become more tolerant of the market (pp. 17–20). An additional feature of these arrangements is that they differ across cultures and societies. This means that the structure of families, associations and the state in Europe for example, will be different from the structure we may find in Asia, even though they might share similar objectives. These differences will correspond to a divergence of ‘‘protective arrangements’’ across societies that will counter the momentum of convergence powered by capitalism (pp. 21–24). The Family In examining the role of families (or a home) as ‘‘protective arrangements,’’ Ringman argues that it is ‘‘not a matter of what the home is, but what it does.’’ In other words, it is the functions that a home performs that qualify it to be a form of protection against capitalism. In the European context, and in early commercial society, the home served more of a public than a private function. Encompassing more than the close members of the family, the home was also a refuge for strangers. This meant that the function of the home as an alternative domain for individuals was lacking. With the advent of the industrial revolution, the family came under severe pressure from the economic and social hardships that ensued. As a result, homes became increasingly privatized and started to take the form of an alternative, nonmarket arrangement. In addition, families were now increasingly characterized by an emphasis on mutual love, child-bearing, and order. However, this separation of the family from the external influence of markets was not costless. This separation of strangers from family members meant that many would eventually not find a home to live in, and as such, homelessness intensified (pp. 31–39). The European home was to come under a new type of pressure, that of consumer society. In this society, the home has developed from an alternative, non-market domain into a consumption domain closely tied to the market. Tied with this development is the increased privacy within families, as each member seeks to create an individual circle distinct from other family members, and the dominant form of communication is through consumption patterns. As such, the protective nature of the family has weakened over time (pp. 39–41). In the Chinese context, many parallels can be drawn with the family structure in Europe. According to Ringman, the family in China has also served the role of a ‘‘protective arrangement’’ for centuries. The family was

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considered to be more important than the individual members, and assumed a public as well as a private character. Under communist rule, the Chinese family came under pressure but was able to survive as a protective arrangement. In Post-Maoist China, the family has to face the typical pressure of an advanced capitalist system and the consumerism that it entails (pp. 43–53).

Associations Associations such as religious sects, guilds, trade and labor unions also serve as ‘‘protective arrangements.’’ In Europe, churches and sects served as alternative, non-market domains that sought to protect people from the perceived injustices created by the market. Sects tend to be stricter than churches in the obligations imposed on members, and as such, could offer a stronger personal and communal refuge for individuals. The importance of religion as a ‘‘protective arrangement’’ has remained to the present day as evident by the religious nature of capitalist societies such as in America (pp. 58–63). In recent history, the emergence of trade unions also protected individuals from harsh market forces. They advocated higher wages, benefits, job security and better working conditions. They also provided opportunities for workers to engage in socializing and help alleviate the ‘‘dehumanizing’’ aspects of work. Given the unlikely scenario that the market would provide these on its own, the unions can thus be credited with an important role as a ‘‘protective arrangement’’ (pp. 63–67). A similar function was provided by Japanese business corporations that aimed to provide, in addition to the daily business operation, a social and communal environment where workers can feel that they belong to a ‘‘family.’’ Measures aimed at achieving this goal included the adoption of lifetime employment to provide job security, milder levels of specialization to reduce the alienation effect, and social activities in the form of sponsored weddings and vacations. The motive was to provide a livable market system, but a negative consequence was the weakening of families as they were increasingly replaced by family-like corporate domains (pp. 71–81). Ringman also examines the structure of family networks in Thailand as they developed over time. Even though a ‘‘loose structure’’ of family relationships was observed in Thailand, family relationships were still strong. During the years of boom, many Thais migrated to cities to face a potentially difficult social environment. However, social networks of neighbors, relatives and friends in the city helped reduce this difficulty, in addition

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to the fact that most were still tied to their villages and families as their stay was temporary. The State Ringman starts his discussion of the role of the state as a ‘‘protective arrangement’’ by stating that, ‘‘the state is potentially our best ally when it comes to dealing with the problems that capitalism causes’’ (p. 95). This he argues is essentially a logical result of the fact that the state is ‘‘sovereign’’; that is, it is considered to be superior to all other institutions of society. However, in a democracy, and at least in theory, this is power held by the people. The state is thus responsible toward its people and should protect their interests. This ‘‘universal’’ protection means that individual attention will be difficult to provide, while it is clear that some have made more ‘‘use’’ of it than others. Although the state and constitutions provided rights to individuals as protection from some aspects of markets, they also provided legitimacy to the markets through laws that safeguarded property rights (pp. 95–96). The advent of nation-states in Europe also contributed to the development of capitalism, in addition to the protection it provided to its citizens. By classifying individuals into citizens and non-citizens, it offered a stronger sense of belonging to its citizens, and received considerable loyalty in return. The protection provided by nation-states remained limited, as they were ‘‘far too dependent on economic growth’’ (pp. 99–102). Ringman (p. 103) states that for the ‘‘working class it was always obvious that neither the constitutional state nor the nation-state did enough.’’ Following the Second World War, there was general accord that even though capitalism provided tremendous prosperity and growth, the state was even more of a necessity to compensate for the deficiencies of the market. The state’s functions included aiding the poor and disadvantaged, job placement, retraining, health care and education. Even with the expansion of the state’s realm and influence in the market, there still was a necessity for a positive relationship between the state and the market, as the state relied on the market’s rewards to perform its functions, while the market required the legitimacy and protection the law provided (pp. 103–107). Ringman notes that ‘‘in relation to economic markets, East Asian states were at least as active as their European counterparts.’’ However, in those countries, the ‘‘state was far more independent of economic interests than was the case in Europe’’ (pp. 109–110). This meant that economic matters were usually of lesser concern than social and political matters. This seems to be changing in contemporary times, as capitalism gains momentum,

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‘‘protective arrangements’’ start to weaken, and societies are left for ‘‘a strange fate’’ (pp. 109–120).

DISCUSSION AND CONCLUSION The main significance of the book can be realized in Ringman’s statement that, ‘‘many of the arrangements that have traditionally protected us are today in a state of serious decay.’’ As such, ‘‘there is a sense of urgency about this investigation’’ (p. 27). This clearly qualifies the book to be interesting and important. It is interesting in that it presents a rich historical analysis of how societies have managed to ‘‘survive’’ the harsh realities that are by-products of the capitalist system. The comparative analysis between different cultures and their respective ‘‘protective arrangements’’ is significant, in that it rightly presupposes (and explains) the distinct nature of diverse cultures in their response to social problems. Many critical studies of capitalism and globalization tend to present a one-dimensional discussion of capitalist and anti-capitalist forces, thereby unintentionally giving into the converging nature of markets. The book is equally important in that it explains a crisis many fail to deal with, or even acknowledge. The problems caused by increasing specialization, commodification, and convergence are real problems with real manifestations. We increasingly feel alienated in our jobs, as we are continuously separated from each other into our ‘‘specialized’’ selves. And then, we are asked to meet again, but in a state of perpetual competition shadowed by distrust, secrecy, and mutual fear. Commodification is reaching previously unimaginable heights, in the name of freedom and innovation. As for the convergence of cultures, it is clearly evident in the constant deja` vu feeling we get every time we travel, shop, and dine. Despite these notable positives, the book lacks a very important element, namely the human element. What this means is that the book provides a strictly institutional analysis of societies’ experience with capitalism. A complete analysis must also address this experience at the personal or human level. In fact, it is at this level that the analysis should concentrate. This is because any social or institutional development is essentially a blend or accumulation of diverse personal experiences. It is important to examine how the family, as a unified unit, provides protection against market pressures. It is also important how associations can create alternative domains for us to socialize and rest from the stress of markets. Similarly, it is vital that states provide mechanisms to partially shield our vulnerability when

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faced with market shocks. However, what is also important is how I can, as an individual, protect myself from the problems created by markets. Do I accept to live within such a system? And if not, do I feel forced to because of the system’s apparent ‘‘inevitability’’? And if I do, how can I protect myself from the negative externalities it creates? What principles can I adopt that may assist in this task? These and possibly others are questions at the personal level. The first and last line of protection for humans is themselves. It is their principles, beliefs, and objectives that determine their behavior and their choices. What families do is a result of the choices made by its members. The success of associations as alternative domains depends on their adopted principles. The state’s role depends on the choices it makes. The mere existence of these institutions does not guarantee that they would serve as ‘‘protective arrangements.’’ But the existence of principles and morals at the personal level critical of market deficiencies will guarantee such protection, via institutional vehicles. Communism, socialism, and religious systems in the past, and today, bear evidence that some have made complete or partial antimarket choices. The ‘‘inevitability’’ of markets is therefore a human consensus in favor of markets, and the perceived ‘‘inhumanity’’ is a consensus that we are at odds with some aspects of the market. But even then, it is because some have chosen to be at odds with the choices of others. Put another way, capitalism is not a separate, living organism. It is the result of human choices, which obey only one rule, that of change. The institutional and sociological discussion should therefore complement a psychological and ethical analysis of ‘‘surviving capitalism.’’ Ringman (p. 145) does indirectly refer to this in the discussion of the individual ‘‘shells’’ we will each create in the future as protection. However, we have always protected ourselves with ‘‘shells’’ of morals, principles and their corresponding choices. Notwithstanding, this impressive book by Ringman is a useful contribution to an ongoing debate on markets. It surely will prove interesting to scholars in the fields of sociology, political science, economics, and anthropology. The case studies presented will offer more in historical analysis, instead of the restrictive theoretical debates of other works. This makes it suitable for scholars and students not only interested in the development of capitalism, but also the counteracting forces it faces.

Augello and Guidi’s ECONOMISTS IN PARLIAMENT IN THE LIBERAL AGE and Maloney’s THE POLITICAL ECONOMY OF ROBERT LOWE PARLIAMENTARY ECONOMISTS IN THE LIBERAL AGE Warren J. Samuels A review essay of Massimo M. Augello and Marco E. L. Guidi’s (Eds) Economists in Parliament in the Liberal Age (1848–1920). Burlington, VT: Ashgate Publishing Co., 2005. xviii+315 pp. ISBN 0754639657; and John Maloney’s The Political Economy of Robert Lowe. New York: Palgrave Macmillan, 2005. ix+188 pp. ISBN 1403947821. The last 250 years have seen four interrelated developments, principally but not solely in the North Atlantic area: (1) the transformation of the political control system from the dynastic state whose leader(s) seemed to live for war and whose populations seemed inured to being used in war, to the modern state more or less meaningfully rationalized and, with greatly enlarged enfranchisement, practiced as democracies and whose mode of existence vis-a`vis other nations generally has been to live and let live but which could also engage in imperialism; (2) economies that were increasingly both market and capitalistic, whose dominant class expanded from the landed-property aristocracy to non-landed plus landed property interests, with increased upward mobility; (3) the growth of per capita real incomes, abetted by the A Research Annual Research in the History of Economic Thought and Methodology, Volume 25-A, 97–124 Copyright r 2007 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 0743-4154/doi:10.1016/S0743-4154(06)25012-0

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foregoing plus technology and a belief system pretty much the reverse of the medieval one; and (4) the discipline of economics. Together they helped to form a new culture. The collection edited by Massimo Augello and Marco Guidi is a result of a major long-term research program by many individuals on the development of economics in numerous countries during the period 1848–1920. How did economists elected to legislatures contribute to the first three developments, and how did these three impact the institutionalization and professionalization of economics during that period? Following from and broadening the work of Frank W. Fetter and others, this collection studies economists in Parliament in Portugal, Belgium, Spain, Britain, France, Germany, Italy, Greece, Japan and the United States. The intellectual biography of Robert Lowe by John Maloney continues his work interpreting the late nineteenth century. Lowe, expectably, enters into Roger Backhouse’s chapter on Britain in the Augello and Guidi volume. One objective of this review essay is to present the findings of both of the books under review. Another objective is to deconstruct ideas that have informed, framed and channeled the Augello and Guidi collection and thereby raise several historiographic problems arising from it. The problems are for the most part raised by contributors but much more can be said about them. No reader will be surprised that I concentrate on the meaning of the baseline concepts ‘‘liberal’’ and ‘‘laissez-faire.’’ Maloney’s study of Lowe provides some help in dealing with the concepts. I concentrate on certain matters because I am not sure how much I can confidently say about the others. In my view, economics in the late nineteenth and twentieth centuries was the product of at least three major considerations that motivated economists. The three are: (1) a desire for status, increasingly the status of being a science, however conflicted and ambiguous the term ‘‘science’’ became; (2) doing nothing to endanger the reputation of either economics or the capitalist market economy; and (3) the desire to have something to say about economic policies but without compromising the idea of laissez-faire, or non-interventionism, i.e., the clash between advocacy and objectivity (Augello and Guidi [hereinafter AG], p. 2), flavored by saccharine treatment of the increasingly capitalist-dominated market economy. Part I opens with Augello and Guidi’s objectives. Part II analyzes the concepts that mark the liberal age. Part III further deconstructs the ideational framework of the Augello–Guidi collection. Part IV discusses the problems encountered in the project. Part V examines the findings of the country studies. Part VI takes up Maloney’s biography of Lowe. I show that

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without accurate understanding of laissez-faire in nineteenth-century politics and the economists’ role therein, the story of economists in Parliament cannot be meaningfully comprehended.

