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