Digressions&Impressions

On Hayek, Entrepreneurs, Elites and Social Change [Guestpost by Erwin Dekker]

[This is an invited guest-post by Erwin Dekker.--ES]

The Austrian tradition in economics/political economy is known for its theory of entrepreneurship. In its Schumpeterian version the entrepreneur is a heroic character who can break routines, innovate, and persuade others to go along in their endeavor. The Mises and Kirzner version of the entrepreneur is a more mundane figure ‘alert’ to profit opportunities which are not yet exploited by others (recall here and here). Both versions of the entrepreneur emphasize the conscious and intentional nature of the innovative acts. Although the entrepreneur’s behavior cannot be captured in a simple maximization framework, it does fit within the teleological means-ends framework of human action which Mises (Hayek’s teacher) developed.

Intentionality fades slowly from Hayek’s later work. In the Constitution of Liberty (1960) he argues: “Humiliating to human pride as it may be, we must recognize that the advance and even the preservation of civilization are dependent upon a maximum of opportunity for accidents to happen” (29).[1] Hayek contrasts the ‘countless number of humble steps taken by anonymous persons in the course of doing familiar things’ with ‘major intellectual innovations which are explicitly realized’ (28). Change in his social philosophy is more a process of adaptation to changing circumstances than the result of human imagination or alert actions to improve the everyday run of things.

It has always struck me as surprising that the most famous Austrian thinker is essentially silent on the theme of entrepreneurship. One plausible explanation is that Hayek was worried about a typical version of romantic individualism, which attributed too much uniqueness to the individual mind and will, as Eric has recently suggested here. A contributing factor is that Hayek was always more of an evolutionary thinker who emphasized the market process rather than the actions of individuals within such a market. His famous critique of the static nature of (perfect) competition in neoclassical models therefore does not blame it for lack of attention to entrepreneurship, but for its lack of attention to the dynamic interactive process of competition. More generally he emphasizes mutual adjustments rather than social change through intentional agency.

And yet, upon rereading the Constitution of Liberty for a recent weekend of the Adam Smith Fellowship program I could not help but being struck by the elitist nature of the theory of social change in Hayek. The key chapter in this regard appears to be the innocuously titled ‘The Common Sense of Progress’ (chapter 3), in which he first argues that the rich bear most of the costs of experimentation, because they are the first to buy new goods which come to the market, initially in limited quantities. Hayek, as is typical for him, does not dwell on examples or empirical substantiation, but at least up to this point we might understand this as a stylized empirical fact: new products are first offered to a small elite which adopts them, and if successful the product will be produced in larger quantities at lower costs, and become available to the middle classes.

But Hayek is aware of the fact that economic inequality in this way breeds social inequality, because: “most of what we strive for are things we want because others already have them” (45). The effects of which he calls cruel, but inevitable: “[in a] progressive society, some must lead, and others must follow” (45). To drive the point home as it were, he turns his more narrowly economic argument into a social argument, by suggesting that it is the rich who engage in experimentation with “new styles of living”, which over time will make these new styles ‘accessible to the poor’, without which the poor would advance much slower. It is important to see that we have moved here from a narrower argument about differences in purchasing power to a broader argument about the role of the rich in advancing society.

Hayek then develops this argument into the political realm by suggesting that a similar dynamic plays out among nations. Just like the poor in a given society benefit from the experiments in buying and living of the rich, so the populations of other countries benefit from the experiments in buying and living of those in leading countries. Both the British labor classes and the rest of the world benefitted from ‘a rich class with old traditions [which] demanded products of a quality and taste unsurpassed elsewhere’ (48). It is an argument that Tyler Cowen has occasionally made about the way in which European regulated welfare states benefit from innovation and permissiveness in the United States.

The flipside of the argument that the rich are those who experiment and therefore bear the costs of social change, is that it is only the rich which are truly free. An implication which would bring Hayek surprisingly close in outlook to Schumpeter, who believed that the masses were merely following rules and customs, while entrepreneurs were those who could psychologically break free from these everyday constraints and imagine better alternatives. One might suggest that such a reading is somewhat uncharitable, but Hayek himself asks the reader at the start of chapter eight ‘Employment and Independence’ to wonder whether the arguments he developed still holds in modern times: “in which a relatively larger part of the people, and most of those who counted in the forming opinion, were independent in the activities that gave them their livelihood” (118).[2]

One might expect Hayek to make the argument that rising living standards mean that more individuals are now in a position to engage in economic and social experimentation. Quite to the contrary he suggests that when the franchise was extended to workers, they quite naturally looked to limit the freedoms of the rich for they could not imagine what these were good for. There are moreover important sociological consequences of the fact that wage-laborers do not assume risks or personal initiatives: “A man who works under direction for a fixed salary or wage may be as conscientious, industrious, or intelligent as one who must constantly choose between alternatives; but he can hardly be as inventive or experimental” (120).

In what follows Hayek continues to systematically distinguish two classes in society, the dependent wage-laborers, and the men of independent means, who have ‘an indispensable role to play in any civilized society.’ They are of particular relevance beyond the market: “in the field of cultural amenities, in the fine arts, in education and research, in the preservation of natural beauty and historic treasures, and above all, in the propagation of new ideas in politics, morals, and religion” (125). So essential does Hayek consider the role of this social class, that if it did not exist, he suggest it might have to be created through a kind of lottery which would free a certain group of individuals to exercise true independence and freedom, although these individuals might lack the education and familiarity with wealth that the children of the rich have. In the absence of such a lottery, the merits of this social class provide an argument in favor of inheritance for Hayek.  

The Austrian tradition, Hayek included, is typically known for its emphasis on the heterogeneity of individuals. But in his theory of social change Hayek suggests that such heterogeneity is in fact largely limited to a small subset of individuals who are free of many of the (material) obligations that life in contemporary society brings with it. His own theory that changes come about through a response to changing circumstances which necessitate adjustments for individuals all over society is seemingly contradicted by his suggestion that only the rich are truly free to experiment. Hayek’s plea for the importance of local and contextual knowledge of time and place next to, or even above, general scientific knowledge, has strong democratic undertones, which completely disappear in the way he talks about the generation of new knowledge through market and social experimentation. This surprisingly makes Hayek theory of social change elitist in a way not too dissimilar from that of Joseph Schumpeter, Hayek even refers repeatedly to the rich as an avant-garde, a favorite metaphor of the maverick Schumpeter. Although, it must be said that Schumpeter, like John Stuart Mill before him, puts more emphasis on differences in character and energy between individuals, while Hayek stresses differences in material circumstances.

Another notable difference with John Stuart Mill is that the experiments in living which both he and Hayek discuss, have no intrinsic value for Hayek. In Mill they foster a spirit of individualism and turn human beings into a ‘noble and beautiful object of contemplation’. Hayek worries that such individualism might upset the social order and the process of coordination, but more importantly he is not at all concerned with the value that individuals might derive from experimentation and deviance, or how it might reinforce a liberal spirit.

If there is a real tension between the broader Hayekian tenets of dispersed knowledge, mutual adjustment, and process theory and his theory of social change, this implies that a Hayekian theory of social change is still to be developed. In my book on the Viennese Students of Civilization I noted similarities between the work of Norbert Elias, who essentially developed a trickle-down theory of social change through imitation of the superior ways of the aristocracy and that of some Austrian economists. Later social theorists, including sociologists originally inspired by Elias, have suggested social change originates from the fringes of society, where individuals have either less pressure to conform (and so the costs of deviant behavior are lower) or oppressed so that individuals stand relatively more to gain from experimentation and protest. Especially since Hayek is explicitly progressive on social liberal issues, he praises: “the abolition of slavery, penal and prison reforms, the prevention of cruelty to children or to animals, and a more humane treatment of the insane” (127).