1. AUGELLO AND GUIDO’S OBJECTIVES In their Foreword, Augullo and Guidi identify the objectives behind the design features of their long-term project. One objective is to study ‘‘the history of economics from the viewpoint of the economists’ relationships with the institutional and professional environment.’’ A second objective is that of comparative methodology, the ‘‘systematic and meditated comparison among national cases y so that the interpretive framework of each might be enriched by cross-fertilization.’’ A third objective is that ‘‘economics was rooted in institutional contexts and had itself over time become an institution—a doctrinal corpus of knowledge which permeates and frames the mind of the student body, scholars, professionals and public opinion at large’’ and to do so ‘‘not merely from the canonical standpoint of doctrinal or paradigmatic evolution’’ (AG, p. xi).

2. LIBERALISM AND LAISSEZ-FAIRE (1) Starting with ‘‘liberalism,’’ Augello and Guidi suggest that ‘‘The obvious requirement is the existence of a liberal constitution conferring the legislative power on an assembly of deputies elected by the people, or at least by the upper classes’’ (AG, p. 11). On the first page of the book they write of ‘‘ruling elites’’; here we have ‘‘upper classes’’; with ‘‘laissez-faire’’ seemingly a verbal loincloth with which to obfuscate unequal policies. At first glance, the juxtaposition or combination of liberal parliament with members elected by the upper classes seems incongruous. But it is one of the hallmarks of this book’s use of the methodology of dialectics that it recognizes that elements of both the old and the new social systems could coexist. See, for example, the reference to a ‘‘constitutional, parliamentary monarchy’’ approved in Belgium in January 1831 (AG, pp. 12, 50). Ultimately, however, any period is capable of various interpretations. For example, Augello and Guidi say in passing that the democratic constitution with its ‘‘peculiar system of ‘checks and balances’ y conferred great power on the President elected by the people, y since the American Revolution of 1776’’ with ‘‘no significant break y until at least the Civil War’’ (AG, p. 11; see pp. 290–291 (in Brad

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Bateman’s entry)). Yet many interpreters of the American presidency consider that period to have had a weak presidency. It depends on which facet of the dialectical process is salient, or is made salient. Apropos of the obfuscation of the revolutionary origins of capitalist market economies as part of the attempt by the system of social control to foreclose any future such activity, Augello and Guidi cite ‘‘the essentially liberal and bourgeois revolutionary movements of 1848–1849’’ (AG, p. 12) and juxtapose thereto the often-successful efforts of reactionary movements in the later nineteenth century. This is also, of course, another example of the portrayal of the dialectic processes of history and of how past revolutions must be considered out of bounds lest revolution per se and the revolutionary origins of the modern system be rendered approved. Another is ‘‘the pace at which the elitist liberal regimes of the nineteenth century were transformed into democratic constitutions [which] varied from case to case’’ (AG, p. 13). But, again, this is all a matter of interpretation: shall one concentrate on the concentrations of capitalist/business power, the gradualist liberal agenda of increasing the masses’ participation in economic and political affairs, or the socialist view of concentration of business power both per se and over government, to conflict with further division of power and the slowed pace of the masses’ participation? That the socialists had a point in criticizing the bourgeois revolutions for failing, after their success, to include the masses as equals in the new middle-class dominated societies, is suggested by Augello and Guidi’s remarkable statement, Amongst the common features that characterize this period the most significant factor is that the government was placed under the more or less strict control of an initially limited elite of wealthy citizens of aristocratic or bourgeois origin, with agrarian and commercial interests or connected to the world of professions. (AG, p. 14)

A combination of brilliant insight and arguable naivete´ is to be found in the following sequel: These social and political equilibria gradually evolved towards an enlargement of the franchise as a response to pressure from the popular classes involved in industrialization, and particularly to the danger represented by the advent of Socialism.y Corresponding to this political involvement came increasing State intervention in economic and especially social affairs.y Thus—with the exception of the US and Britain as regards custom tariffs—the age of political liberalism is far from corresponding to an age of economic liberalism. (AG, p. 14)

The following comments are warranted: First, if Socialism is the extension to the masses as rights that hitherto had been the privileges of the relative few, the first stage of Socialism was the extension of economic and political

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power to the middle class—against which the landed aristocracy fought well into the twentieth century. Second, the idea of increasing State intervention is simply wrong, a function of taking the middle-class’s view of things for granted. Government action did not increase, but now it was directed to the interests of a broader group of people. Third, that political liberalism and economic liberalism are different phenomena is unsurprising if one takes a dialectical approach and sees, for example, that political liberalism, much less in practice than its public marketing promised, was both the price paid for economic liberalism and an object of control to maintain concentrated political and economic power. Fourth, all of this ironically reflects the success of Benthamism. Gradual extension of the franchise was the Whig solution to the problem of electoral responsibility in a republic. It also meant that politicians seeking working- and lower-class votes had to be responsive to the claims of those classes and did so in adopting the institutions of the welfare state, doing for the masses what government had hitherto done for the ruling classes. Preaching laissez-faire and noninterventionism was a device to contain the effects of the extension of the franchise. No wonder that Augello and Guidi identify ‘‘countries that stood in an unstable equilibrium between tradition and modernity’’ (AG, p. 20). How does one distinguish between the dictates of economic science, those of economic ideology, and those of concern lest the discipline and its members be thought radical? What of ‘‘the enthusiasm raised by Cobdenism [declining] under the pressure of the ‘social question’ and socialist movements’’ (AG, p. 21)? To the extent that these terms apply to economists in the mid-nineteenth century, what do they reveal? Identification with the regnant status quo? Some of those who raised the problem of the ‘‘social question,’’ it seems to me, may have been more concerned with containing the pressures brought by the working class for greater rights—for having their interests protected by government along with and/or in place of the interests of the propertied—than with responding favorably to their grievances. Those who were concerned about ‘‘socialism’’ may have been seeking to protect a system of privilege, or their part of the system of privilege, from efforts to convert the privileges of a few into the rights of all. They did this by defining socialism—along with many socialists—in terms additionally repugnant to the privileged. As Brad Bateman notes, the idea of a laboring class itself was downplayed (AG, p. 293). Once again, it seems clear that many economists were more sensitive to their own status and interests and more desirous to giving effect to their own sentiments than to the arguable tenets of political and economic liberalism—and in being so were acting much like other people.

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A more concrete but still evanescent conclusion that one surmises from the various chapters is that no few simple statements will adequately cover the variety of possible positions erected on personal views, the influence of class position, the relation of both of the foregoing to the individual’s notion of Political Economy, and the influence of Parliamentary culture on the foregoing, including the corrupting influence of new self-interests. One would need, for example, a thorough theory of the formation of self-interest. A topic such as ‘‘the social question’’ can be articulated in several ways. At first reading, Guido Erreygers and Bert Mosselmans, in their splendid chapter on Belgium, present seven lines of text under that heading in which the issues of worker protection, freedom of association, and social security become increasingly prominent (AG, p. 61). Is putting it that way enough? Is it (too) radical to think that the larger labor versus capital issue ought to be the focus and that they trivialize it? Is the (more frequent) discussion of the extension of the franchise a better and more sufficient alternative? Or does it beg the question of a larger context? One cannot overemphasize, relative to the objectives of the contributors to Augello and Guidi’s book, the importance of ideas and of policy in contrast to the role of economists in Parliament. I confess to a great(er) interest in ideas but in this matter I also feel that discussion of the role itself of economists in Parliament must be understood, more rather than less largely, in terms of ideas. I acknowledge, indeed emphasize, the ineluctable roles of selective perception and of multiple interpretation. There are, too, the unusual formulations. I have also encountered, in the remote past, the use of laissez-faire in asserting that rulers, or ruling class, be free to do what they want to do. Here we are reminded by Backhouse that free trade could mean the removal of barriers to the realization ‘‘of God’s providential order. The case for laissez-faire was moral as much as economic’’ (AG, p. 120) and evangelical as much as secular (AG, p. 121). Of course, a David Hume likely would insist that such meaning was purely metaphysical if not nonsensical. Along a different line, take the creation and extension of financial institutions that eventually enabled the masses of people to have bank accounts and thereby access to credit; banking was decreasingly an upperclass privilege, though it was the latter in the U.S. well into the twentieth century. Karl Rodbertus was possibly the first to make this a part of his socialist program. Was this socialism or laissez-faire? What are we to make of Yves Breton’s statement, apposite eight-hour day and weekly 24-hour rest period legislation, that ‘‘Many members of parliament were hostile to these laws, as their effect was to decrease the nation’s power by imposing constraints on the will of the individual’’ (AG, p. 153)? Would it not have

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been more accurate and more pertinent to have it read ‘‘on the grounds that their effect’’ instead of ‘‘as their effect was’’? Winston Churchill’s early argument that it is better to have hope than fear as a motivator of individuals (clearly a judgment) is apposite. But analytically the claimed inverse relationship between national power and individual will so much ignores the complexities of the subject of power—and of coercion, freedom and constraint—that it is almost devoid of meaning (the claim surely was intended to motivate and not to serve as deep social theory). Harald Hagemann + and Matthias Rosch mention Adolph Wagner’s dubbing of Bismarck and Emperor Wilhelm I ‘‘State socialists’’ (AG, p. 185) to illustrate Wagner’s deep skepticism of contemporary German conservatism in relation to the development of capitalism. Well, some people have called the former Soviet Union ‘‘state capitalism’’ and I, only half in jest, have referred to law school programs as training in ‘‘socialism,’’ intending a humorous treatment of those who define either law or legal change as socialism. Contrast the foregoing failures to distinguish (mere) ideas from ‘‘reality’’ with Brad Bateman’s use of phrases articulating belief and ideas as such and not as Truth when he writes, for example, of American republicanism having its ‘‘basis in the idea of free men working in free markets,’’ ‘‘a strong belief in laissez-faire,’’ and ‘‘a rhetoric for arguing’’ (AG, pp. 292–294). If liberalism, as an idea and/or in practice, incorporates hierarchy and ruling elites, is this the same liberalism that James and John Stuart Mill, among others, had in mind, when they lauded liberalism? Or is the son’s more radical liberalism a function of the development of liberalism itself? More pertinent for present purposes, should not the story of economists in parliament have this context more amply, more directly and more candidly developed? What would be the pains and pleasures of doing so? How much has been lost due to the hypersensitivity of a discipline one of whose more accomplished scholars once said to me something like, ‘‘Warren, you should not talk about power so much.’’

3. THE IDEATIONAL FRAMEWORK OF AUGELLO AND GUIDO FURTHER DECONSTRUCTED Economists did more than objectively study the economy; they provided ‘‘political debate with new powerful arguments’’ (AG, p. 2). Thus ‘‘it is interesting to explore whether or not political economy provided consistent arguments for discussion, and how these arguments interacted with other

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questions of a political or social nature’’ (AG, p. 3). Why ‘‘consistent arguments’’? Which arguments are ‘‘consistent’’? With what are they consistent? How do we know? What does ‘‘consistency’’ mean in a dialectical world? Mainstream economics justified property on productivity grounds. Henry George wanted to cast aside what he considered non-productivity grounds, the ‘‘unearned increment’’ due to the growth of society and not individual productivity. He was treated by some economists as a dangerous, subversive heretic, which he was by one formulation of property theory, and by others as a conserving purifier of property by another formulation. Many of the publicly critical economists actually agreed with his argument, which followed from classical rent theory, but they were concerned for the reputation of economics in a period in which many terrains were contested, notably that of property. Augello and Guidi seek to determine the influence of economics on political language, the ‘‘interrelations between economic analysis and arguments of a political or ideological nature’’ (AG, p. 5), and ‘‘the extent to which the message of political economy was transmitted to the political debate and the compromises that were established between the point of view of economic science and the ordinary logic of politics’’ (AG, p. 5). Their point of view is, it appears to me, that economics is scientific analysis and politics is something less than that. How much did the hubris of economists produce such a view? I refer to economists’ typical presumptions that only one optimal solution to a problem exists and that economists should speak with one voice, if the discipline is to have a respectable identity. What about the role of government in establishing and changing the structure of rights that determines whose interests count, which, for all its negative aspects, is what politics is all about? Economics has done very little to improve the language of either its practitioners or ordinary people; rather it, on balance, has abetted the continued fictions of laissez-faire, non-interventionism, minimum government, and so on. It has done very little to counter the projection of sentiments and the manipulation of illusion and thereby has taken sides on great issues. To some extent it has done so inadvertently, but to a larger extent it supported the prestige and safety of economics and allowing leading economists to have economics echo and serve their deeply and sincerely held beliefs. Policy issues, in my view, have greatly influenced the topics taken up by economists. But what of the influence of economists and of economic ideas on policy? As any reader of this annual will appreciate, this is a very large and recondite question. Professional hubris coupled with the framing effects of the editors’ project may readily have led them to overstate that influence.

