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The Independent Institute
Commentary

The Self-Imposed Poverty of Economics


Life is more than a game, and human beings are more than rule-bound strategists. Moral values are possible. Authentic allegiance to such values is possible.

Too obvious a point to debate, you think? Maybe not. In The New Republic (June 5, 2000), the very bright and philosophically astute Professor Peter Berkowitz of George Mason University Law School reviewed Eric A. Posner’s interesting book, Law and Social Norms (Harvard University Press, 2000). Posner’s book is essentially a rendering into economic language of the ethical and political issues of human life. Posner sets out to show that, using the tools of scientific economics alone (or even more narrowly, of game theory), we can explain why people act as they do. Why, for example, do people sustain their commitments to others even despite opportunities to “advance” their interests “by means of what game theorists call ‘defecting’ or ‘opportunistic behavior,’ and what ordinary people call lying, cheating, and stealing”?

The analysis by Berkowitz is insightful, largely setting forth, rather adeptly, often-heard complaints against economic reductionism. He explains that there is really more to ethics and politics, at their best, than merely the working out and following of narrow strategies for realizing what one desires in life. “In so far as we are small,” he concludes, “game theory may explain what we do; but we are not only small.”

Economists, like other social scientists, are always seeking some comprehensive and unitary explanation of human behavior, one that mimics the natural sciences, especially physics. What they want is surefire predictability of regular phenomena, a basic motive or drive to explain why people do what they do; and that explanation, once arrived at, is expected to be exhaustive. Usually the favored motive is the desire to prosper, even though the content of prosperity may vary tremendously from person to person, age to age, and region to region around the world. Indeed, just to make sure he covers everything, the economist tends to define prosperity as the getting of what one desires to get. Every sought goal is thus ipso facto an economic goal.

Posner proposes that the explanatory scheme he draws from economics and game theory can make complete, comprehensive sense of ethics and politics. Ethics and politics may not seem equivalent to straightforward economic thinking and behavior, but in fact they are just differing expressions of the same motivation: people do the right thing because it will get them what they want, fulfill their concrete desires, whether over the short run or the long run. Laws and social norms are but common practices that help us get our way; they are strategies for living. Actions that seem to supply evidence of moral commitment are really, according to Posner, just “behavioral regularities” undertaken “to show that they are desirable partners in cooperative endeavors. Defection in cooperative endeavors is deterred by fear of reputational injury. . . . People who care about future payoffs not only resist the temptation to cheat in a relationship; they signal their ability to resist the temptation to cheat by conforming to styles of dress, speech, conduct, and discrimination. The resulting behavioral regularities, which I describe as ‘social norms,’ can vastly enhance or diminish social welfare.”

Plausible—as far as it goes. Certainly human action is purposeful, at least; we do pursue ends and deploy means to achieve those ends. But as Berkowitz observes, Posner seems not only to be rather gratuitously translating the “wisdom of the ages” into the language of economic theory, but also to be claiming, “With Machiavelli, that it is more important to appear good than to be good.” A corollary claim seems to be that morality is either a mirage or, in Berkowitz’s words, “at least a discourse that is reducible to something more fundamental and thoroughly nonmoral.”

With deep moral commitment banned from the picture, so are its obvious incarnations; thus Posner, Berkowitz writes, can perform “the remarkable feat of writing an entire chapter on marriage and the family without ever mentioning love.” His stance thus fails to capture the wealth of human motivations and, in the end, is vacuous. If what drives us is the desire to have our desires satisfied, we do not learn anything about why there are so many extremely varied desires “driving” people. It is an odd science indeed that offers the same alleged explanation for the bank robber as it does for the bank executive, for the thief as for the producer, yet that is just how the economic explanation of human behavior tends to go.

Where Is Immorality?

It is odd, too, that the economist’s account of morality makes little room for immorality. One is invited to suppose that when people do lie, cheat, deceive, commit fraud, murder, rape, assault and such, somehow they have simply miscalculated or misjudged the proper strategy.

Posner’s reductionist economics has no room for choice (except insofar as it is smuggled into the discussion in contradiction to the terms of that discussion). But a bona fide understanding of ethics and politics requires a recognition of the genuine choices that human beings confront. If one ought to be honest, it must also be true that one might be either honest or dishonest. If one ought to care for one’s children, it must also be true that one might either care for them or neglect them. And indeed, we know well enough that just such is the case: lots of people act as they should and lots of others do not. But because this sort of economics, rational-choice theory, and game theory fail to take full account of morality and choosing, theoreticians like Posner wipe morality from the slate and reduce it to mere scheming. Even justice, on this account, can be broken down into what Socrates took so much trouble to argue against, namely, “the advantage of the stronger.”

Such an understanding of ethics and politics also faces the problem of explaining why seeming to be good would ever matter to anyone, if the capacity to be genuinely good is but a myth enlisted for strategic purposes. If it is a myth that one can be invisible or levitate, what benefit is gained by someone who manages to feign such abilities (other than the limited entertainment value magicians cash in on)? There is none. But sensible people do believe in moral possibilities (they experience those possibilities themselves), and that is why faking moral fiber might at least briefly fool even those who would not believe in your power to levitate. Just as hypocrisy is the compliment vice pays to virtue, so pretending to be good is the compliment pretentiousness pays to morality.