This tension is also relevant for a political economic analysis of power in society. One might expect that those with independent means will primarily be interested in protecting the status quo, rather than changing it. Hayek admits that this class is more likely to produce ‘bons vivants than scholars and public servants’, but he never entertains that they might abuse their economic and social power to corrupt the political system in their favor. Whereas Schumpeter praised the rotation of elites in one of his characteristic metaphors which spoke of the elite as the top floor of a hotel which is always full, but always with different people. Hayek seems more concerned with the disappearance ‘of a cultural elite’ which resulted from the combined effects of inflation and taxation (129).  

Hayek’s own emphasis on heterogeneity and his plea for maximizing the chances for accidents to happen, could equally well be developed into a social theory which suggests that social change is more likely to occur when opposing groups or individuals with different values meet each other, and the necessity for mutual adjustment emerges. This is also what Mill concluded about the reason why pressures for social conformism have not led to social stagnation among the European family of nations. This was not due to the superior excellence in any one nation or class, but a result of: “their remarkable diversity of character and culture. Individuals, classes, nations, have been extremely unlike one another: they have struck out a great variety of paths, each leading to something valuable, their.” This is in line with more recent work in (cultural) economics which suggest that more social diversity is good for growth and  development.

Closer to Hayek’s own epistemological liberalism there is increasing attention in the philosophy of science for the benefits of cognitive diversity (see Ryan Muldoon's overview). Most importantly, it would take more seriously the stylized facts which Deborah Coen in her Vienna in the Age of Uncertainty made central to Viennese liberal thought: the increasing heterogeneity between all individuals in an increasingly complex society, spurred on by the division of labor and the resulting division of knowledge. I think with Mill that a liberal should find such heterogeneity on its own desirable, but it also supplies a better starting point for theorizing social change, than the one that Hayek provides.

Lenin and The State's Essential Coerciveness

In what follows I use Lenin's The State and Revolution (1917; hereafter S&R quoted by chapter and section) as my guide to an orthodox Marxist interpretation of Marx and Engels on the nature of the late nineteenth century capitalist-imperial state. It's perfectly fine for my purposes if you think that Lenin flattened Marx and Engels or misrepresents them (or the evolution of their thought, etc.). It's also fine for my purposes if you think that this is not the best version of a Marxist theory (orthodox or not) of the capitalist state out there. 

Drawing on Engels' fascinating (1884) The Origin of the Family, Private Property and the State, for Lenin the modern state is the effect of class conflict; the state exists in order, it's fundamental function is, to reduce the transaction costs of class conflict. As Engels puts it: "in order that these antagonisms, classes with conflicting economic interests, shall not consume themselves and society in fruitless struggle, a power, apparently standing above society, has become necessary to moderate the conflict and keep it within the bounds of “order”; and this power, arisen out of society, but placing itself above it and increasingly alienating itself from it, is the state." This independent power understands itself "as apparent mediator." In some respects (I will qualify this below) this anticipates the idea familiar from twentieth century neoliberalism which conceives of the state as an "impartial umpire" above civil society (I am quoting the excellent SEP entry on Hayek by Schmidtz and Boettke).

Of course, Marxists emphasize that the mediating role is not truly impartial. It serves the interest of capital. In particular, the bourgeoisie have captured the state for their own interests. As Marx and Engels put it in the Communist Manifesto, "the executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie." Or as Lenin puts it, "According to Marx, the state is an organ of class rule, an organ for the oppression of one class by another; it is the creation of “order”, which legalizes and perpetuates this oppression by moderating the conflict between classes.  (S&R 1,1) It is worth noting that this emphasis on the order creating nature of states anticipates the Ordoliberal self-understanding in non-trivial ways, and also, as I learned from Erwin Dekker's biography of Tinbergen, more technocratic social democrats like Tinbergen, and the young Rawls as Katrina Forrester persuasively argues in the early chapters of In the Shadow of Justice. I return to this below.

While Lenin suggests that bourgeois politicians would deny it, as an empirical matter, it's not difficult for liberal thinkers to agree that late nineteenth century liberal states are characterized by rent-seeking elites biased toward relatively narrow interests. This was, in fact Hobson's view in his (1905) Imperialism -- a book Lenin (recall) studied carefully -- and Lippmann's in his (1937) The Good Society. And it is a familiar refrain from, say, the Chicago school onward in so-called classical liberal understandings of the contemporary state (recall here).

As an aside, Lenin anticipates the view of liberals of the 1930s that the 1870s were a watershed period in the development of the nineteenth century liberal state. As Lenin notes, in commenting on a remark by Marx that it "was understandable in 1871, when Britain was still the model of a purely capitalist country, but without a militarist clique and, to a considerable degree, without a bureaucracy." (3.1) For, in the 1920s and 30s, in reflecting on the collapse the global order during WWI, so-called neo-liberals came to believe that a corruption of liberalism was manifested after the 1870s. (They would tell different stories about the timing and original source of that corruption (compare here with here). 

The point of the last few paragraphs is that there is non-trivial overlap between Lenin's Marxist analysis of the period leading up to WWI and the liberal analysis of that same period in the first third of the twentieth century.  This is, as I have shown in a different context (recall), also visible in the accounts of the rise of militarism and imperialism as an effect of national monopoly. A crucial difference is that for Lenin capitalism naturally tends toward monopoly whereas Hobson treats it as an effect of rent-seeking behavior.

I use the language of 'rent-seeking' because the Marxist-Leninist position is that in addition to the exploitation of proletariat by capital, and the structural domination of all under capitalism, government offices and the leading functionaries in the bureaucracy are treated as special rents. This is manifest in the following passage (and others like it): "The bureaucracy and the standing army are a “parasite” on the body of bourgeois society--a parasite created by the internal antagonisms which rend that society, but a parasite which “chokes” all its vital pores." (Lenin S&R, 2,2) I don't mean to deny that in context Lenin's major point is the intrinsically coercive nature of the state. I return to that below. But on the orthodox Marxist view it is notable that the bureaucracy (and the army) is parasitic on the body of bourgeois society. These are rents extracted not just from the proletariat, but even from the bourgeoisie. This is pretty much Hobson's own position. (It is peculiar that Lenin implies this would be denied by "the petty-bourgeois and philistine professors and publicists.")

That is to say, on the Orthodox Marxist view the state is a coercive mechanism for upward redistribution. Further evidence for the claim that the bureaucracy is understood as a source of class based rents can be seen in the proposals what to do with the bureaucracy in the transitional period after a successful revolution (and before the state has withered away): 

At the present the postal service is a business organized on the lines of state-capitalist monopoly. Imperialism is gradually transforming all trusts into organizations of a similar type, in which, standing over the “common” people, who are overworked and starved, one has the same bourgeois bureaucracy. But the mechanism of social management is here already to hand. Once we have overthrown the capitalists, crushed the resistance of these exploiters with the iron hand of the armed workers, and smashed the bureaucratic machinery of the modern state, we shall have a splendidly-equipped mechanism, freed from the “parasite”, a mechanism which can very well be set going by the united workers themselves, who will hire technicians, foremen and accountants, and pay them all, as indeed all “state” officials in general, workmen's wages. Here is a concrete, practical task which can immediately be fulfilled in relation to all trusts, a task whose fulfilment will rid the working people of exploitation, a task which takes account of what the Commune had already begun to practice (particularly in building up the state).