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The mindset of the middle class as a whole, of legislators, and, inter alia, of economists undoubtedly developed together, and the pattern of recursive mutual influence may be impossible to discover for so many countries and for so long a period. This is a corollary to the problem posed for Augello and Guidi by Maloney’s intellectual biography of Robert Lowe: it is so difficult to make sense of the ideas of one person, it should be almost impossible to generalize meaningfully for such a large group(s) as are covered in Augello and Guidi’s book. Surely I do not intend to generalize from one economist’s experience but it is suggestive to read Murray Weidenbaum’s comment based on his experience in the Reagan administration as chairman of the Council of Economic Advisors: ‘‘[F]ew if any decisions in government policy—be they labeled economic or social or foreign affairs—are made solely or even primarily on the basis of economic analysis or information from economists’’ (Weidenbaum, quoted in Taylor, 2006, p. 240). Augello and Guidi reveal the depth of their insight—and stimulate my wish that they had gone further in their discussion—when they turn to classical economics in general and James Mill in particular. Not enough attention is given to James Mill’s twin thrusts of his desired revolution in government: (1) the reformation of parliament and the franchise; and (2) the adoption of an ostensibly laissez-faire program for government. I cannot insist too strongly that such a laissez-faire program was nothing of the sort; it changed the interests to which government was being used to promote; it helped changed the economic system. Augello and Guidi appreciate the political and economic radicalism of Mill’s program, but take a somewhat narrow view of its treatment of government, limiting it to involvement with ‘‘the power of monopolies and the system of ‘old corruption’ which coexisted, albeit conflictually, with a developed commercial and industrial society,’’ though they do get it correctly when they write of certain ‘‘liberal revolutions’’ in which the ‘‘message of political economy interacted with a more radical need to overcome the feudal remains of the ancient re´gime y’’ (AG, p. 6). By the time of Mill Britain had already undertaken both the circumscribing and replacement of its post-feudal regime and the development and partial substitution of the system of non-landed property that legitimized the interests of middle class capitalism. The minimization of the economic role of government, as a sentiment and ideology, conflicted with the ‘‘programme of institutional reform y accompanied by an equally indispensable plan of structural interventions directed to facilitating the functioning of market mechanisms and promoting the spread of knowledge and innovations’’ (AG, p. 6). It is only by taking the capitalist market economy as the natural order of things and seeking to obfuscate the middle-class

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nature of certain revolutionary movements that non-interventionism can be made plausible and sold as an ideology. All this is true whether the economists in parliament were economists or parliamentarians first, becoming if necessary in some sense the latter, because they had, by the nature of the topics with which legislatures had to do, dealt with economic issues. Augello and Guidi quote from Roger Backhouse’s chapter: ‘‘the increasing opposition in the [British] public mind between the necessary expansion of State activities in social and economic policies and the cliche´ of political economy as intrinsically associated with laissez-faire reveals the difficulties encountered by the economists of this period’’ (AG, p. 7, Backhouse’s comment is on p. 121). That is a very important statement: it deals with belief and not necessarily the reality of government. Augello and Guidi say that ‘‘the focus is less on policy results than on their meaning for the history of economics’’ (AG, p. 19). They affirm Anto´nio Almodovar and Jose´ Luis Cardoso’s position that ‘‘knowledge of ‘the bases and the doctrinal and theoretical justifications behind constitutional and legislative measures’ is necessary in order to understand a crucial aspect of ‘the process involved in the affirmation, formation and dissemination of the scientific discourse of political economy’’’ (AG, p. 10). But how much did certain doctrinal justifications influence what people wanted, and how much did the defense of what people wanted use whatever justificatory lines of reasoning were available?

4. THE INELUCTABLE PROBLEMS Economics is widely identified with classical liberal society and policy. One can treat classical economic liberalism as either or both the cause and/or consequence of liberal society. The problem parallels the Max Weber conundrum of whether capitalist ideology—religious and/or economic—is the cause or the consequence or both of capitalist practice. But what is ‘‘liberal’’ is a function of the historic stage and details of the dialectical movement identified above. So too is ‘‘laissez-faire.’’ Free trade is certainly at the heart of the matter but the meaning of free trade and whether much if anything beyond free trade is involved are two interpretive and practical problems (see Samuels, 2005a, 2005b). If one agrees with the proposition that every society and every economy is what it is, both in general and in its details, because of government/law, then one can readily see that non-interventionism is essentially a culturally and psychologically driven sentiment. Government is both ubiquitous and

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important. Both the old landed property and the new non-landed property system depend on who controls government and the purposes for which government is put to use by them. Particular events, phenomena and policies will reflect the relative power of the old and the new ruling groups, always within the principal dialectic clash identified above. The authors are aware of the inevitable problems. These include the identity of who counts as an economist, laden with circularity; the evolution of economic discourse; the difference(s) between the role of economists and of Political Economy in Parliament; whether political economy consisted principally of arguments for debate over issues driven by ulterior motives and whether the principal economics doctrines had impact on political decision making; the fundamental role of government, ideology to the contrary notwithstanding, versus ideological views thereof; the meaning of such terms as ‘‘liberal,’’ ‘‘non-intervention,’’ and ‘‘laissez-faire,’’ arguably expressing the new system’s self-perceptions but with all of them, notably ‘‘liberal,’’ representing quite different things in different countries; the co-existence in all countries of several schools of economic thought; revolution as a handmaiden of liberalism; and the extent to which descriptive and explanatory doctrines became valued for their manipulative ideological use, i.e., objectivity versus advocacy. The questions which these objectives immediately raise include (a) how important are the relationships with the institutional and professional environment; (b) what are the routes of influence and do they vary; (c) how do we know when the interpretive framework of one country might be meaningfully applied to another country; (d) what has mattered more, the dominant ideology, economists’ specific doctrines, their emotional attachments, or institutional context; and (e) how confident can we be of conclusions from the study? Of interest to this writer, and I think many others, are such additional questions as (f) what makes a ‘‘liberal’’ economist liberal and (g) what makes some policies ‘‘laissez-faire’’ and others not? These questions frame and therefore help inform and channel the project. They involve assumptions in the sense of hypotheses. They may also be seen as examples of Karl Popper’s conjectures. In both their Foreword and opening chapter, ‘‘Economists in Parliament in the Liberal Age: A Comparative Perspective,’’ Augello and Guidi identify the problems which beset a project such as theirs. One overriding problem is dual: (1) whether we interpret the history of economics as a not quite self-subsistent domain, but a domain nonetheless, influenced by and influencing other groups and domains in society, which means, in part, that we employ and work on the level of large vistas, with

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few if any details (or with details understood in terms of the large vista we adopt); and (2) whether details are the core of the interpretive project, presumably with no overriding large vista dominating the reading of the details. The immediate manifestation of this predicament has to do with the meaning of ‘‘liberal’’ as in liberal society and liberal policy. The contributing authors do provide clues as to what they mean, but the meanings vary. There are a few lines where an author(s) make a deep statement. Alas, this reader would have preferred elaboration in depth. To show how far Augello and Guidi go in these matters, we need only consider the further difficulties they find inevitably encountered in their project. A pair of difficulties relates to their objective to document ‘‘the spread of economic science into the sphere of politics in different areas of the world through the activity of economists and the development of economic debates in Parliaments’’ (AG, p. xiv). One difficulty involves designing the story in terms of the spread from A (economic science) into B (politics). Perhaps both A and B are what they are because both are a function of C (the new economic system). This is a very different story. Another different story is to postulate that A and B are actually two facets of a common domain, the legal-economic nexus (say, AB). In either case, legislators or royal advisors were confronted with having to make economic decisions long before there were recognized economists around. The second difficulty is that of circularity. The spread of economics by economists may simply involve calling anyone who deals with economic ideas or problems ‘‘economists.’’ One of the best lines in either book comes when Augello and Guidi, in their chapter on Italy, pointedly write that ‘‘a single book published by Marco Minghetti (1859) earned him an undisputed reputation of being an economist’’ (AG, p. 197). Another difficulty with different nuances derives from Augello and Guidi’s portrayal of the ‘‘changing nature of economic science y from an ingredient of legislators’ and bureaucrats’ wisdom to a formalized science, with rigorously defined distinctions between pure and applied economics, or between science and art’’ (AG, p. 1). The two editors seem to be carriers of the status-emulation virus, with ‘‘economic science’’ the disciplinary generic name, and the stated ‘‘rigorously defined’’ distinctions. None of this is quite so simple; in part, economics was socially constructed, not a transcendent given. Then there is the statement in the next paragraph about the spread of classical political economy ‘‘enlightening public opinion and the ruling elites with what was presented as a scientific analysis of market mechanisms and the benefits of free competition’’ (AG, p. 1). None of this, too, is quite so simple. Charles Gide and Charles Rist long ago noted the tension within

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Physiocracy between the approval of both liberty and authoritarian government. This is a matter of the Physiocrats sentiments and it too is not quite so simple. What if economics is a belief system or ideology used by a ruling class to denigrate policies not congenial to the interests or sentiments of the ruling elite as a violation of some ambiguous and selectively perceived ‘‘laissez-faire,’’ whereas policy congenial to the ruling class is portrayed as part of the natural order of things and as part of what constitutes laissezfaire? What if ideas called laissez-faire become economics? Because everyone loves a tax cut, does a tax cut sold on the basis of the imagery of the children of the poor some day becoming rich and benefiting from it, nonetheless not represent a policy favoring present-day recipients of very high incomes and thereby constitute what Robert Lowe considered one class made tributary to another (see below)—a very high percentage of the current very rich benefiting from the tax cut and a small percentage of the present poor whose children become very rich in the future? Augello and Guidi continue with the juxtaposition of ‘‘Anti-market visions based on archaic moral and religious values’’ and ‘‘the message of political economy—itself often associated with religious views’’ (AG, p. 1). Here we have the clash of religious belief systems (vide Joseph Schumpeter’s treatment of Marxism as a religion; see also the attention given to Fre´de´ric Bastiat’s ‘‘economic harmonies’’ as ‘‘also largely based on religious arguments’’ (AG, p. 9)). One possible plot design centers on two religious belief systems, both derived from the system of practice, and not, or not only, a clash between a religion and a science, Thomas Hobbes had, after all, a place for a mythic belief system as an important source of order complementing Leviathan. Either one or another belief system, one or another myth or religious system, will tend to prevail; all such systems are socially constructed of materials available to the builders. One cannot fully portray the history of the institution of property, for example, without confronting how one or another theory of property is part of that history and not an independent objective standpoint. The same is true of economics. These difficulties are not unique to Augello and Guidi; they are pandemic in the discipline as well as in the larger society. Economists have done almost nothing to generate serious understanding of what is going on. What makes a ‘‘liberal’’ economist and what makes some policies ‘‘laissez-faire’’ and others not are key questions to which no unique answer obtains but which must be raised. If Lionel Robbins and others, including myself, are correct, one has to be able to distinguish framework-filling activities of government (including their change) from particular interventions and this is largely a matter of selective perception. When the middle class used

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government to transform the legal foundations of the economy from a rural agricultural landed-property system to an urban commercial and industrial non-landed property system, analytically they were changing the framework. When the middle class opposed working class oriented changes in the latter system, this was called interventionism, socialism, statism, interfering with the market, and so on. The foregoing are entirely positive statements. They describe what took place. They express no normative position on any of these uses. The same is true of efforts to manipulate the belief system of society in support of one or another legal-economic system, including the manufacture of ignorance (Samuels, Johnson, & Johnson, 2004–2005, 2005). In the foregoing pages I have stressed the need for historical and analytical as well as historiographic depth when pursuing a project such as that reported in Augello and Guidi’s book. My lamentations, not criticisms, acknowledge problems understood and pointed out by the editors of and contributors to this volume. I especially would have liked a section pulling together and expanding upon the large questions raised by dealing with the ‘‘liberal age’’ and perhaps other sections comparing the role of socialists and of non- or anti-socialist political economists in Parliament, and comparing the role of political economists and that of clergymen. This review essay itself has too little to say about the book’s contents with regard to political evolution, the institutionalization and professionalization of political economy in relation to Parliamentary activity, and the role of economists (in and out of parliament) as men of knowledge in the sense that Florian Znaniecki discussed in The Social Role of the Man of Knowledge (1940).