Despite its critical acumen, Berkowitz’s analysis of Posner fails to give an account of why economists have such a serious problem with ethics properly understood—that is, not as a strategic device but as a principled guide to action enabling us to live proper human lives. Interestingly, it is the father of scientific economics who may be called on to assist us [p. 40] in understanding this problem. In The Wealth of Nations, Adam Smith noted that even by his time, moral virtue had come to be regarded as disconnected from mortal happiness and the good life:

    Ancient moral philosophy proposed to investigate wherein consisted the happiness and perfection of a man, considered not only as an individual, but as the member of a family, or a state, and of the great society of mankind. In that philosophy, the duties of human life were treated of as subservient to the happiness and perfection of human life. But, when moral as well as natural philosophy came to be taught only as subservient to theology, the duties of human life were treated of as chiefly subservient to the happiness of a life to come. In the ancient philosophy, the perfection of virtue was represented as necessarily productive to the person who possessed it, of the most perfect happiness in this life. In the modern philosophy, it was frequently represented as almost always inconsistent with any degree of happiness in this life, and heaven was to be earned by penance and mortification, not by the liberal, generous, and spirited conduct of a man. By far the most important of all the different branches of philosophy became in this manner by far the most corrupted. (Random House, 1937, p. 726)

Smith saw that when morality, or ethics, is conceived along lines that would be fully realized in the work of Immanuel Kant—who denied that anything done to advance one’s own cause can have moral significance—moral thinking cannot embrace the virtue of prudence, or practical wisdom. (No can any moral virtue be construed or justified, however broadly, in relation to the acting agent’s own well-being and flourishing.) But prudence—recognized as a prominent virtue indeed in the ethics of Socrates and Aristotle—would make plenty of room for an ethical conception of most economic activity. While prudence may not be the highest virtue in human life, economic action is well understood as an expression of it (as well as of such virtues as honesty, integrity, and justice). With prudence expelled from the moral realm, however, all the economists can do to render commerce and business respectable is to collapse them, along with the rest of life, into expressions of near-bodily functions à la Hobbes (which is what, in the end, Posner does, and what Berkowitz finds so objectionable). If economic value-seeking were taken to be as morally legitimate as any other human endeavor, the economist would not be quite so tempted, whether in self-defense or for revenge, to strip morality from human doings and replace it with game-theoretic constructs instead.

If the mechanistic world view of many economists is in part a response to Kantian reworking of moral theory, the Kantian philosophy was itself an attempt to escape the dilemmas spawned by the metaphysics of mechanism. For Aristotle and other moral philosophers, self-development and flourishing were things a person had to exert his will to achieve; they were not automatic. And so the care of the self could be seen as a moral virtue, a chosen, effortful practice for which credit could be due. But when the notion gained prominence that human beings behave exactly like the rest of matter-in-motion in the universe, free will took a beating. Hobbes, a materialist of the highest order, spent a lifetime denying its reality; he debated the topic until the day he died. In its stead he posited a drive for self-preservation, something that seemed close enough to the deterministic motion of matter. Self-preservation, on this view, is directly impelled by antecedent causes; the acting agent has no real autonomous say in the matter; he can only submit. Obviously, such ineluctable submission cannot earn one any moral credit.

Kant could not accept this obliteration of moral responsibility. But in the process of salvaging the moral dimension of life, he didn’t quite abandon the Hobbesian notion that we are all naturally driven by self-preservation. What he proposed was only that we can escape that natural drive and choose a different course of action—a moral course. If we will things impartially, utterly without regard to any personal drives or motives, and if we tear ourselves from a “dead insensibility” to perform an action “only from duty and without any inclination,” our action is now morally praiseworthy. By this move, morality was “rescued,” in a way, but rescued at the expense of relevance to individual life and flourishing. It is this kind of sundering that Smith was reporting, even before Kant’s final “solution” arrived on the scene.

In their very different ways, Posner and Berkowitz each accept the pitting of morality against individual well-being. For Berkowitz, the shortcoming of the game-theoretical universe is that it “permits explanations of human conduct only in terms of rational self-interest.” And it is true enough that we can act against our own interests (and also that we can act irrationally). But the more fundamental problem of the Posnerian universe is that it is premised on a too-narrow conception of self-interest, banning from its ken the moral values that can constitute and animate it. A rich conception of individual flourishing would surely embrace all the virtues of honor, integrity, commitment, and so forth. Prudent concern for self is not inherently inimical to any of these, nor to the heeding of the “promptings of conscience.”

This isn’t the place to address all the problems with the Kantian “solution” or with the scientism that lies behind the Hobbesian and Posnerian perspectives. Suffice it to note that a richer, more robust understanding not just of human affairs but also of reality itself—one that does not seek to reduce everything to just one thing—would go far to remedy matters. Such an understanding would also make ample room for the moral virtue of prudence and therefore for the task of every person to look after his or her prosperity. Economists can teach us a great deal about that, and can be proud of doing so.


Tibor R. Machan is a Research Fellow at The Independent Institute and Professor of Philosophy at Chapman University. He is the author of numerous books including Private Rights and Public Illusions.

David M. Brown is the editor of The Daily Objectivist.

This article is reprinted with permission from The Freeman, December 2000. ? Copyright 2000, the Foundation for Economic Education.