To organize the whole economy on the lines of the postal service so that the technicians, foremen and accountants, as well as all officials, shall receive salaries no higher than "a workman's wage", all under the control and leadership of the armed proletariat--that is our immediate aim. S&R 3,3

After the revolution, functionaries in the bureaucracy will be paid workman's wages, the implication being that their existing wages are a form of extraction, parasitic on proletariat's labor, that is, a rent. I don't mean to suggest that's the extent of the change. Lenin also re-activates ideas I associate with the French revolution (including Girondins intellectuals like Grouchy) in which bureaucrats are elected and subjects to recalls. (For example: "The workers, after winning political power, will smash the old bureaucratic apparatus, shatter it to its very foundations, and raze it to the ground; they will replacce it by a new one, consisting of the very same workers and other employees, against whose transformation into bureaucratic will at once be taken which were specified in detail by Marx and Engels: (1) not only election, but also recall at any time; (2) pay not to exceed that of a workman; (3) immediate introduction of control by all, so that all may become “bureaucrats” for a time and that, therefore, nobody may be able to become a “bureaucrat”. S&R 6, 2; see also 6,3))

Let me wrap up with the crucial issue. While compared to anarchists, liberals tend to expect obedience to legitimate law,  liberals understand the liberal state as providing order without authoritarianism. In fact, the introduction of professional police -- as opposed to citizen militias and armed forces -- is seen as a crucial means forward away from despotism in part because the use of force against civilians can be more calibrated and less lethal than it is when every riot or public disorder is treated as a trigger of military action. And even states in which the mercantile tendency toward state violence is not fully defeated, but only partially tamed by parliament, law, press, and public opinion are often understood as doing so without extensive authoritarianism. (Of course, there are standing objections to this claim during, say, the Jim Crow era, and many periodic states of emergency.)

By contrast, for Lenin [here he is quoting Engels (1891 preface to the third edition of The Civil War in France)], the state is nothing but a machine for the oppression of one class by another, and indeed in the democratic republic no less than in the monarchy." (S&R 4.5; see also 2.1) Fundamentally, according to the Marxists we're focusing on here, the modern state is a coercive entity to impose class interests. Lenin (S&R 1.1) quotes Engels to that effect, the state “consists not merely of armed men but also of material adjuncts, prisons, and institutions of coercion of all kinds.” (Engels 1884; ch. 9)

That according to Lenin the most democratic state is essentially coercive is also revealed, by his view of what happens after the revolution:

Democracy is a form of the state, it represents, on the one hand, the organized, systematic use of force against persons; but, on the other hand, it signifies the formal recognition of equality of citizens, the equal right of all to determine the structure of, and to administer, the state. This, in turn, results in the fact that, at a certain stage in the development of democracy, it first welds together the class that wages a revolutionary struggle against capitalism--the proletariat, and enables it to crush, smash to atoms, wipe off the face of the earth the bourgeois, even the republican-bourgeois, state machine, the standing army, the police and the bureaucracy and to substitute for them a more democratic state machine, but a state machine nevertheless, in the shape of armed workers who proceed to form a militia involving the entire population. S&R 5, 4 (Higher phase of communist society)

What's notable about this is that the intrinsic coerciveness of the state is treated as an essential core that must be preserved through the transitionary period (the dictatorship of the proletariat) as a means to destroy class enemies, and to force changes in class structure and the possibility of acquiring rents. As Luxemburg discerned (recall the post earlier in the week) this understanding of the state, and the post-revolutionary transition period, has an inherent fragility; in so far as one leaves the coercive nature of the state untouched, one then opens the door to state capitalism in which a new managerial class extracts rents (as described by Burnham (recall) in The Managerial Revolution).

My point in the previous paragraph is not a victorious one. For, after the work of Foucault, few would be satisfied with the relatively limited list of coercive institutions that the orthodox Marxist tradition focus on. In addition, the last few years of financial crisis and pandemic have shown that liberal states have many instruments of coercion that they can use without fundamentally altering the liberal structure of the state or even traditional political institutions (elections, parliaments, press, rule of law, etc.) Simultaneously, Black Lives Matter has reminded many that even policing can easily be experienced as occupation, or worse. So, what I take away from the Marxist orthodoxy is that for liberalism to have proper self-understanding it needs to have an account of the centrality of the liberal state's coerciveness.** To be continued.

 

Luxemberg vs Lenin and a comment on Hayek (and Wieser)

The history of the Russian labor movement suggests the doubtful value of such centralism. An all-powerful center, invested, as Lenin would have it, with the unlimited right to control and intervene, would be an absurdity if its authority applied only to technical questions, such as the administration of funds, the distribution of tasks among propagandists and agitators, the transportation and circulation of printed matter. The political purpose of an organ having such great powers only if those powers apply to the elaboration of a uniform plan of action, if the central organ assumes the initiative of a vast revolutionary act.

But what has been the experience of the Russian socialist movement up to now? The most important and fruitful changes in its tactical policy during the last ten years have not been the inventions of several leaders and even less so of any central organizational organs. They have always been the spontaneous product of the movement in ferment. This was true during the first stage of the proletarian movement in Russia, which began with the spontaneous general strike of St. Petersburg in 1896, an event that marks the inception of an epoch of economic struggle by the Russian working people. It was no less true during the following period, introduced by the spontaneous street demonstrations of St. Petersburg students in March, 1901. The general strike of Rostov-on-Don, in 1903, marking the next great tactical turn in the Russian proletarian movement, was also a spontaneous act. “All by itself,” the strike expanded into political demonstrations, street agitation, great outdoor meetings, which the most optimistic revolutionist would not have dreamed of several years before.

Our cause made great gains in these events. However, the initiative and conscious leadership of the Social Democratic organizations played an insignificant role in this development. It is true that these organizations were not specifically prepared for such happenings. However, the unimportant part played by the revolutionists cannot be explained by this fact. Neither can it be attributed to the absence of an all-powerful central party apparatus similar to what is asked for by Lenin. The existence of such a guiding center would have probably increased the disorder of the local committees by emphasizing the difference between the eager attack of the mass and the prudent position of the Social Democracy. The same phenomenon – the insignificant part played by the initiative of central party organs in the elaboration of actual tactical policy – can be observed today in Germany and other countries. In general, the tactical policy of the Social Democracy is not something that may be “invented.” It is the product of a series of great creative acts of the often spontaneous class struggle seeking its way forward.--Rosa Luxemburg (1904) "Revolutionary Socialist Organization," part 1.

It is well known that despite their mutual admiration, and their common rejection of reformist/gradualist social democracy ('Bersteinism,') Lenin and Luxemburg also had some important disagreements. The quoted passage is from Luxemburg's response to Lenin's (1904) One Step Forward, Two Steps Back, and shows familiarity with Lenin's (1902) What is to be Done? In these works Lenin had advocated for an all powerful central party apparatus, as Luxemburg suggests. This apparatus was supposed to be secret (to avoid capture by the police) and constituted by an elite group of professional revolutionaries. (Lenin is also very critical of an exclusive, trade unionist focus on economic issues.) Lenin's argument appeals to the benefits of the division of labor among professional revolutionaries to the development of a professional cadre with different kind of specializations (agitators, propagandists, theoreticians, etc.) It is worth noting that the demand for secrecy is an effect of the Russian context (it being an autocratic police-state with few liberties of association), but the focus on professionalism seems less context sensitive for Lenin (nothing that follows hinges this, I hope). 