5. THE FINDINGS OF THE AUGELLO AND GUIDI GROUP The various authors seem to be saying that events and phenomena are to be understood dialectically, as the product of clashes of forces. The principal clash is between forces supporting remnants of post-feudal society and forces supporting republican government. The former has a dynastic monarchical state, or an equivalent, with land as the basic category of economic and political significance. The latter has a wider rather than a narrower franchise, with capital, in all its forms, as the basic category of economic and political significance. A subsidiary clash is between the belief systems and consciousnesses of the two forms of society. The authors are aware of these clashes but seemingly do not want to disturb people’s beliefs

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discussing social myths as such; on the other hand, they do not refrain from acknowledging class and political elites. One aspect of this set of clashes is the status of economic knowledge, whether it is derivative of the growth of middle-class, capital-oriented society—the ideology of the system—or whether, or to what extent, it is a reasonably objective, complete and accurate portrayal of a domain of study. Their caution or their preoccupation with other aspects of their objectives prevents a deep analysis of economic thought, whatever its context, orientation and content. Society changes, and with it come changes in its belief system and power structure, from both of which economics has emerged to become a force of its own. It has done so while, perhaps because of, largely omitting belief system and power structure from its own domain, thereby rendering its work both easier and open to criticism as ideological. As for the role of economists in Parliament, and admittedly begging the question of who was an economist seated in Parliament (does considering revision of the health care system and medical liability make one a physician?), it is clear from the country studies of this book that economists, like other citizens, were in part driven by their sentiments and perceived selfinterests and that economists were on every side of most if not all issues. Among the points made by Augello and Guidi is that ‘‘those who applied a purely political logic often had little patience with members [of Parliament] who stood up and dogmatically explained, in lengthy interventions and quoting the authorities of economic science, the tenets of economic theory with regard to the feasibility and consistency of measures that were the result of political compromises and tactical decisions’’ (AG, p. 19). Economics does not tell one whose interests should count, or the metric on whose basis that judgment can be reached. Nor does it have much to say about consistency among policies without presuming whose interest should count. I have heard a serious lecture by a university regent in the first half of which the case for free trade in plywood (exports) was preached along traditional orthodox lines and in the second half of which the case for protection in tomatoes (imports) was preached along traditional heterodox lines, with no evident sense of analytical or policy inconsistency but clearly a judgment about protection. What made the speaker consistent was that it was the U.S. plywood industry seeking an opening of foreign markets to its goods and the U.S. tomato industry seeking a closing of U.S. markets to foreign tomatoes. Augello and Guidi remark both that in many countries ‘‘a sharper split in the community of economists between economists-scientists and economists-politicians can be perceived today than in the period between 1848 and 1920’’ and that ‘‘the presence of economists in Parliament y reveals that

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they favoured in some way the spread of economic science in the sphere of politics’’ (AG, p. 20). Both of these remarks reveal to me that economists have something to sell, that they differ in what that something is, and that in these and other respects, economists are like other people, including the great pains they take to differentiate their respective products. Thus Augello and Guidi write that In many circumstances—especially in countries that stood in an unstable equilibrium between tradition and modernity—the arguments deriving from economic science contributed, not without opposition, to sweeping away archaic visions concerning commerce, money, credit and technological change, and encouraged a more favourable vision of the market and free enterprise. y they disseminated a faith in economic development that became the gospel of the ‘age of improvement.’’’ (AG, p. 21)1

I have also paid some attention to the findings with regard to the role of economists (of different kinds) in Parliaments. One theme voiced by Augello and Guidi (relying in part on Bateman’s work; see AG, p. 292ff) is that the United States was largely different from other countries in that throughout much of its history economists, by any non-circular definition, were conspicuously absent from legislative seats. Assuming the accuracy of that view, is it not ironic that economics has, by most accounts, risen to the greatest heights in that country? Or have I fallen into a trap by using a questionable statement about ‘‘what is’’ as an interpretive base? In any event, still assuming the accuracy of the argument, perhaps economists liked the world of the abstract; perhaps they did not want to get involved, even at several removes, in the games and gross misdeeds of politicians; perhaps they were unwilling to spend years in positions lesser than legislator so as to have paid their political dues; perhaps they believed what they said, that government is unimportant and inept and so on. But if all that is true of American economists and their boycott of political office during the period studied in this book, why were matters different in so many other countries? Was the important matter the degree to which political if not economic liberalism had been achieved in this country, lessening the presumed payoff for self and for society, but not in most other countries? Or more narrowly, did economists increasingly trained (after the 1940/1950s, replacing the tendency statements of Alfred Marshall, hence of questionable use as an explanation for the period covered by Augello and Guidi, though precursors existed) in the research protocol requiring unique determinate optimal equilibrium solutions pursue such endeavors confident that something called ‘‘the rule of law’’ was alive and well in this country, so they were not needed in Parliament, but not so in most other countries?

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What one gets out of a book depends in part on what they bring to it. I understood more from Backhouse’s chapter on Britain and Bateman’s on the United States than from most of the other country studies. Given the key problem of identifying economists in Parliament in such a way as to avoid ambiguity and circularity, these other chapters were well done but met, in me, relatively few pegs on which to hang description and findings, though all of them contributed to Augello and Guidi’s conclusions. One can say that the economists were there and, as a general rule, made themselves heard. How much is due to their efforts against dialectical forces and how much was due to being in the right place at the right time, I do not sense and surely do not know. The issues of free trade versus protection, monetary and banking system, taxation, and so on, are much the same everywhere, given the stage of development of the overriding tension identified above; and in some cases colonial policy and labor (‘‘the social question’’), also arise. Most of the particular conclusions are beyond this reviewer’s competence. I refer, for example, to the Almodovar–Cardoso emphasis on the influence of Parliamentary activity on recognition of the importance of Political Economy (though they seem to take only one side on issues such as whether they defined Political Economy in the process) (AG, p. 46). The apparent importance of economists (however identified) varies over time within a country and between countries. I am not sure that a model of great specificity can be developed from the materials presented or summarized in this volume; if it could be, I expect the editors would have suggested one. One dimension of such a model—the relations between political structure and economic policy—is amply evident, for example, in Breton’s essay. But there is no conclusive reason why a single overriding model should emerge. Frank Fetter’s splendid study is put to reasonable use. Backhouse, in particular, expands upon Fetter’s explanation for the decline in economists’ involvement in Parliament (AG, p. 122). In part, he uses the language, ‘‘the role of the State was increasing’’ (AG, p. 122). In part, too, he notes Fetter’s view that ‘‘By the end of the classical period y the broad objectives of the classical economists had been achieved’’ (AG, p. 122). From my perspective, the point was neither that the broad objectives had been achieved nor that the economic role of government was increasing. It was the failure of the economists to appreciate the roles of government being used to control the evolution of the economic system and to change the structure of power perhaps synonymous with controlling the evolution of the economic system. In any event, it is a pleasure to read the chapters in Augello and Guidi. Some chapters are richer in output per unit of input than others but all are enlightening. (By input I mean the materials—the economists and what they

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did—of the role of economists in Parliament; by output I mean the stories and findings formed by the authors.) I must also point out the highly informative charts provided by chapter authors detailing the economists’ Parliamentary and personal backgrounds. Entitling the book in terms of Parliament is a bit misleading: Many of the same people, including Lowe, had executive or other non-Parliamentary careers as well. Perhaps that was a fault taken over from Fetter! Backhouse is the only contributor to Economists in Parliament to mention Lowe and no other contributor need have done so. Maloney has told us pretty much what we want to know of Lowe.

6. ROBERT LOWE: LIBERALISM AND LAISSEZFAIRE (2) I now turn to Maloney’s biography of Robert Lowe and will start with the matter of laissez-faire, to which several chapters are devoted. Near the end of Chapter 1, on Lowe’s early success in Australia in accumulating assets (land and thereby land rent) to provide himself with later economic security, Maloney announces that one of his themes is that ‘‘Lowe was less inflexible than his doctrinaire reputation’’ (Maloney [hereafter M], p. 9). Maloney attributes this relative flexibility to Lowe’s pragmatism. That is for a biographer to say, but surely Lowe did not think so himself, else why a sequence of contradictory absolutist positions? Even interpreting Lowe on the relatively easy topic of free trade through treaty requires Maloney to state four different positions between which Lowe oscillated (M, p. 21 and passim). Maloney makes Lowe’s position clear: Lowe was in favor of a middle-class economic system in which property rights were important. Liberalism in politics was a matter of Party issues, elections and personal positions, and need not detain us. Liberalism in economics meant the defense of a market economy. But where the defense of a market economy could take one path or another, Lowe did so with characteristic absolutist aplomb. He knew, I think, that his job as a member of government was to establish and, especially, revise the legal foundations of his nation’s market economy. Maloney entitles his first chapter on the subject, ‘‘The Limits to Laissez-Faire,’’ but it is less the limits to laissez-faire with which he is concerned than the form it takes and why. The form is idiosyncratic and the reasons why are principally two: that Lowe often had to choose between different notions of what a market economy required (and on which his position as a member of

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government required him to choose), and that he chose his notions on grounds which he expounded as absolutes and which he may or may not have appreciated as reflecting his idiosyncratic, oscillating sentiments. Maloney commences Chapter 2 with a quotation from Lowe expounding ‘‘the grand principle of Free Trade—far more valuable than Free Trade itself—that no one class in the country should be made tributary to another class’’ (M, p. 12). This sounds laudatory but does not the existence of class in a society signify positions of subordination and superordination and ‘‘tributary’’ in the sense of a corpus of law skewed in favor of channeling income and wealth to the latter? Two different rights and power structures, A and B, yield two different structures of income and wealth, and yet, since both power structures work through the markets they help create, the result can be called ‘‘market determined’’ (Samuels, 2004). The first topic (other than an initial consideration of free trade and its value) that Maloney takes up is the principle of limited liability. Lowe supported limited liability to encourage enterprise. He also supported reducing the minimum number of shareholders required to register as a limited-liability company from 25 to 7. He supported, as its Vice President, the vast reduction in the role of the Board of Trade in investigating and regulating such firms. He supported allowing limited liability companies to issue shares in lower denominations (par securities) than hitherto. He supported doing away with the rule for (non-railway) companies that 20 percent of capital subscribed must be paid in at the start, in part on the ground that, since it was never checked, it opened the door to dishonesty. Lowe’s principal reasoning was that ‘‘it would now be easier to start a business on limited capital’’ (M, p. 14), thereby promoting popular capitalism. (Much the same reforms began taking place in the U.S. 15 or so years earlier in the movement to general incorporation laws.) Adam Smith had been suspicious of corporations. Critics like Lord Overstone protested that working class investors would be seen to need protection from their own folly. Lowe invoked several lines of rebuttal, one being that ‘‘the well-established principles of political economy y prescribe that contracts ought to be free’’ (M, p. 15; see also p. 67). In a leader in The Times, Lowe went to the heart of the matter, arguing that Lord Overstone and others ‘‘regard society as mainly constituted for the purpose of enabling a few persons to make a great deal of money’’ (M, p. 14). Maloney quietly comments that ‘‘the Act itself did little to justify Lowe’s hopes that it would now be easier to start a business on limited capital. The trend towards concentration continued y’’ (M, p. 14). It is in the midst of this discussion that Maloney quotes Lowe before Parliament, as reported in Hansard, saying that a nation cannot have too

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much freedom of commerce, in such manner as to wind up ‘‘with a characteristic definition of laissez-faire and description of the invisible hand’’ (M, p. 13). Here is most of Maloney’s quotation: When the political economists say ‘Laissez-faire,’ they do not mean to say ‘Leave all matters to blind chance, let everything go as it may.’ What they mean by ‘laissez faire’ is, that we are not to interfere with human laws where other laws so much wiser exist. Man, Sir, with his free will, his caprices, and his errors, is as much under the rule and government of a natural law as the planet in its orbit, or as water, which always seeks its level. Those laws, planted by Infinite Sagacity, have the power of correcting and compensating errors y Who could have imagined it possible that a state of society resting on the most unlimited and unfettered liberty of action y would tend more to the prosperity and happiness of man than the most matured decrees of senates and of States? These are the wonders of the science of political economyy. (M, pp. 13–14)2

One could debate the existence of a divinely given natural law constituting an Invisible Hand, including its role in social control, the use of metaphysics, theology, and religion in legitimizing the status quo, and the meaningfulness of ‘‘the most unlimited and unfettered liberty of action.’’ Much more manageable is another question: A market economy can have different provisions in its body of corporate law. Legislators can choose between some L-1 and L-2, say, a law with and a law without limited liability, and/or different provisions on the other topics on which Lowe took a position. Does not the Invisible Hand operate in markets formed by different laws? One point is that if laissez-faire signifies control (‘‘rule and government’’) by natural law, different positive laws—L-1 and L-2—are presumably here permitted by and are similarly operative under control within natural law. Another point is that two people can affirm a free market promotive of enterprise and yet, on the basis of idiosyncratic sentiments, differ on how they would institutionalize or instantiate the particulars of a supporting law of corporations. When David Ricardo was in Parliament, one issue involved the liability of a principal (A) for the ultra vires actions of his agent (B) to a contracting party (C) when C is unaware of the limits of B’s authority. Both of the alternative legal positions will promote enterprise: having A be responsible for B’s contracts on his behalf, or imposing on C the need to determine the scope of B’s authority, the former placing the policingof-information burden on A, the latter on C. Neither one nor the other violates laissez-faire, though merely reading about it brings a judgment to mind. As for limited liability, Adam Smith was not the last liberal economist who wondered why an honest, non-devious person would want to limit their liability for their actions. As for the argument that one should be cautious under any law about those with whom one does business, this, too, does not