Luxemburg's intervention on the side of the spontaneous activity is notable not just because she risks being seen to side here, in part, with those gradualists she ordinarily condemns, but also because it appears she rejects the advantages of the division of labor to the revolution. In particular, Lenin's vanguardism solves a kind of knowledge problem for the proletariat which, while being exploited, lacks access to the intellectual tools to plan and organize a revolution. (It's short on human capital one may say.) Because I am not a Marxist, I hope the next part of this sentence is not treated as thinly-disguised-polemic, but it strikes me that Lenin is right to think that his view is well grounded in Marxist-Leninist writings (despite their criticisms of the division of labor under capitalism).* 

As an aside -- this may be more fairly construed as more polemical, but it is meant to be factual observation --, vanguardism does introduce an important tension into Marxism from a purely theoretical point of view. For, one of the key claims on behalf of Marxism, very clearly annunciated in the Communist Manifesto, is that it promises rule by the majority against the minority. And one need not be an Elite theorist to recognize how rare that it is. (The aristocratic element in liberal democracy -- elections to representative bodies -- secures (to be sure, legitimate) minority rule over a majority.) Vanguardism is a clear break with the idea of majority rule, which is why it is promised to be provisional. Of course, the non-trivial risk is that once in power the vanguard becomes a (new) species of elite rule.

So, Luxemburg's attack on the Leninist counterfactual ("The existence of such a guiding center would have probably increased the disorder of the local committees") is not merely an invention over a tactical debate, but also addresses a principled issue for Marxism. And here I want to call attention to two epistemic features of her position that are meant to respond to Lenin's solution to the knowledge problem for a revolutionary proletariat. First, she argues that central coordination does not increase unity and effectiveness, but is likely to cause disorder. And she attributes this to difference of positional or situated perspective which results inevitably in different stances (prudence vs enthusiasm), which itself undermines common agency. Of course, this is not a very convincing response to Lenin because the very enthusiasm of the masses is not sufficient to make a revolution (and often is directed at only local improvement without wider political regard). This is why Luxemburg's second point, the rejection of top-down policy, is significant.

Second, I read her as suggesting that many local struggles are each occasions of learning, trials that may in their very spontaneity and so novelty lead to new discoveries: where conflict induced necessity  generates "great creative acts." Each local trial of strength between the proletariat and the authorities and/or capital provides a feedback mechanism from which to learn in which (the revolutionary consciousness of) the working class is trained. And, in particular, over time this will create a critical mass of "the existence of a large contingent of workers educated in the class struggle" (presumably capable of revolutionary politics). So, from her perspective the temptation of vanguardism is understandable, but with patience (and class struggle) avoidable. 

By contrast, Lenin is quite clear that he thinks this is bunk--that a central clearinghouse is needed to integrate lessons learned and to provide the necessary expertise, to coordinate, and to educate. So, I am not suggesting Luxemburg wins this argument. In fact, with the benefit of hindsight we can see that he was right that vanguardism could achieve real power. But at the same time, Luxemburg was prescient in discerning that such vanguardism would inevitably lead to rule of a minority over a majority (as she notes "the self-discipline of the Social Democracy is not merely the replacement of the authority of bourgeois rulers with the authority of a socialist central committee.")

Now, what I want to note, in conclusion, is that Luxemburg's position on the spontaneous, bottom up education by the proletariat through local struggle is structurally analogous to (recall)the view that Michael Polanyi and then, more famously, Hayek develop in the 1930s on the way learning occurs in markets and the generation of spontaneous order. To be sure, knowledge about the spontaneous order generating features of markets pre-date Luxemburg, so I am not suggesting she influenced their development of the concept, which was already familiar. (And Polanyi is surely influenced by the way 'spontaneous' is used in chemistry and physics of the nineteenth century.) But anyone familiar with debates among Marxists at the start of the twentieth century, will be quickly struck by how important and intense the debate over revolutionary spontaneity is. This debate died circa 1920.

Hayek (1899 – 1992) and Michael Polanyi  (1891 – 1976) came to maturity in the aftermath of this debate. While Polanyi never seems to have flirted with social democracy (and was not especially educated in economics), Hayek was clearly (and un-controversially) influenced by Wieser and charmed by Wieser's 'Fabian socialist' tendencies as a student. The Fabians were the standard-bearers of social democratic gradualism (which is at times compatible, of course, with left liberalism). So, it's worth exploring to what degree Wieser and the young Hayek were themselves enmeshed in, or at least aware of, the debates over the epistemic merits of spontaneous proletarian action. 

 

 

Fear is the Cause of Hatred: Joshua Child on economic growth and Jewish naturalization

Those that are for the admission of the Jews, say in answer to the aforesaid Reasons, viz .
1st, The subtler the Jews are, and the more Trades they pry into while they live here, the more they are like to increase Trade; and the more they do that, the better it is for the Kingdom in general, though the worse for the English Merchant, who comparatively to the rest of the People of England is not one of a thousand.
2dly, The thriftier they live, the better Example to our People; there being nothing in the World more conducing to enrich a Kingdom than thriftiness.
3dly, it is denied that they bring over nothing with them; for many have brought hither very good Estates, and hundreds more would do the like, and settle here for their Lives, and their Posterities after them, if they had the same freedom and Security here as they have in Holland and Italy, where the Grand Duke of Tuscany, and other Princes allow them not only perfect Liberty and Security, but give them the privilege of making Laws among themselves'; and that they would reside with us, is proved from the known  Principles of Nature, vz.
Principle 1. All Men by Nature are alike, as I have before demonstrated, and Mr. Hobbs hath truly asserted, how Erroneous soever he may be in other things.
Principle 2. Fear is the cause of Hatred, and hatred of separation from, as well as evil Deeds to, the Parties or Government hated, when opportunity is offered: This by the way shews the difference between a bare connivance at Dissenters in matters of Religion, and a toleration by Law; the former keeps them continually in Fear, and consequently apt to Sedition and Rebellion, when any probable occasion of success presents: The latter disarms cunning, ambitious minded Men, who, wanting a popular discontented Party to work upon, can effect little or nothing to the prejudice of the Government. And this methinks discovers clearly the cause why the Lutherans in Germany, Protestants in France, Greeks in Turkey, and Sectaries in Holland, are such quiet peaceable-minded-men, while our Non-conformists in England are said to be inclined to strife, War, and Bloodshed; Take away the cause and the Effect will cease.
While the Laws are in Force against Men, they think the Sword hangs over their Heads, and are always in fear (though the Execution be suspended) not knowing how soon Councils, or Counselors, Times or Persons, may change, it is only only Perfect Love that casts out fear; and all Men are in love with Liberty and security: It cannot be denied that the Industrious Bees have Stings (though Drones have not) yet Bees sting not, except those that hurt them, or disturb their Hives.

    It is said, the Jews cannot Intermarry with us, and therefore it cannot be supposed they will reside long amongst us, although they were treated never so kindly: Why not reside here as well as in Italy, Poland, and Holland? They have now no Country of their own to go to, and therefore that is their Country, and must needs so esteemed by them, where they are best used, and have the greatest Security.--Sir Josiah Child (1698) A new discourse of trade: wherein is recommended several weighty points relating to companies of merchants, the Act of Navigation, naturalization of strangers, and our woolen manufactures, the balance of trade, and the nature of plantations, p. 142-144 [I modestly modernized spelling--ES]

As I noted in a piece I contributed to The Reading Room, Josiah Child's writings on the naturalization of the Jews, which he developed in successive editions of his works, and his mercantile thought more generally were influential through the intercession of Vincent de Gournay in the political economy circles associated with the Encyclopédie. Child (1630/31–1699) was a MP, and governor of the East India Company, and had not trivial importance for its expansion in India. He is generally treated as a Mercantilist. As can be gleaned from the quoted passage (and larger context), he is advocating for policies that are meant to fundamentally copy Dutch success in trade and economics, and thereby displace their power. He has some claim to being the source of the very idea of economic progress.

Child frankly acknowledges that Jewish immigration and naturalization, which will bring in stock and trade-connections, may have zero-sum effects for relatively small number of English traders. But the overall effect will be good for the English economy due to the expansion of exports and change in culture they will bring. Child clearly thinks that, alongside trade, savings are essential to economic growth. The underlying idea is that once one opens borders to people and capital, a rising population and capital will facilitate trade and enhance competitiveness, and so allow the English to compete more successfully with the Dutch. Child does not suggest here that one should open borders to goods and commodities. People and capital are de facto treated as inputs with the goal (or output) being export of goods and a competitive trade balance.

That immigration may harm some locals was, as regular readers know (recall this post), tackled by John Toland in his (1714) Reasons for Naturalizing the Jews in Great Britain and Ireland, Chapter XVI, by explicitly drawing on Locke’s political economy. But unlike Child, Toland addresses the displacement concerns of what one may call the working poor. Yes, they will have to compete with new workers. But these new workers will also ensure a larger internal market with an improved cost of living (due to "cheaper wrought" goods). And the goods will be cheaper not just because the division of labor can be more specialized, but also because the newcomers will bring technological improvements. The newcomer’s ‘stock’ is also a human capital. This build's on Child's own claim about the Jews ("subtler").  That is to say, Toland grasps and fully articulates the more liberal win-win logic that is essential to Locke's more liberal arguments, and later generalized by Hume and Smith. 

I can't prove that Toland read Child (although it would be surprising if he had not), but I would be amazed if Mandeville hadn't. For Child's "thrifty bees,' are clearly Mandeville's target in the Fable. In Mandeville's hive, they will indulge in luxury spending. 

Child inscribes his argument in what I (following Levy and Peart) call methodological analytic egalitarianism (MAE): the positing of homogeneous human nature such that we're equal for theoretical (including moral and political) purposes. Observed differences are due to cultural, educational, institutional factors. This is developed (as I have argued) by Mandeville, but, as Child also notes, first articulated by Hobbes (recall here). 

That there is an important difference between mere toleration and formal legal recognition/protection is explained by Child in terms of its effect on one's expectations. The underlying logic is Hobbes', but I don't think Hobbes (who emphasizes the positive impact of the rule of law on stabilizing expectations and reducing uncertainty) actually makes this point. The security afforded by the rule of law is conducive to liberty and economic growth.

That "fear is the cause of hatred" does not, I think, have a Hobbesian provenance (although I would be delighted to learn otherwise).* It does have a Shakespearian ring: "In time we hate that which we often fear." And I suspect that lurking behind Shakespeare and Child is Machiavelli's Prince, Chapters 17&19. (There are other Machiavellian allusions in Child.) To be sure  Machiavelli is clear that part of political skill is to be feared without causing hatred. 

In fact, Child clearly recognizes that the benefit of an impartial rule of law, which does not discriminate against some groups, is not in the first instance economic but to reduce civil unrest greatly. And for him this is compatible with a thoroughgoing multiculturalism because he sees no problem in allowing the Jews self-government ("the privilege of making Laws among themselves') so they can maintain their identity.

RIP: Noel Swerdlow (1941-2021)

My graduate school classmate at The University of Chicago, Matt Kerrigan Frank, alerted me to the fact that Noel Swerdlow recently passed away. (See this obit.)

I met Noel on one of the first days in graduate school back in September 1995. The seminar room was busy filling up with faculty and graduate students from philosophy and history of science for one of the many, weekly joint seminars I would attend during the next seven years. I was trying to impress David Malament with my knowledge of the Huygens/Newton debate which I had been researching under the guidance of George Smith (one of my undergrad gurus). An old crank -- I now realize he was then barely older than I am now-- interrupted my narrative to tell me that Huygens' objections to Newton's inverse law were primarily metaphysical. I tried to explain to the guy that Koyré's view had been refuted (by George and me). I never get a chance. I asked David, "who is that old man?" and he informed me it was Noel Swerdlow.

Over the next few years I saw Noel in action at the various joint seminars: often abrasive and impatient, but at times quite brilliant. Some of his exchanges with visiting scholars could be quite spirited. (His exchange with Motti Feingold was legendary, but they were or became close friends.)

My relationship with Noel evolved once he spent some time away at Dibner (where George had become director). After we met again on campus, he told me with a big smile "you could have told me about all the archival research that went into the Huygens paper [see here]. I thought you were just bluffing. It's really marvelous work--I love the argument with the maps." I meekly tried to say, "i tried." But something had changed, I was now on his good side. And to receive a compliment from Noel (or anyone in graduate school) was one of the highlights of my graduate career.

He was famous for his work on Babylonian astronomy (he was a student of the legendary Otto Neugebauer), but I have to admit that as a PhD student I loved learning about Copernicus and his (obscure to me) peers from Noel. I also have a memory of him playing piano, but I have not seen this mentioned in any obituary so maybe I am confused. We discovered our shared love for opera at the Lyric, and I always looked forward to seeing him there. (He was very learned on opera.)

When I was nearly done with my PhD, I had the luminous idea to ask him to read Adam Smith's posthumous "History of Astronomy" with me. This piece was central to my dissertation. I was delighted he agreed, and even more that he had never read it before. (I always assumed Noel pretty much had read everything.) I expected that Noel would be extremely critical of Smith as a historian (as the editors of the Oxford edition are). But Noel was, in fact, quite impressed with Smith's historical acumen and, more importantly, gave me a graduate seminar on all the possible sources Smith could have consulted during the 18th century. He also flattered my vanity in assuming that I was intimately familiar with all the works of Regiomantus, Riccioli, and Peuerbach. Often after our reading group at The Medici I had to go to special collections to figure out what he was saying. (This was before the age of google.books!)

Later, when I realized I had bombed out on the job-market first time around, he even helped me apply (and wrote a letter) for a project on Smith as historian of astronomy. But that was not funded.

At the time, i assumed it was normal for historians of astronomy to have a position in an astronomy department.  So, I later used that as an argument for my paper on "philosophy and a scientific future of the history of economics" But I have learned it is much less common (although archeoastronomy is sometimes practices by professional astronomers). 

That paper was part of a rather contentious symposium. organized by Paola Tubaro & Erik Angner. To be clear the symposium was lovely but our audience of established historians were underwhelmed. I think referees managed to prevent bublication of some of the papers.
Anyway, my core idea was that the history of economy theories could play an evidential role in present day economics as the custodians of the theories and data of the past. This was not well received at all. But it let to an invitation by Bertram Schefold to reflect on the possibilities and significance of economic history. I did not know much about the practice of economic history. But as I was musing about the invite, I wondered what the oldest economic data might be. The hunch being that if you have data very far apart this might help you to calibrate important measures.  So on a lark I googled (!) "Babylonian economics" and I was directed to Alice Louise Slotsky The Bourse of Babylon Market Quotations in the Astronomical Diaries of Babylonia, which I read and loved.

I was astonished to learn that the very clay tablets with astronomical data Noel had studied also had economic data on them! I started drafting one of the craziest and fun papers I ever wrote, "Prophecy, eclipses and whole-sale markets: A case study on why data driven economic history requires history of economics, a philosopher’s reflection." [published in Jahrbuch für Wirtschaftsgeschichte/Economic History Yearbook 50.1 (2009): 195-206.]

With some trepidation I sent an early draft to Noel. Rather than scolding me for my amateurishness (this was the initial response of some of my Leiden colleagues who were experts on ancient Mesopatamia--I think they really thought I was crazy), he wrote lengthy letters on the quality of the data that I wanted to use. (The published version of the paper includes excerpts from his letters to me. ) Nobody seems to have read this paper, but it was good enough for me that Noel (who called my attention to relevant other scholars) took it seriously enough to try to help me improve it.

In later years, Noel would always read works I sent him. Sometimes even my blog. Even when I relied on impeccable scholarship of others, he would correct mistakes that had crept into now famous scholarly works. My favorite letter, however, is this one-liner, "Take it down; it's nonsense!--Noel."