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tell us which law is consistent with laissez-faire and why. As for Political Economy prescribing ‘‘that contracts ought to be free,’’ it is a nice sentiment but (1) is that the case in a world of giants and pygmies and of standardized contracts of adhesion, i.e., precious little bargaining and (2) did he intend, in the name of Political Economy, to discard the entire law of contracts, which is largely restrictions on aspects of contract? Maloney next takes up regulation versus public ownership of railroad transportation. The issue is much the same, with railroad management’s different behaviors, if any, under two sets of regulations. That Lowe is idiosyncratic in dealing with the details of relevant legal issues is evident in his use of freedom of contract to defend the railroads’ establishment of a price cartel, even to the extent of making it legally binding (M, p. 16). Other examples of his combining economic theory and personal sentiment include the reversal (‘‘his radical change of direction’’) of his position on public education after a tripling of the electorate ‘‘made it urgent to educate ‘our new masters’’’ (M, p. 16); and what Maloney calls ‘‘public goods as pretexts for state intervention’’ in the case of compulsory vaccinations (M, pp. 16– 17). The issue is not whether there will or will not be a law governing who can do what to whom, for there will be such a law willy nilly. The issue is not laissez-faire. The issue is which sentiment will give effect to which distribution of sacrifice. Even free trade is made complicated by subsidiary considerations motivated by different sentiments. One complication concerns unilateral versus bilateral or reciprocal tariff reductions. Another is the relation of free trade to war or national security. Those topics are taken up in Chapter 3. Also in that chapter, Maloney discusses Lowe’s objection to patent law, not particular provisions but having a patent law at all. My point is that the issue of laissez-faire is irrelevant here. Whether there is a body of law encouraging invention by granting partial monopolies, or whether the law is silent and therefore denies them, you have L-1 and, logically, the empty L-2. One chooses between them. The market for invention differs but government is involved—by its action to permit patents or by its inaction, as it were, to deny them (when starting from zero)—in Lowe’s case there is action too, namely, in repealing the law and abolishing patents altogether. Liberalism, then, connotes a capitalist market economy (and its democratic republican polity). Like its predecessor system, the capitalist market economy depends upon its legal foundations, its legal framework, which is always subject to change. Neither having such a framework nor providing for its change constitutes violations of laissez-faire. Nor does taking positions on the basis of sentiments constitute such a violation. All that shows

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that liberals (or conservatives) can differ among themselves on the details of the governing law as to who can do what to whom. There is no litmus test as to which policy conclusively represents laissez-faire. As for private property, like it or not, present regulation is only the latest example of the way in which the received institution of property has changed over time, come down to us through what likely had been denigrated by opponents as violations of natural law and laissez-faire. The words ‘‘property,’’ ‘‘freedom’’ and ‘‘coercion’’ have remained the same but their content has changed. Given a non-landed property system, the term ‘‘laissez-faire’’ gives effect to a preference for continuity in the face of continuous change and to projections of the sentiments and self-images of modern middle-class societies, no manner how much modern societies represent combinations of the old and the new societies. It is contexts like these in which economists in Parliament, including Lowe, operated and which require greater and deeper attention than passing references to ruling and tribute-receiving elites— though better a few words than none at all! Three points are warranted. One point is that economics deals with ideas and ideas are complicated, multi-faceted and problematic. In pursuing an account of economists in Parliament, one inevitably has to deal with ideas, and to have a chance at getting the main story correctly, one has to get the relevant ideas fully and correctly. (I am not denying that people take positions on the basis of selective perception even though they make no sense—as Vilfredo Pareto wrote; they decide on the basis of what they believe.) The second point is that getting even one Parliamentarian correctly is difficult enough; getting three-quarters of a century’s Parliamentarians correctly is infinitely more difficult. The study of one man’s oscillations of sentiment and position suggests utter ambiguity when lumping many of them together. Maloney’s account—what Robert Lowe said and did on various occasions—leads him into making two types of characterizing statements. One type is that Lowe was rash, idiosyncratic, inclined to say conflicting things and to fault others for saying what in fact they had not said, being barbarous and nasty in debate, and so on. The other type is that, in some particular instance or overall, Lowe was not as unscrupulous as he appears to have been at first glance (e.g., M, p. 17). These two combine to produce the third point, which can be stated several ways. (1) Lowe’s frequent invocation of Political Economy is a means of appeal to authority, with Lowe defining what authority meant. (2) One is uncertain how much of what he claimed to be Political Economy was in fact Political Economy and how much was his idiosyncratic application or misrepresentation of Political Economy. (3) One is uncertain how much Lowe’s

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arguments were only means to an end, determined antecedently, and how much they were substantive and important per se. All of these formulations are unsurprising in a world in which Political Economy is not given to man—claims of its absolutist laws notwithstanding—but is socially constructed and it is understood that Lowe was one of its builders. One of Maloney’s more telling remarks is that ‘‘[Lowe’s] appeals to authority generally ended with authority being marched firmly into line’’ (M, p. 132). Lowe was a man of huge and changing sentiments. He could be nasty. He was impressed with himself—as indeed he should have been: he held several positions any one of which would have, ceteris paribus, made most other people feel a success. These positions included elected Liberal member of the House of Commons, Vice President of the Board of Trade and of the Board of Education, Chancellor of the Exchequer, home secretary, and, as Viscount Sherbrooke, a member of the House of Lords. One wonders if he appreciated that general principles can each have varying particular applications. Surely, though, he was familiar with Aquinas’ proposition that when reason comes to particular cases, one needs more than general principles, one need particular principles. But what of the principles that enable one to discriminate between conflicting principles, be they general or particular principles? There is, in light of multiple principles, no reason why he had to be consistent in his applications of principle(s) but one would have expected that he be able to account for the differences. Such an expectation would have been unwarranted. Most people cannot see that most legislative or judicial choices are not for or against private property rights but for one set of property rights and not for another. It is largely by selective perception of relative rights that absolutist property and laissezfaire claims seem correct. Although Maloney does not, as I recall, make the point, Augello and Guidi’s emphasis on a dialectical interpretation of what Parliamentarians said and did, arises in his biography; such can account for at least some seeming inconsistency. Lowe sought to use market incentives (as well as to eventually adopt compulsory education) to promote education of the lower classes, but he also did not seek to promote upward mobility; rather he desired to keep it in check (M, pp. 43–44 and passim). The key is upward mobility; and there is a world of difference between believing that ‘‘some degree of inequality would benefit all’’ and putting ‘‘a considerable brake on social mobility’’ and intending to do so (M, pp. 43, 44). Maloney invokes a subtle supportive argument, saying that ‘‘a larger efficiency required that, though social ladders be available, they should not be so available as to unsettle the majority who would always fail to climb them’’ (M, p. 144).

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What does that mean? That statism which comprises the opiate of the masses in order to keep them quiet and docile while the upper classes can continue to use government to advance their interests? Or that statism which enables the masses to develop their capabilities (in the sense of Amartya Sen) thereby to enable them to have happier and perhaps even more productive lives, including their ability to invoke Political Economy based on their sentiments (M, p. 32: ‘‘In fact, said Lowe, the working class was so bound to be wrong that it was better for it not to try to understand political economy at all.’’)? That statism which further protects already protected interests which use the state to do so, or that statism which uses the state as a check on the power of the already powerful? Which is the greater inefficiency, that waste due to unsettled masses or that waste due to repressed abilities? Is this ‘‘larger efficiency’’ what he meant when, according to Hansard, he spoke to Parliament of ‘‘a state of society resting on the most unlimited and unfettered liberty of action y’’ (M, p. 14)? How do the quotations earlier in this paragraph square with Maloney’s statement that ‘‘Opposition to what he saw as class legislation was a consistent, passionate and fundamental theme of his career y’’ (M, p. 57; see also pp. 71, 143)? Perhaps the answer lies in the qualifier, ‘‘what he saw’’ but also in his taking property for granted and thereby fail to see classism as inevitable: Maloney quotes Lowe thus: ‘‘You could not go beyond proportional taxation ‘without shaking the very basis of that property on which modern society reposes’’’ (M, p. 77; see also p. 92). That Maloney lauds Lowe for ‘‘his crusade to free society from statism and vested interests, his recognition that these two enemies were intimately linked’’ (M, p. 145), is comprehensible but, in my view, unwarranted. Consider how much the British Empire (yes, imperialism) expanded in the period of Lowe’s life, 1811–1892; consider the classist character of British society; consider that law was both ubiquitous and important; consider Lowe’s lack of enthusiasm for a seriously extended franchise; and so on. I find it difficult to accept that Lowe sought to free society from statism and vested interests by any account save his sentimental identifications. I reiterate the clash of that statism which further protects already protected interests which use the state to do so, with that statism which uses the state as a check on the power of the already powerful. Maloney at one point writes of Lowe’s ‘‘existing ideal of a government chosen by an elite cadre of voters, operating a minimal state apparatus and brooking no interference with freedom of contract’’ (M, p. 51). Several points are warranted: (1) Maloney says Lowe changed his mind only on education. (2) Did his ideal change over time? It is not apparent that it did, except in some marginal respects. (3) Invocation of

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an elite cadre of voters harkens back to the restricted electorate of the pre1832 period (and beyond). (4) The minimal state apparatus was illusionary, especially if one included the governance administered by the local lords and their minions.3 (5) Freedom of contract is applied against unions, not much else, given the larger system of contract law (contract law was used to enforce class inequality: as of 1867, workers who broke contracts faced criminal charges; employers who did so could only be sued (M, pp. 55–56)).4 These latter are very important questions that also pertain to Augello and Guidi’s collection. The questions pertain specifically to how we read the record of economists in Parliament, how we evaluate where Political Economy/Economics stood in the Liberal Age, how we understand Liberal and laissez-faire, and so on. They would be easier questions to answer, I suppose, if the following statement by Maloney about Lowe had meaning by my accounts (I put it that way in order not to subject Maloney to a criticism applicable to most people, most of whom should know better): ‘‘he stands out as a particularly vivid example of a Benthamite coming to terms with the increased power of the nineteenth-century state’’ (M, p. 3). Why this is not meaningful by my accounts is spelled out above: The state under labor (if that were the case) is in principle no more powerful than it is under middleclass capitalism or under a landed aristocracy. Though Maloney thinks differently, John Stuart Mill was surely apposite when he seems to have included Lowe among those economists who ‘‘believe themselves to be provided with a set of catch-words, which they mistake for principles y and are [applied] y without the trouble of thought’’ (M, p. 68). I suggest that Maloney makes my point when he says that ‘‘The one ‘catchword’ he did use y was y the name of political economy itself.y Precisely because Lowe does use it as a slogan, it in the end adds nothing essential to the edifice of his arguments over Ireland’’ (M, p. 68)—and more than Ireland. The tension in Maloney’s writing on Lowe, between criticism and exculpatory evidence, is paralleled by tension between the use by Lowe of question-begging phrasing and our analysis of the phrasing itself. In both respects, the difficulties encountered in placing Lowe as an economist in Parliament in the liberal age are evident to anyone willing to look. It is these difficulties in dealing with one man that make one wonder about conclusions based on dealing with many men, in regard to materials where large numbers do not cancel out errors. The tension in the Augello–Guidi collection is the same, but on a broader stage, as that found in Maloney’s book. Economic liberalism tended to mean some combination of free trade, ‘‘free’’ contract, taxes no higher than they needed to be—not necessarily the same thing as low taxes—and a host

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of issues one side of which was considered suitably liberal and the other either reactionary or radical, for example, labor and trade union rights eclipsed by capitalist and employer rights. The tension is between traditional rulership and policy, on the one hand, and extending the franchise and making government responsive to a working class with voting rights. The identity of what constituted tradition and modernity changed, extremely slowly, but change they did, and many if not most issues had political and economic meaning depending on the changing identities. For those reasons and because of national differences, Augelo and Guidi are correct in drawing certain conclusions but lack strength in others. I quoted Augello and Guidi above, regarding ‘‘the enthusiasm raised by Cobdenism declined under the pressure of the ‘social question’’’ (AG, p. 21). Surely the ‘‘social question’’ was not given, it was socially constructed. Those who invoked it then seemingly wanted to keep it at arm’s length, lest they have to take up overly the tensions between traditional rulership and the demands for rights by labor. Among the correct (but tainted) conclusions are that political economy provided no ‘‘single, neutral and uncontroversial strategy of policy making,’’ that ‘‘the use of economic arguments itself revealed how political economy as a science of legislators was the battleground of passionate controversies,’’ and that ‘‘the fiction of impartiality and universality was challenged by a clearer understanding of conflicting class interests y’’ (AG, p. 21). The last is true to a point, but those on the side of tradition might have had a much clearer understanding. It is also perhaps too saccharine, though it is outdone in their statement that ‘‘economic debate flourished in the context not only of policy making but also of political passions of a generally noble and disinterested nature’’ (AG, p. 24). I am not convinced that economic debate ‘‘flourished’’ unless one means that it provided new language for debate; and I am less convinced of ‘‘political passions of a generally noble and disinterested nature.’’ This is wishful thinking coupled with a desire seemingly to praise and not to offend; after all, apropos of the three conclusions cited earlier in this paragraph, these conclusions involved no neutral strategy, ‘‘their views were partisan,’’ and political economy ‘‘was the battleground of passionate controversies’’ (AG, p. 21). Moreover, Augello and Guidi earlier have Parliaments dominated by local demand and by ‘‘a rhetoric focusing on the ideals of national power, civilization and economic progress’’ (AG, p. 21). I do not see much nobility and disinterest, nor, for that matter should I: Individual legislators are entitled to have their personal identifications with definitions and sides of issues. From those active in the arena I ask for only that they not be corrupt. But—always the ‘‘but’’!—historically, corruption has been a source

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of primitive accumulation and those seeking to acquire and/or retain office must make hard and sometimes tragic choices and deals with the devil. With that bit of theology, I conclude with Gladstone’s translation of lines sent to Lowe—lines with which Maloney closes his text (M, p. 146): Here lie the bones of Robert Lowe Where he’s gone I do not know If to the realms of peace and love Fairwell to happiness above If to a place of lower level I can’t congratulate the Devil.