Conversation is a Surprisingly Difficult Skill; the Covid Blues, part #28752

I wrote my most recent entry in my 'covid diaries' (here; here; here; here; here; here; here; here; and here) a week ago, just as a noticeable upswing occurred. Since, I am clearly capable of more physical activity -- I often clock an hour of intermittent walking each day now -- and I have a few 'clear' hours each day where I feel 'normal.' This despite the fact that my chronic insomnia is ongoing. I still can be struck by sudden head-fatigue out of the blue without any apparent trigger, but more often than not the head fatigue and occasional headache is a consequence of too much activity. I still sometimes awake to a headache (almost certainly partially responsible for the insomnia), but I now can be more confident it will dissipate during the day. 

The lecture course I was responsible for has ended; I now spend some of my good morning hours copy-editing proofs, which had been piling up, in twenty minute spurts and answering emails from the brilliant crew creating an index for one of my monographs. The department has been pretty good in leaving me alone during my officially sanctioned incapacity, but it is noticeable that beyond the many generous inquiries about my health, any business message I receive tends to be some bad news or an annoying issue that requires my relatively urgent attention.

Three days ago, during one of my insomniac mornings, I picked up Keynes's Essays on Persuasion. Despite his evident antisemitism, and the sense he is talking to a different audience than me, I read it with great deal of pleasure. I had forgotten what a wonderful stylist he is! And I was struck by how much he anticipates what came be to known as neo-liberalism, and how astute on the major political fault-lines around sexual identity of what we now call post-keynesian society (especially amazing because he never witnessed the keynesian version). (More about that some other time.) After an hour, as my family was awakening, I noticed with a quiet ecstasy that I had read him for a full hour without any headaches. Sadly, the feat has not been repeated since. 

One nice thing about my relative improvement -- not a moment too early, I have been bedridden for over three months now -- is that I have time to reflect on some of the symptoms that escaped my notice earlier. What follows was prompted by the aftermath of a nearly hour long phone conversation with a friend over the week-end. I had been needing some professional advice, so I made a phone-date with a trusted academic friend whom I have known forever. I felt in safe hands, and was grateful for his insight. There was not a single note of dissonance during the conversation and for most of it I just listened. (My wife later told me that it was noticeable that I said less and less as the conversation went on.)

I should mention that when I could, I had been avoiding zoom/phone conversations since a few weeks after I fell ill. But that was because of my extreme irritability to human voice and sensitivity to certain (not all) sounds that I had developed alongside my Covid. But while the irritability and pseudo-misophonia has not disappeared altogether, in my good hours it's no worse than normal. 

After we hung up. I was drained, and a pale green. I laid in bed for three hours uninterested even in a Jason Statham movie. I was also in a kind of shock. It had never occurred to me that listening to somebody and remain engaged with what they say, when you like them and they are talking about something you care about (Ceteris paribus), is work. (Yes jokesters, I am open to the suggestion I have never tried my hand at listening before!) 

Most of my cognitive incapacitation I interpret through the filter my GP handed me a few weeks (months?) ago, when she pointed out that anything that requires my brain to multi-task or split attention creates a kind of overload now. (As an aside, I have been bemused that both my GP and my occupational physician have deployed a set of metaphors -- 'energy'; 'force'; 'etc. -- to help me grasp my own situation that can only be described as new-agey.) And I have become rather disciplined in avoiding situations in which that is likely. So, even at home I avoid conversations or rooms with more than one other person. This is also why, on the whole, I am not watching complex drama's on Netflix, but action movies.

In 2006, when I first met Vernon Smith, I had the kind of interaction that in the hands of a better writer would be comedy gold. I had just landed my first tenure track position, and I was eager to talk about my paper in which I modestly criticized his methodological views, while Vernon's agenda was to learn from me about Adam Smith.   At some point during the conversation, I realized Vernon Smith (who had just won the Nobel in economics) was a very deep reader of Smith. (I warmly recommend Vernon's book with Bart Wilson.)* Since I had already learned quite a bit about Smith from Buchanan in the preceding years, and was then a respectful reader of Sen on Smith, this gave me the wholly false impression that economists as such cared about Smith. 

Anyway, during this conversation, he planted the idea in my head that Adam Smith might have been an Asperger. (Later I learned Vernon had shortly before revealed himself ('come out'?) as an Asperger.) Vernon's remark never guided my interpretation of Adam Smith (although it seems plausible hypothesis to me), but like many readers of (Adam) Smith I find his phenomenology of daily life astute, and I have been taught to see what he calls 'situations' or interactions in a new kind of light. As it happens, on my interpretation of Adam Smith, for Smith many of our interactions occur while we are simultaneously making rapid judgments ground in and about counterfactuals several layers deep about the agents' principally concerned (which might include ourselves). If this is confusing or too terse go read my book!

Now while I admire Adam Smith's description of social life, it is by definition not something you can quite introspect. (In some respects Smith's reliance on sub-conscious processing goes much further than Hume's.)+ So, I have always treated this part of Smith's moral psychology as an interpretation of his text not necessarily obvious truth. 

As I was reflecting on my total exhaustion after a kind and nurturing conversation, I wondered in silent amazement how much cognitive skill goes into a simple (low stress) conversation. And before I knew it I heard myself saying to myself that tacitly keeping track of all the boxes and, especially, diamonds during a conversation must be quite (ahh) energy intense. :)

Before hands-free calling opened the floodgates of people talking while walking on the street, the only people seen mumbling to oneself were the people you tried to avoid and the elderly (sometimes the same person). In fact, and I close on this, one side-effect of my covid is that I am starting to grasp some of the elements of what it's like to be elderly. 

For the first time in decades, I have no agenda each day; and I am incapable of doing anything quickly. (That still doesn't stop all the mishaps; while I didn't burn down the kitchen, last week I broke the microwave plate.) I also can't jump into any activity my son might tempt me with. His cheer, which ordinarily I would find lovely, now may in its exuberant expression may well discomfort me. And when, after reflecting on this and sundry matters,** I asked my wife whether I had aged these last few months, she said in the kindest possible way, 'I just had that thought last week;' she must have sensed the bullet pierce my heart before I registered it, so she quickly added for good measure, "but maybe with a haircut we can de-age you." 

 

 

David Hume's unusual (Lockean) argument for free trade

Nothing is more usual, among states which have made some advances in commerce, than to look on the progress of their neighbours with a suspicious eye, to consider all trading states as their rivals, and to suppose that it is impossible for any of them to flourish, but at their expence. In opposition to this narrow and malignant opinion, I will venture to assert, that the encrease of riches and commerce in any one nation, instead of hurting, commonly promotes the riches and commerce of all its neighbours; and that a state can scarcely carry its trade and industry very far, where all the surrounding states are buried in ignorance, sloth, and barbarism.

It is obvious, that the domestic industry of a people cannot be hurt by the greatest prosperity of their neighbours; and as this branch of commerce is undoubtedly the most important in any extensive kingdom, we are so far removed from all reason of jealousy. But I go farther, and observe, that where an open communication is preserved among nations, it is impossible but the domestic industry of every one must receive an encrease from the improvements of the others. Compare the situation of Great Britain at present, with what it was two centuries ago. All the arts both of agriculture and manufactures were then extremely rude and imperfect. Every improvement, which we have since made, has arisen from our imitation of foreigners; and we ought so far to esteem it happy, that they had previously made advances in arts and ingenuity. But this intercourse is still upheld to our great advantage: Notwithstanding the advanced state of our manufactures, we daily adopt, in every art, the inventions and improvements of our neighbours.--David Hume "Of the Jealousy of Trade"

Of the Jealousy of Trade presents itself as a companion piece to "Of the Balance of Trade," and is easily overshadowed by it. That's a shame because Hume's particular argument is still timely, as I look at the news reporting on Brexit talks. Unlike the more familiar Smithian ('absolute advantage') and Ricardian ('comparative advantage') arguments,* Hume's here is focused on what we may call the epistemic effects (or positive externalities) of trade. I assume this is familiar in the literature, but I had not noticed it before.

For Hume trade exposes us to innovations of others and induces imitation, learning, and what he calls "emulation" from them. And the effect of this is enhanced technology and productivity ("we daily adopt, in every art, the inventions and improvements"). I don't want to overstate the originality of Hume's argument not just because I may be unfamiliar with relevant contemporary authors, but also because it is pretty clear that Hume is extending an important argument by Locke.

Recall that in Locke's art of government (in sections 41-42 of the chapter 5 of "Two Treatises") and in his (1695) "Further Considerations Concerning Raising the Value of Money," Locke advocates for policies that would grow the population and simultaneously grow their skill/productivity. This argument was noticed and emphasized by Toland in his argument for Jewish emancipation (recall). And, in fact, Hume' echoes one of Locke's key arguments. Hume writes, shortly after the passage quoted above, "But if our neighbours have no art or cultivation, they cannot take them; because they will have nothing to give in exchange. In this respect, states are in the same condition as individuals."

In section 43, of Chapter of the Two Treatises, Locke had made the same conceptual point in terms of the American Indian being unable to benefit from the same amount of labor in land as the European because he lacked wealthy neighbors. Locke's point here is often missed because scholars and critics are more focused on debates about his labor theory of value and to what degree these passages support colonialism. But it would be very surprising if Hume had not noticed the point. After all, this is treated as axiomatic by Hume in this essay ("it is obvious, that the domestic industry of a people cannot be hurt by the greatest prosperity of their neighbours;").

I do not mean to ignore the significance of pro-European free trade argument ("a British subject, I pray for the flourishing commerce of Germany, Spain, Italy, and even France itself") lodged at the end of  the little essay. But I have already discussed it in the context of Foucault's arguments of 24 January 1979, lecture 3, The Birth of Biopolitics. 54-6.

 

David Hume, Intellectual Arbitrage, and the Grounds of True Freedom

On the other Hand, Learning has been as great a Loser by being shut up in Colleges and Cells, and secluded from the World and good Company. By that Means, every Thing of what we call Belles Lettres became totally barbarous, being cultivated by Men without any Taste of Life or Manners, and without that Liberty and Facility of Thought and Expression, which can only be acquir'd by Conversation. Even Philosophy went to Wrack by this moaping recluse Method of Study, and became as chimerical in her Conclusions as she was unintelligible in her Stile and Manner of Delivery. And indeed, what cou'd be expected from Men who never consulted Experience in any of their Reasonings, or who never search'd for that Experience, where alone it is to be found, in common Life and Conversation?

'Tis with great Pleasure I observe, That Men of Letters, in this Age, have lost, in a great Measure, that Shyness and Bashfulness of Temper, which kept them at a Distance from Mankind; and, at the same Time, That Men of the World are proud of borrowing from Books their most agreeable Topics of Conversation. 'Tis to be hop'd, that this League betwixt the learned and conversible Worlds, which is so happily begun, will be still farther improv'd to their mutual Advantage; and to that End, I know nothing more advantageous than such Essays as these with which I endeavour to entertain the Public. In this View, I cannot but consider myself as a Kind of Resident or Ambassador from the Dominions of Learning to those of Conversation; and shall think it my constant Duty to promote a good Correspondence betwixt these two States, which have so great a Dependence on each other. I shall give Intelligence to the Learned of whatever passes in Company, and shall endeavour to import into Company whatever Commodities I find in my native Country proper for their Use and Entertainment. The Balance of Trade we need not be jealous of, nor will there be any Difficulty to preserve it on both Sides. The Materials of this Commerce must chiefly be furnish'd by Conversation and common Life: The manufacturing of them alone belongs to Learning.--David Hume "Of Essay-Writing"+

I quote from one of Hume's withdrawn essays. I was reminded of this essay by Emily Nacol's An Age of Risk; she makes the important point that Hume "frames this exchange as a risk-free, positive-sum one that issues in profit on both sides, in a metaphor that prefigures the kind of argument he will make about the positive-sum experience of free trade in his essays on commerce." (86-7) Today's digression is a further elucidation of this thought.

The title of Hume's essay may mislead those expecting instruction in writing essays. It's not a how-to, self-help manual of that kind. Rather, the official theme of the essay is to explain the utility or advantageousness of the genre. (I return to that below.) Much of the subtext of the essay is devoted to the explicit shaping of the judgment of his implied audience -- learned and conversable women -- into seeing how worthy his works (and works like it) are. And it is an open question how much of this is servility or (or commercially prudent) flattery, and how much of it is sincere (I return to this below.) This is a stark contrast to the more youthful Hume, who in the "advertisement" to the Treatise where he was more willing to claim that he allowed himself to be instructed by the judgment of his public ("the approbation of the public I consider as the greatest reward of my labours; but am determin'd to regard its judgment, whatever it be, as my best instruction.") Unfortunately "Of Essay-Writing" involves Hume in sexist stereotypes (some of which thinly disguised by attempts at wit), and so one hopes this is the reason why Hume thought it better to withdraw it.

On a different day I would reflect a bit more on how in the nature of a speech act of withdrawing a text in circulation, or not reprinting it in later editions of a text, in the age of printed and electronic publication. Doomed to failure, but, perhaps, not intending to fail. But here I want to focus on three of Hume's very striking claims. 

First, Hume views his essays as a form of what we would call arbitrage between two relatively closed domains: that of specialist learning and that of semi-public conversation (the "learned and conversible Worlds"). And Hume thinks this arbitrage is useful to both domains ("their mutual Advantage"). 

The question Hume leaves hanging is to what degree this arbitrage gives rise to a third domain. Now sometimes arbitrage does not give rise to anything new: it is merely a mechanism to facilitate commerce that would perhaps not happen or occur less efficiently (rapidly, etc.) without the arbitrage. But arbitrage can also generate new products; the instruments that facilitate trade (money, optical fiber cables, mammoth tankers, etc.) may themselves become thriving industries with their own technicians, after all.   

That a third domain is generated by Hume's arbitrage is partially obscured by the fact that in addition to commercial and economic tropes, Hume also uses language of diplomacy (in which he represents himself as an ambassador from the learned). Diplomats are primarily representatives and so it is unnatural to think of them as somehow productive of new kinds. But even Hume notes, explicitly, that diplomates generate treaties and federations ("League, offensive and defensive,") that may take on a life of their own.

So, Hume's essays are not merely arbitrage between other domains, they also are intended to help reinvigorate, perhaps constitute, the domain of what he calls "polite Writing" and Belles Lettres. That he sees his arbitrage activity as more than just facilitation of trade, is clear in that he hopes to shape the judgment of his audience of it. He is not asking his audience to become better judges of the world of learning -- they require his arbitrage for that! -- not better judges of the conversible world (whose criteria are immanent in common life). He does hope, of course, that his arbitrage will improve both domains, so indirectly criteria of judgment in these may be shaped by his activity.

As an aside, as regular readers know I am not un-attracted to the idea of philosophy as a form of intellectual arbitrage. (It's the kind of thing I associate with Liam Kofi Bright's writings bringing together formal tools with topics in fields previously unconnected.) One important difference since the time of Hume's writing is that (recall my musing on synthetic philosophy here; and here with a nod to Lewens) given the fracturing of the learned world into many esoteric domains, intellectual arbitrage can now take place among many specialist sciences as well as among the specialist sciences and the manifest image along many (to use Galison's phrase) trading zones.