NOTES 1. The term ‘‘age of improvement’’ is from Asa Briggs. 2. I have recently seen a discussion of whether laissez-faire is or is not hyphenated; Lowe, in the quote, has it both ways—plus italicized and non-italicized. 3. Maloney quotes E. F. Biagini thusly: ‘‘Most radicals tended to consider the state an appendage of the upper classes and shared Adam Smith’s view that it was inherently oppressive, incompetent, inefficient and corrupt’’ (M, p. 75). 4. Apropos of the opiate-of-the-masses allusion in my immediately preceding paragraph, Maloney relates that ‘‘Lowe firmly refused’’ ordination at the price of a year’s delay in receiving a lay fellowship at Magdalen College (M, p. 5). Surely it is obvious that of two different forms of statism (England had an Established Church), he elected one and not the other.

ACKNOWLEDGMENT The author is indebted to Steven G. Medema for comments on an earlier version of this essay.

REFERENCES Samuels, W. J. (2004). Markets and their social construction. Social Research, 71(2), 357–370. Samuels, W. J. (2005a). The role of government in the history of political economy: The 2004 HOPE conference interpreted and critiqued by the general discussant. In: S. G. Medema & P. Boettke (Eds), The role of government in the history of economic thought. History of Political Economy (Suppl.) 37, 393–423. Samuels, W. J. (2005b). Laissez faire. In: J. Beckert & M. Zafirovski (Eds), International encyclopedia of economic sociology (pp. 387–389). Routledge: London. Samuels, W. J., Johnson, M., & Johnson, K. D. (2004–2005). The Duke of Argyll and Edwin L. Godkin as precursors to Hayek on the relation of ignorance to policy. Storia del Pensierro Economico, 1(1), 5–32 1(2), 37–67; 2(1), 35–71; and 2(2), 19–38.

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Samuels, W. J., Johnson, K. D., & Johnson, M. (2005). The Duke of Argyll and Henry George: Land ownership and governance. In: J. Laurent (Ed.), Henry George’s legacy in economic thought (pp. 99–147). Northampton, MA: Edward Elgar. Taylor, T. (2006). Recommendations for further reading. Journal of Economic Perspectives, 20(1), 240. Znaniecki, F. (1940). The social role of the man of knowledge. New York: Columbia University Press.

Parisi and Rowley’s ORIGINS OF LAW AND ECONOMICS THEY MAY NOT BE ‘‘ORIGINS,’’ BUT THEY ARE ‘‘CONTRIBUTIONS’’ (FOR THE MOST PART) Nicholas Mercuro A review essay of Francesco Parisi and Charles K. Rowley’s (Eds) The Origins of Law and Economics: Essays by the Founding Fathers. The Locke Institute. Cheltenham, UK: Edward Elgar. 531 pp. ISBN 1840649631. Whatever else may be said about this book, surely after one reads it you are left with the impression that it was given the wrong title. Not one chapter is dedicated solely to describing the ‘‘origins of law and economics.’’ Indeed, very few—Richard A. Posner’s chapter being the notable exception—make the effort to broach the subject. Its title should have been—‘‘Contemporary Contributions to Chicago Law and Economics, Public Choice Theory, and New-Institutional Economics.’’ The book is divided into two sections. The first section is comprised of three introductory essays; a second section is comprised of 16 chapters under the section heading ‘‘Essays by the Founding Fathers.’’

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PART 1—INTRODUCTORY ESSAYS Charles K. Rowley’s thin chapter is titled ‘‘An Intellectual History of Law and Economics: 1739–2003.’’ I say thin in the sense that, by my calculation, for the dates it purports to describe, it covers about one decade of history per page. Perhaps ‘‘accelerated’’ might better capture its essence. Overall it is an adequate outline of the history of Chicago law and economics (with some notable exceptions). To his credit (unlike most of the other chapters in this book), perhaps because, as its co-editor and probably responsible for the title of the book, he (like Posner) does actually include a nice discussion of those who were part of the ‘‘origins of law and economics.’’ The chapter does have two major flaws. First, for some odd reason, he chooses to challenge the well-accepted moniker—legal realist movement—and invokes the ‘‘legal realist mood’’ and then tries (awkwardly) to maintain the ‘‘moodspin’’ within his descriptive analysis—it just sounds silly. One wonders, who (other than he) even thinks to raise the question as whether the legal realists were a ‘‘movement’’ or a ‘‘mood.’’ Surely not Edmund Kitch, one of the mainstays of Chicago law and economics and a contributor to his volume. Kitch does not buy into Rowley’s spin; like all other scholars who write on legal realism (both in and out of the field of law and economics), in the forward to his chapter, Kitch follows the legal scholarship and uses the widely accepted – legal realist ‘‘movement’’ (p. 54). The second problem with this thin history is his assertion that ‘‘the real significance of legal realism is to be found not in any concrete linkage between law and social sciences y but in the ‘avenue’ that it opened up for a future marriage between law and certain social sciences, notably economics’’ (p. 11). While legal realism did help pave the roadway, his assertion is without any acknowledgment—indeed, without a word or reference to the contributors to sociological jurisprudence—the real roadway pavers that laid the foundation for Rowley’s ‘‘avenue.’’ Legal historians (indeed, most contributors to the mood of law and economics) will cringe at the neglect of such notables as Oliver Wendell Holmes Jr., Roscoe Pound, and Benjamin Cardozo. These are not backroom figures in a book claiming to describe the ‘‘origins of law and economics.’’ These are legal scholars who, well before the legal realists, claimed that law cannot be understood without reference to social conditions, and thus that insights from the other social sciences, including economics, should be integrated into the law.1 Francisco Parisi’s overall chapter is a well written, more than adequate overview of the methodological issues and evolving contours of the new law and economics. However, unlike his co-editor, he identifies the

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‘‘originators’’ of law and economics so narrowly so as to invite critique. After an obligatory mention of Smith and Bentham, he writes: ‘‘It was not until the mid-twentieth century—through the work of Henry Simons, Aaron Director, Henry Manne, George Stigler, Armen Alchian, Gordon Tullock, that the links between law and economics became an object of serious academic pursuit’’ (p. 33). Like his co-editor, he, by either an act of omission or commission, neglects to mention the likes of John R. Commons and Robert Hale (just to mention one American institutionalist and one legal realist) who, despite Parisi’s exclusion, were indeed interested in the interface of economics and the law and, as their biographies attest to, were certainly engaged in ‘‘serious academic pursuits’’ (see Commons, 1964; Fried, 2001). Parisi is not alone in his oversight; indeed most Chicago types continue to ignore (overlook) their work, with two notable exceptions— Oliver Williamson2 and Richard A. Posner.3 This aside, Parisi does go on to make one extraordinary statement that is hard to comprehend. He argues that as compared to the Yale school of law and economics which he says is the normative school, he writes that: ‘‘Chicago-style economists generally recognized the limits of their role in providing normative prescriptions for social change or legal reform’’ (Parisi, p. 39). Is he not aware of the normative thrust of the Chicago ‘‘efficiency of the common law’’ literature? Everyone recognizes it is not just a descriptive endeavor; it has normative/policy overtones as expressed by many.4 Can he really be unaware of the normative impact the Chicago school has had on antitrust law in the U.S. (see McChesney, 2004) or the Chicago-driven efforts at U.S. tort reform? Is he not aware of the efforts by a Nobel Prize winning Chicago economist James M. Buchanan’s efforts to reduce property taxes in California? (see Buchanan, 1988). Does he really think that Henry Manne had no normative intentions when he began teaching neoclassical economics to our nation’s Federal Judges in ‘‘Pareto in the Pines’’ (and elsewhere thereafter)? Does he really think that the Becker–Posner Blog (both stalwarts of the Chicago school) has no normative overtones? Could he possibly not know that the right-wing thinks tanks in the U.S. are dominated by Chicago-school thinking? Let me be clear. There is nothing, I repeat, nothing wrong for those who hold dear the theories of Chicago law and economics to compete and even succeed in normative policy debates. My objection here is to have the co-editor of this venture suggest that the Chicago school ‘‘recognized the limits in their role in providing normative prescriptions for social change or legal reform’’ and thereby intimate that it is only the Yale school of law and economics that is involved in normative undertakings.5

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The final introductory essays is a reprint of the well-known ‘‘The Fire of Truth: Remembrance of Law and Economics at Chicago, 1932–1970’’ edited by Edmund Kitch. By all accounts, this chapter remains a ‘‘standard’’ in the Chicago repertoire. Especially for students who are looking for an unvarnished history of what transpired at Chicago in both the law school and the economics department, this remains a good read. That someone had the foresight to bring the group together and advance their oral history speaks volumes in establishing a nexus between the players and the ideas that have come to be known as the ‘‘Chicago school’’—good for them, good for us. While it is not included in the ‘‘Introductory’’ section, the chapter by George L. Priest, ‘‘The Rise of Law and Economics: A Memoir of the Early Years,’’ has many of the same virtues as the ‘‘Remembrance’’ chapter. It is an old (1982) article that was not previously published but was resurrected for this symposium to benefit of the readers of this book. Like ‘‘Remembrance,’’ it recounts the early Chicago years and then provides a clear exposition and comparison of the seminal works of Coase and Calabresi and their role in establishing the field of law and economics.

PART 2—ESSAYS BY THE FOUNDING FATHERS These 16 essays (now 15 as I moved Priest into the above section) are a valuable contribution to Chicago law and economics, to public choice theory, and even to the new institutional economics (though the co-editors do not formally mention new institutional economics in their introductory chapters). These essays can be divided up into four categories—(1) Reprints of previously published articles/chapters or previously presented papers, (2) Personal Accounts of individual legal-economic scholars describing how they entered the field of law and economics, (3) Restatements, really summaries of previously published articles and chapters, and (4) Original Works. Due to space limitations, I will comment on only a couple of chapters in each of these categories.

Reprints Three more-than-worthwhile reprints would include Guido Calabresi’s ‘‘The Pointlessness of Pareto: Carrying Coase Further.’’ Building on Coase’s seminal article, in this chapter Calabresi identifies the many pitfalls of trying to use a strict Pareto superiority criterion to fashion law. Specifically, he

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explores what we really learn by ‘‘taking markets transactions cost into account.’’ Calabresi argues that, given technology, incorporating transaction costs into the analysis will allow society to arrive at a Pareto optimal point (on the Pareto frontier). Any subsequent legal changes that pupport to shift out the frontier inevitably disadvantage at least someone thereby making distributional considerations unavoidable leading him to conclude that ‘‘the frequently made distinction between removing inefficiencies (making moves to the frontier) and innovating (pushing the frontier outward) is a false dichotomy’’ (p. 169). Calabresi believes that the use of Pareto superiority tends to set aside the inevitable distributional impacts associated with legal change and thereby avoids a serious discussion of issues that should concern those interested in changing law. Gary Becker’s ‘‘The Economic Way of Looking at Behavior’’ is a slightly revised version of his remarks made at his Nobel Prize in Economics’ lecture given in the 1993. It is a concise summary of four facets of Becker’s past research. It reviews the literature on the economic approach—rational choice analysis—with regard to discrimination, criminal behavior, human capital, and family behavior. It is clear, concise and true to his life’s work. In his concluding comments to the article, Becker, in part in response to the critiques of rational choice analysis, concedes that his ‘‘work may have sometimes assumed too much rationality,’’ but goes on the contend that ‘‘it has been an antidote to the extensive research that does not credit people with enough rationality’’ (p. 151). Finally, Richard A. Posner’s contribution, ‘‘The Law and Economics Movement: from Bentham to Becker,’’ is noteworthy. Although not formally a reprint, the chapter is largely included in his 2001 book titled Legal Frontiers. As I stated above, this chapter is true to the title of the book tracing some of the ideas of Jeremy Bentham into various eddies of law and economics. Other reprints (or previously presented papers) included in the book but not touched on in this review essay include Paul H. Rubin’s ‘‘Why Was the Common Law Efficient?’’ and Steven Shavell’s ‘‘Law versus Morality as Regulators of Conduct.’’

Personal Accounts Three chapters are essentially personal accounts of individual legaleconomic scholars touching on (among other things) how they entered and subsequently contributed to the field. These include, the chapters by Richard Epstein, ‘‘The Economist in Spite of Himself’’; William M. Landes,

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‘‘The Art of Law and Economics: An Autobiographical Essay’’; and Henry G. Manne, ‘‘How Law and Economics Was Marketed in a Hostile World: A Very Personal History.’’ In some ways—for those interested in people and ideas—these are the most interesting group of chapters in the book. Epstein’s chapter describes his own three-stage intellectual progression regarding the field of law and economics—initial hostility to cautious conversion, followed by his belief in the indispensability of law and economics (when ‘‘properly’’ understood, p. 262). His combined personal reflections and the discussion of specific legal cases relevant to his ‘‘conversion’’ make for a good, interesting read. Landes’ ‘‘The Art of Law and Economics’’ is an autobiographical essay that walks you through his studying economics under Gary Becker at Columbia University through his 1973 appointment on a tenured track position at the University of Chicago Law School (Chicago being one of the few law schools in the 1970s to have an economist—without a law degree— on their faculty). He recounts his close cooperation with Richard A. Posner (co-authoring over 30 articles with him as well as their book on tort law). There is an interesting section of this chapter where he argues that ‘‘the most neglected side of law and economics is empirical’’ (p. 303). The results of his survey and speculations as to why this may be the case (along with the rest of the chapter) are illuminating. Finally, Manne’s ‘‘How Law and Economics Was Marketed in a Hostile World’’ is a real treat. In direct contrast to Epstein, Manne was a full-time ‘‘missionary’’ (self-described; see p. 309) for Chicago law and economics since its inception. This chapter takes you on his lively 25 to 30-year journey from ‘Pareto in the Pines’ (at the University of Rochester) on to University of Miami Law School, to Emory Law School and then on to George Mason University School of Law. It is a journey filled with people and ideas and a remarkable story of an individual dedicated to firmly establish and embed an intellectual paradigm—Chicago law and economics—within legal education. In summary, these three personal accounts, each in their own way provide a glimpse at how the field developed and the impact it had on the lives of certain legal scholars, and, more importantly, how their collective contributions helped to direct and develop the field of law and economics.

Restatements (Summaries of Past Work) Some of the chapters are an author’s restatement or summary (somewhat compressed, though no less valuable) of his previous contributions to the

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field. The only substantive restatement of one’s work not reviewed here falls within the realm of the economics of property rights. It is by Harold Demsetz titled ‘‘Toward a Theory of Property Rights II—The Competition between Private and Collective Ownership.’’ Ronald Coase’s ‘‘The Relevance of Transaction Costs in the Economic Analysis of Law,’’ and Oliver G. Williamson’s ‘‘Why Law, Economics, and Organization,’’ provide two chapters that are really at the core of new institutional economics. Coase’s article reminds economists that when they study the working of the economic system, they are dealing with the effects of individuals’ or of organizations’ actions on others operating within the system (p. 217). He believes that legal-economic scholars should focus their attention on the institutions of the firm and the market and, more generally, to study how law impacts the working of the economic system (p. 201). In the spirit of new institutional economics, the call is for the inclusion of transaction costs so as to be able to assess and predict the impact of alternative institutional arrangements. The Williamson article is also firmly within the tradition of new institutional economics focusing of the institutional environment and institutional governance. Building on Coase (p. 489), Williamson’s call is for both the inclusion of organization theory together with an expansion of transaction cost economics (TCE). His paradigm sees a reciprocal relationship between organization theory and TCE with each informing the other (p. 487). Believing that organization theory has massive ramifications for the TCE theory of the firm, he views his model of the firm-as-governance structure as an evolving theory and one that holds much promise in advancing comparative institutional analysis (p. 504). We next come to the two public choice chapters—James M. Buchanan’s ‘‘Cost, Choice, and Catallaxy: An Evaluation of Two Related but Divergent Virginia Paradigms,’’ and Gordon Tullock’s ‘‘The Case Against the Common Law.’’ Together they raise a set of old concerns over Chicago law and economic’s reliance on the common law given its purported efficiency. Buchanan’s chapter is an integration of five previous works (see his first three footnotes for the sources). The thrust of his article is an elaboration on the similarities and differences (i) between Coase’s paradigm and Buchanan’s catallatic approach, and (ii) between their respective understandings of the market and the legal order. Buchanan characterizes Coase’s paradigm as objectivist (where efficiency has an existential reality independent of the market exchange process), and hence, an end-state theory that allows for normative prescription as to what the law should be. To this Buchanan responds ‘‘his [Coase’s] analysis seems to offer a definitive criterion for adjudication (p. 163)’’—a form of economically motivated

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judicial activism. Buchanan goes on to argue that his own approach—that of catallatics—is a subjectivist approach whose focus is on process and hence, maintains a positivist stance. It is the normative thrust of Coasian (perhaps Posnerian; perhaps Chicago) law and economics that Buchanan ultimately objects to—the reliance on the common-law courts and damage measures to yield an efficient legal outcome. Tullock’s purpose was not much different; he outlines a case against the common law (p. 470). He does so by setting forth a public choice analysis analyzing the behavior of the principal players in U.S. common law. With as jaundiced a view of the American legal system one can find, he asserts: The common law system is a socialist bureaucracy, in which attorneys essentially lobby government officials—judges and juries—much in the same way that special interest groups lobby the legislature.y The invisible hand [within the common law] is the visible boot of the politically active judge and the boney knees and elbows of the semi-blindfold, intellectually lame jury (pp. 472–473).

The Buchanan–Tullock perspective on the role of the courts and judges in common law puts public choice at odds with the role of the courts and judges as envisioned by most proponents of the Chicago approach to law and economics, the latter of which argues for a greater reliance on the common-law courts to generate the efficient legal outcomes (as described above). Within the Buchanan–Tullock public choice analysis we witness a preference for a much reduced role for the courts. Tullock’s critique of the common law serves to throw added fuel on a long-simmering fire ignited by Buchanan in his expressed concerns of advancing theories on the efficiency of the common law within legal education.6

Original Works The final two chapters touched on here are Robert Cooter’s ‘‘The Confluence of Justice and Efficiency in the Economic Analysis of Law,’’ and Michael A. Trebilcok’s ‘‘Journeys Across the Divides.’’ Both are original works. Cooter’s chapter argues that private law is an ineffective way to pursue distributive goals. That is, by virtue of the fact that distributive justice is largely irrelevant to private law, the state should pursue distributive justice primarily through taxation and social welfare legislation. Application of corrective justice remedies in private legal disputes is generally thought to resolve such cases in an efficient manner (though not always without some tensions). In addition, Cooter incorporates social

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norms into the analysis, norms that he argues help to direct individuals to cooperate in an efficient way and divide the results of production fairly. Trebilcock’s chapter does two things. First, it describes the evolution of the Law and Economics Program at the University of Toronto over the past 25– 30 years (it was started in 1976); and then it addresses the dynamics of policy reform focusing on recent public policy debates in Canada. His (and his colleagues’) involvement in on-going public policy initiatives leads them to conclude that what is needed is a third way—an approach that is more optimistic than public choice theory while at the same time less optimistic than the nirvana-oriented welfare economists. A good part of the chapter is an extended (and very worthwhile) discussion of the policy reform process as related to several Canadian case studies that he (and his colleagues) were involved in. It is a discussion about methodology/policy that places institutions at the forefront of the analysis. More importantly, their approach provides ‘‘an opening or a window of opportunity for new ideas, new interests, and hence, a way of generating and discussing new institutional options’’ (p. 460).

NOTES 1. This has long been recognized. See, for instance, Paton and Derham (1972). 2. Oliver Williamson has consistently cited the work of John R. Commons. See, for instance, Williamson (2000a), and Williamson (2000b, p. 600) where the work of Commons is brought to the attention of the reader under a section entitled ‘‘Good Ideas.’’ 3. Posner (1995, p. 3) contends that Robert Hale ‘‘anticipated some of the discoveries y of law and economics’’ as we know it today. 4. The normative overtones of the Chicago efficiency theory of the common law has typically been described as follows: Whenever the market falls short of providing an efficient allocation of resources due to externalities or some other form of market failure, one can rely on the common law and damage measures, which they contend have been demonstrated to be comprised of rules and doctrines that produce efficient results. In general, given the existence of some form of market failure, society need not rely on the legislative branch to adopt regulatory statutes or bureaucratic mechanisms to remedy these problems. All one needs to do to give the market a gentle nudge in the direction of maximum social welfare is to rely on the common law to generate the efficient outcome. This particular characterization comes from Burrows and Veljanovski (1981, pp. 10–11); however, it is the common understanding of the thrust of the Chicago efficiency theory of the common law—it is both normative and ubiquitous. 5. Even if he had just read Posner’s contribution to this book he would have found that: ‘‘[T]he law and economics movement has influenced legal reform in a number of important areas. These include antitrust law and policy, the regulation of public utilities and common carriers, environmental regulation, the computation of

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damages in personal injury suits, the regulation of securities markets, the design of federal sentencing guidelines, methods for dividing property and computing alimony in divorce cases, and the law governing investment by pension funds and other trusteesy. [T]he increased respectability of the free-market ideology owe[s] something to the law and economics movement’’ (p. 330). 6. Buchanan (1974, p. 491) questioned the whole idea of introducing economic theory into the curriculum of law schools, particularly if such teaching were ‘‘to train potential jurists [to be] void of any qualms about legislating for all of us.’’ He strongly urges that ‘‘the judge should not change the basic law,’’ even if guided by the efficiency criterion in doing so, ‘‘because, in such behavior, he would be explicitly abandoning his role of jurist for that of legislator. He would be ‘making law’’’ (Buchanan, 1974, p. 490). He concluded his discussion on this matter by going so far as to openly worry about ‘‘the potential excesses of a Posner court guided by the extra-legal criterion of maximum value, that is economic efficiency’’ (Buchanan, 1974, pp. 491–492).

REFERENCES Buchanan, J. M. (1974). Good economics—bad law. Virginia Law Review, 60, 483–492. Buchanan, J. M. (1988). The economic reform of politics reborn. Challenge, 31(2), 4–10. Burrows, P., & Veljanovski, C. G. (1981). Introduction: The economic approach to law. In: P. Burrows & C. G. Veljanovski (Eds), The economic approach to law (pp. 1–34). London: Butterworths. Commons, J. R. (1964). Myself, the autobiography of John R. Commons. Madison: University of Wisconsin Press. Fried, B. H. (2001). The progressive assault on laissez faire: Robert Hale and the first law and economics movement. Cambridge, MA: Harvard University Press. McChesney, F. S. (2004). Talking ‘bout my antitrust generation. Regulation, 27(3), 48–55. Paton, G. W., & Derham, D. P. (1972). A textbook of jurisprudence (4th ed.). Oxford: Oxford University Press. Posner, R. A. (1995). Overcoming law. Cambridge, MA: Harvard University Press. Williamson, O. E. (2000a). Why law, economics and organization? Boalt Working Papers in Public Law, no. 112. repositories.cdlib.org/boaltwp/112/ (accessed September 26, 2006). Williamson, O. E. (2000b). The new institutional economics: Taking stock, looking ahead. Journal of Economic Literature, 38(3), 595–613.

Jones’ CULTURES MERGING THE MISSING CULTURAL FOUNDATIONS OF ECONOMIC GLOBALIZATION Jonas Zoninsein A review essay of Eric L. Jones’ Cultures Merging: A Historical and Economic Critique of Culture. Princeton: Princeton University Press, 2006. 328 pp. ISBN 0691117373. In Cultures Merging, Eric L. Jones offers an introductory, concise and useful account of the role of culture in the development of capitalism. In his historical and economic analysis of culture written mainly for MBA students, Jones proposes a post-Marshallian solution for including culture into economic analysis. In the last paragraph of Chapter 10, entitled ‘‘Culture as Reciprocity,’’ Jones summarizes his argument: ‘‘As to economic development, culture may act as a brake or filter but is seldom likely to be the original source of change y’’ (pp. 270–271). Chapter 10 contains the best summary of Jones’s approach for addressing culture as a determinant of economic life and elucidating the mechanics of cultural change. I would suggest that those readers interested primarily in the more abstract formulation of Jones’s approach, advance from Chapter 1 immediately to Chapter 10, before returning to Chapters 2 through 9. Following Alfred Marshall ([1890] 1920) and Ekkehart Schlicht (1998), Jones argues that culture is contingent, intrinsically labile, inherited, unstable, barely conscious, related to personal matters, lacking in permanent A Research Annual Research in the History of Economic Thought and Methodology, Volume 25-A, 135–140 Copyright r 2007 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 0743-4154/doi:10.1016/S0743-4154(06)25014-4

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foundations, and is not derived from explicit choices by those making economic decisions. According to Jones, culture is shaped as a residue of past decisions subjected to slow and gradual change, and is impacted by current material incentives, priorities and choices. Cultures are simply artifacts, continuously created and recreated. They seem sticky, but also are fluid. Jones argues that in addition to the sluggish and incremental dimension of cultural change identified by Marshall, cultural patterns also present sudden and traumatic transitions in response to abrupt shifts in the balance of economic incentives. Jones distinguishes culture from institutions. He defines pure culture as an unconsciously assimilated pattern of beliefs, habits, expectations, values, ideals, and preferences absorbed mainly from families and the surrounding society’s influences. Institutions are rule-bound organizations that derive from conscious political choices, and intentions and routine operating methods of firms, trade unions, banks, and codified legal systems. According to Jones, the different effects of values and institutions are ‘‘hard to demonstrate, agreed, because the relationships are broad, complex, fugitive, indirect, and not easy to observe’’ (p. 110). Institutions, such as legal, educational and scientific institutions and the security apparatus, may contribute to channel, support, or reinforce cultural practices and beliefs. The mechanisms, protocols, and channels through which pure culture (as distinct from institutions) reproduces itself and translates into institutional and politically conscious behavior are briefly indicated by specific historical examples (such as to the role of Christianity in the rise of the advanced industrial West) but are left unexplored in Jones’s more abstract formulations. Jones assumes that the central tendencies of Western culture generate the most effective and prosperous economic institutions. Western culture and institutions contribute to reduce transaction costs, increase profitability and raise the rate of economic growth of national economies. Based on these effects, Jones posits the universality of the mode of economics as a culturally progressive set of choices that self-interested individuals pursue in the market.

CULTURE AS A SECOND-ORDER VARIABLE Economists should not, according to Jones, neglect the legal, cultural, and social impediments that affect the dissemination of full-blown market behavior outside Western society. Custom, traditions, beliefs, and values combine with economic choice to produce existing culture. But, within these

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interactions, the economic choices of self-interested individuals and their formal institutions hold the upper hand. Jones rejects the hypothesis of ‘‘cultural nullity,’’ according to which culture depends entirely on the economy. Jones also rejects the alternative ‘‘cultural relativist’’ hypothesis, where each culture maximizes its own values, and the free market and capitalism are themselves cultural artifacts. For Jones, the cultural context within which capitalism develops is relevant only as a second-order factor to explain the pace and uneven nature of the global diffusion of wealthmaximizing, self-interested, and competitive behavior. Jones argues that culture may seem sticky, but it is, indeed, fluid from a long-term perspective. The fixity of culture is conditioned by the power of the market, since market behavior dissemination is slowed down and filtered by cultural beliefs, values, and norms. Although the power of fresh market incentives and the economic calculus and material ambitions of self-interested individuals dominate social behavior, it is generalized through lagged alterations in the existing belief systems, values, and customs. The specific impact of culture on the economy translates, therefore, into a whole range of existing lagged and uneven social practices. This range includes national economic regimes where high transactions costs and less than optimal allocation of resources constitute the residues of cultural mediocrity and inferiority, sponsored by protectionist and backward nation states, elites, and social groups. Cultural merging results from asymmetrical interactions of the market economy and cultural traditions within ever larger markets, including non-Western social economic regimes, in which choice leads to an ‘‘uniform consumer culture of the type somewhat carelessly described as American,’’ (pp. 49–50) but which, Jones argues, is indeed ‘‘cosmopolitan.’’

CULTURE AND INSTITUTIONS How does Jones explain the historical strength of the animal spirit of capitalism and the deeply ingrained urge and drive to accumulate wealth by rational and competitive individuals in modern societies? A cultural analysis of the self-interested and money-making behavior of individual actors in a modern market economy—i.e., the foundational beliefs, values, customs, and norms that inform the intellectual and ideological hegemony of the institutions that surround the competitive process organizing the production and allocation of economic value and capital—is absent, however, from his analysis. Whereas Jones posits the universality of economics as a choice technique, he ignores the fact that different cultures indeed may define and

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pursue self-interest on the basis of distinct types of groups or their collective preferences and rationales: family, religion, ethnic, racial, national, and universal, in addition to individualistic rational-maximizing wealth behavior. Jones’s approach ignores a broader cultural context and system of social choices within which the profit motive of self-interested individuals constitute, in reality, only one among multiple modes for coordinating the life choices of rational individuals. In his approach, the analytical developments and the debates among beliefs, values and ideas that inspire economic policy discourses in the market, the media, and the academia, as well as in the cultural, social and institutional contexts in which economic activity reproduces and grows, are simply circumstances and epiphenomena that may brake, filter, or modify the infinitively more powerful (and, by definition, universal) system of market and profit incentives. However, if we believe that culture is more than a mask for materialism, and more than a brake or filter on its dissemination, we have to interpret the cultural ingredients that compose the soul of vulgar materialism and capitalism. Jones’s operational definition of culture is vague and unsatisfactory for exploring the central tendencies in the pattern of beliefs, habits, expectations, values, ideals, and preferences guiding the economic practices of self-interested individual actors in capitalist societies. For Jones, ‘‘culture consists of unconsciously assimilated beliefs’’ (p. x) whose consequences for political and economic practices are not perceptible. In the mythical past, policies and institutions with particular characteristics may have been established by conscious cultural and ideological predispositions. A pure cultural influence is, however, not in Jones’s investigation of the merging of cultures in modern times. Cultural patterns are simply brakes or filters, second-order factors distorting the implementation of rational individualist self-interest, but are rarely, if ever, the original source of economic change and growth. These original economic incentives and intentions are taken for granted but the interpretation of their hegemonic reproduction in the present is absent; they constitute the ‘‘misty’’ and ‘‘unconscious’’ pure force moving the tangible, conscious, and policy-driven institutions of capitalism. Jones also indicates that those informal institutions not operating on the basis of explicit choices, should be relabeled as culture, and that he is doubtful about our ability to properly separate the role of blind culture from that of social institutions. How pure culture is transformed into conscious programmatic activity is not a concern for Jones. In contemporary times, a conscious economic agenda seems, therefore, to be established by the fiat power of an automatic

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cultural mechanism. This fiat power, its normative, intellectual, and political will, as well as the ideological, political and social conflicts and struggles conditioning its deployment, however, are not addressed in this work on culture and economics.

WESTERN CULTURAL GLOBALIZATION BY AUTOMATON’S FIAT As a second-order variable, culture is a creation of the economy, albeit with a historical lag, ‘‘a creature of the economic life of a former generation rather than of the present one’’ (p. 23). The material accumulation incentives and intentions of self-interested individuals constitute, thereby, the independent variable which operates in a social terrain where culture provides the circumstances (not the agency) which ‘‘brake and filter’’ the economic process. Non-Western cultures change by adapting to and adopting the dominant market culture values and preferences expressed in Western forms, which are themselves syncretic, although very energetic. Cultures mix and merge around the center of gravity established by the dominant market culture. This dominant culture tends to become universal, thereby constraining choice to a narrower, more energetic menu of profitoriented, individualist self-interested intentions and incentives regarding financing, production, and consumption of goods and services. The moral foundation of alternative cultures, and the normative, intellectual and political contexts in which different economic classes, gender, religion, ethnic groups, nation states, and humanity operate as creators of self-interest, generating the cultural foundations for alternative approaches to national and international development policy, are considered secondary and merely adaptive influences. They will be conquered and subordinated to the superior profit motive. They only slow down and color the superior, narrower, more efficient and dominant system of constrained choices established by neoliberal regimes of capital accumulation. However, to properly study globalization and analytically assess the contested and violent frontiers of capitalism and representative democracy, the long run trends and policy challenges in the confrontation and merging of cultures, it is necessary to examine critically the effects of the profit motive, instead of simply affirming, as Jones does, its universality. The assumed universal power of the competitive economic calculus is associated with a simultaneous perception of culture as adaptive to the shifts in the economic, social, and political norms motivated by a continuous supply of fresh profit

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initiatives in steady-growing markets. The slant of Jones’s proposed solution to the location of culture in economic analysis disappoints when he uses his model as a predictive tool. Thus, Jones fails to evaluate the responsiveness of what he calls Western institutions to the challenges of religious, economic and political opportunism, and illiberal democratic regimes. At the end of part I, entitled Cultural Analysis, abstracting from a broader menu of group self-interests, Jones loses the ability to penetrate the nature of the conflicts and challenges at the cultural frontier of capitalist globalization.

REFERENCES Marshall, A. ([1890] 1920). Principles of economics (8th ed.). London: Macmillan. Schlicht, E. (1998). On custom in the economy. Oxford: Clarendon Press.

NEW BOOKS RECEIVED Augello, M., & Marco E. L. Guidi (Eds) (2005). Economists in Parliament in the Liberal Age (1848–1920). Burlington, VT: Ashgate. xviii+315 pp. $99.95. Backhaus, Ju¨rgen G. (Ed.) (2005). Entrepreneurship, Money and Coordination: Hayek’s Theory of Cultural Evolution. Cheltenham, UK: Edward Elgar. 199 pp. $110.00. Backhaus, Ju¨rgen G., & Drechsler, Wolfgang (Eds) (2006). Friedrich Nietzsche (1844–1900): Economy and Society. The European Heritage in Economics and the Social Sciences. New York: Springer. xi+253 pp. $99.95. Be´nassy, Jean-Pascal (Ed.) (2006). Imperfect Competition, Nonclearing Markets and Business Cycles. The International Library of Critical Writings in Economics, no. 192. Cheltenham, UK: Edward Elgar. xxiii+562 pp. $255.00. Bicchieri, Cristina (2006). The Grammar of Society: The Nature and Dynamic of Social Norms. New York: Cambridge University Press. xvi+260 pp. $70.00. Bromley, Daniel W. (2006). Sufficient Reason: Volitional Pragmatism and the Meaning of Economic Institutions. Princeton, NJ: Princeton University Press. xiii+244 pp. $35.00. Buchanan, James M. (2005). Why I, Too, Am Not a Conservative: The Normative Vision of Classical Liberalism. Cheltenham, UK: Edward Elgar. vii+111 pp. $75.00. Burton, Antoinette (Ed.) (2005). Archive Stories: Facts, Fictions, and the Writing of History. Durham, NC: Duke University Press. 408 pp. $84.95. Checchi, Daniele (2006). The Economics of Education: Human Capital, Family Background and Inequality. New York: Cambridge University Press. x+278 pp. $80.00. Coleman, William, Selwyn Cornish, & Alf Hagger (2006). Giblin’s Platoon: The Trials and Triumph of the Economist in Australian Public Life. Canberra, AU: ANU E Press. xv+263 pp. $24.95 (Paper). Daianu, Daniel, & Radu Vranceanu (Eds) (2006). Ethical Boundaries of Capitalism. Burlington, VT: Ashgate. xi+259 pp. $99.95. 141

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Davanzati, Guglielmo Forges (2006). Ethical Codes and Income Distribution: A Study of John Bates Clark and Thorstein Veblen. London: Routledge. xvi+144 pp. $120.00. Davis, John B. (Ed.) (2006). Recent Developments in Economic Methodology, 3 vols. The International Library of Critical Writings in Economics, no. 192. Cheltenham, UK: Edward Elgar. 1776 pp. $670.00. Erdkamp, Paul (2005). The Grain Market in the Roman Empire: A Social, Political and Economic Study. New York: Cambridge University Press. xiv+364 pp. $95.00. Fayazmanesh, Sasan (2006). Money and Exchange: Folktales and reality. New York: Routledge. xi+156 pp. $105.00. Grady, Mark F. & Francesco Parisi (Eds) (2005). The Law and Economics of Cybersecurity. New York: Cambridge University Press. viii+310 pp. $75.00. Granato, Jim, & M. C. Sunny Wong (2006). The Role of Policymakers in Business Cycle Fluctuations. Cambridge: Cambridge University Press. xxvi+290 pp. $75.00. Haakonssen, Knut (Ed.) (2006). The Cambridge Companion to Adam Smith. New York: Cambridge University Press. 424 pp. $70.00. Heertje, Arnold (2006). Schumpeter on the Economics of Innovation and the Development of Capitalism. Cheltenham, UK: Edward Elgar. vii+142 pp. $90.00. Jorgenson, Dale W., Landefeld, J. Steven, & Nordhaus, William D. (Eds) (2006). A New Architecture for the U.S. National Accounts. Chicago: University of Chicago Press. 488 pp. $99.00. Kalman, Laura (2005). Yale Law School and the Sixties: Revolt and Reverberations. Chapel Hill, NC: University of North Carolina Press. xiv+467 pp. $49.95. Klein, Philip A. (2006). Economics Confronts the Economy. Cheltenham, UK: Edward Elgar. viii+396 pp. $130.00. McCloskey, Deirdre N. (2006). The Bourgeois Virtues: Ethics for an Age of Commerce. Chicago: University of Chicago Press. xviii+616 pp. $32.50. Mercuro, Nicholas, & Medema, Steven G. (2006). Economics and the Law: From Posner to Postmodernism and Beyond (2nd ed.). Princeton: Princeton University Press. x+385 pp. $35.00 (paper). Miller, Norman C. (Ed.) (2005). Open Economy Macroeconomics, 2 vols. The International Library of Critical Writings in Economics, no. 191. Cheltenham, UK: Edward Elgar. 1056 pp. $425.00.

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Montes, Leonidas, & Schliesser, Eric (Eds) (2006). New Voices on Adam Smith. Routledge Studies in the History of Economics. London: Routledge. xxi+364 pp. $80.00. Nafziger, E. Wayne (2005). Economic Development (4th ed.). New York: Cambridge University Press. 868 pp. $80.00. Peart, Sandra J., & Levy, David M. (2005). The ‘‘Vanity of the Philosopher’’: From Equality to Hierarchy in Post-Classical Economics. Ann Arbor: University of Michigan Press. xviv+323 pp. $40.00. Prindle, David. F. (2006). The Paradox of Democratic Capitalism: Politics and Economics in American Thought. Baltimore: Johns Hopkins University Press. xvii+368 pp. $49.95. Siklos, Pierre (Ed.) (2005). The Economics of Deflation, 2 vols. The International Library of Critical Writings in Economics, no. 189. Cheltenham, UK: Edward Elgar. 1264 pp. $500.00. Swann, G. M. Peter (2006). Putting Econometrics in its Place: A New Direction in Applied Economics. Cheltenham, UK: Edward Elgar. 264 pp. $100.00. Therborn, Go¨ren (Ed.) (2006). Inequalities of the World. New York: Verso. xviii+332 pp. $35.00 (paper). Thun, Eric (2006). Changing Lanes in China: Foreign Direct Investment, Local Governments and Auto Sector Development. Cambridge: Cambridge University Press. 344 pp. $70.00. Tirole, Jean (2006). The Theory of Corporate Finance. Princeton: Princeton University Press. xii+644 pp. $55.00. Walker, Donald A. (2006). Walrasian Economics. New York: Cambridge University Press. x+357 pp. $80.00. Wallak, Jessica S., & T. N. Srinivasan (Eds) (2006). Federalism and Economic Reform: International Perspectives. New York: Cambridge University Press. 526 pp. $95.00.

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