So, with the growth of sciences arbitrage opportunities have grown, too. I leave it to a sociologist of science to formulate the law that accounts for the proportion of arbitrage to underlying intellectual developments!* Either way, Hume strikes me as an important role-model for the very possibility of intellectual arbitrage and theorizing about it. In particular, such arbitrage promotes a liberal civilization: one that ends the zero-sum cycle of winners and losers.

Second, Hume makes a striking, easily missed claim about the significance of conversation. It is necessary (can only be acquir'd) for the acquisition of "Liberty and Facility of Thought and Expression." I think Hume is here more radical than one may recognize. It is easy to assume for those shaped by Descartes' meditator, or the recurring image of an arm-chair in a quiet study found in philosophical writing, to assume that what the mind needs to be prepared for genuine ('facility') and independent ('liberty') thinking is a withdrawal from the noisiness of everyday and the stupidity of common sense and public opinion. 

And while Hume certainly allows that some thinking requires silence and withdrawal, the mind gets prepared for this by being socially engaged in discussion with others. We can see recognition of this insight in such institutions as the oxbridge high table, the public seminar, and the social club. Hume would certainly include the coffee house and dinner table in this category. It also follows that for Hume the world of learning is even in an intellectual sense not wholly self-sufficient.

Hume does not quite explain why the mind's emendation toward liberty has to be socially embedded. That's in part because here he does not explain what he means by liberty of thought (a phrase that echoes Cicero, Spinoza, and the freethinkers). Presumably the idea is that in conversation we are practiced in encountering the viewpoints of others on a variety of topics, of listening, and of sharpening our argumentative and rhetorical skills. Hume also seems to think that in conversation we are exposed to more variety of human life/experience. 

I could stop here. But I want to note a third feature. For Hume's claim echoes (recall) an important passage -- which he himself claims is free from "servility and flattery" -- in his dedication (to the tragedian Home) of his Four Dissertations:

Another instance of true liberty, of which antient times can alone afford us an example, is the liberty of thought, which engaged men of letters, however different in their abstract opinions, to maintain a mutual friendship and regard; and never to quarrel about principles, while they agreed in inclinations and manners. Science was often the subject of disputation, never of animosity. Cicero, an academic, addressed his philosophical treatises, sometimes to Brutus, a stoic; sometimes to Atticus, an epicurean.

Liberty of thought is characterized by the possibility of mutual friendship and conversation among those that may differ in ideology (abstract opinions). That is to say, liberty of thought is a virtue in the context of political and theoretical polarization. So, strikingly, the very social institution that make freedom of thought possible (conversation, itself (recall) the grounds of civilization) are also the site of its expression, while simultaneously vulnerable to implosion. 

The pandemic makes the effects of the absence of conversation visible. On a personal level it reduces a sense of connection (see this moving post by Helen de Cruz). But if Hume is right then one of the long-term social casualties of the past year is the absence of a fertilizer of freedom. But, perhaps, if i understand Hume correctly, the writing of essays, to engage in arbitrage, which involves finding the opportunity for mutual gain, presuppose some such liberty of thought and is intended to contribute to it. And so maybe we have others means to encourage it.

Ambedkar on Bertrand Russell

The laws of consumption, it may be noted, are simply certain deductions from the economic doctrine of the utility theory of value Formulated, as a reaction to the classical theory by Cournot, Gossen, Walres [sic]Menger and Jevons, it no longer thinks of utility as a quality inherent in the objective thing or condition but as dependent upon the capacity it possesses to satisfy human wants. This being so, the utility of an object varies according to the varying condition of the organism needing satisfaction. Even an object of our strongest desire like food may please or disgust, according as we are hungry or have over-indulged the appetite. Thus utility diminishes as satisfaction increases. In other words as satisfaction is the pleasurable activity of a particular organ or a group of them, the curve representing the relation of the organ to the object of its satisfaction varies inversely with the condition of the organ.
If Mr. Russell had carefully gone into the implications of this psychological analysis, he would certainly have avoided the misconception in question. For what does the psychological analysis really mean ? Why does the utility of an object tend to be zero or even negative ? This takes place it may be argued either (1) because at some point in the process of satisfaction the particular organ irritated ceases to derive any further satisfaction by feeding itself on the object of its craving or (2) because other organs needing a different kind of satisfaction clamour against the over-indulgence of some one organ at their expense. Prof. Giddings holding the latter view says “ if the cravings of a particular organ or a group of organs are being liberally met with appropriate satisfactions, while other organs suffer deprivation, the neglected organs set up a protest, which is usually sufficiently importunate to compel us to attempt their appeasing. The hunger of the neglected parts of our nature normally takes possession of consciousness, and diverts our attention and our efforts from the organ which is receiving more than its due share of indulgence”.13 Of the two alternative explanations that of Prof. Giddings is probably the more correct. Having regard to the behaviouristic hypothesis, of the organism as an active entity, it is but proper to suppose that there does exist this hunger of the entire organism for a varied satisfaction appropriate to each of its organ which would engender such a protest. It is this protest that compels obedience to what is called the law of variety in consumption. If this is a fact it is difficult to understand how one organ by perpetual dominance can mutilate the whole organism. On the other hand, though one at a time, all the appetites have their turn. Human nature is, thus, fortunately, provided by its very make-up against a one-sided development leaving no doubt as to its promise for an all-round development in a congenial environment. Whether it will be able to obtain the miscellaneous food-material, intellectual or spiritual it craves for is a matter beyond its control. If it is mutilated by the lack of variety of food, it will be through social default and not its own. B.R. Ambedkar (1918) "Mr. Russell and the Reconstruction of Society," in Dr. Babasaheb Ambedkar: Writings and Speeches: Vol. 1 Compiled by Vasant Moon, 490-491

A moment of google enhanced, idle speculation -- would Russell and Ambedkar have known each other? -- prompted by a fascinating essay by Meena Krishnamurthy on Ambedkar's early writings (1916) on caste that I had recently edited brought knowledge (see here) of the existence of Ambedkar's review of Russell's (1916) The Principles of social Reconstruction. (also known as Why Men Fight).The review was initially published in the Journal of the Indian Economic Society in 1918.* 

Ambedkar is that rare world-historical figure -- among his many legacies one can single out the authorship of the Indian constitution -- who, as one starts to read his writings, turns out to be a serious intellectual, too. So, I was thrilled to see he wrote on Russell. And while it is, perhaps, true to say that Russell's star is fading within professional philosophy -- I doubt he is much taught or studied outside of history of analytic -- in virtue of being the rhetorically most gratifying founder of analytic philosophy who shaped our ways of thinking, returning to him always is rewarding. When he wrote the review he had just obtained two MAs at Columbia University, and was on leave from the LSE back in India while writing a dissertation in economics (conferred by UCL after the war). His learning shines through the review despite the orientation of, and self-limitation on,  the "review...meant for an economic journal" is a focus on Russell's analysis of the institutions of property and the modifications it is alleged by Mr. Russell to produce in human nature." (484)

Despite this self-limitation, there is plenty of (political) philosophy in the review (Nietzsche and Dewey are discussed cleverly). And, in fact, one of his main polemical targets, which he discusses while treating Russell's philosophy of war, is the idea that Indian identity is (or ought to be) tied up with "the gospel of quieticism and the doctrine of non-resistance." (486; I am not an expert on these matters, but I do note that Gandhi had returned to India a few years before, although was not yet leader of National Congress.) Ambedkar wishes to decouple Russell from pacifism. And he treats Russell approvingly, I think, as a liberal reforming advocate of (what we may call) non-violent agonism as the key to social progress (see, especially, p. 487). Some other time I hope to return to this.

Okay, let me turn now to the bit I quoted from the review at the top of the post. The target of Ambedkar's argument is Russell's claim (itself partially influenced by James) that love of money in human nature mutilates itself by stimulating one appetite at the expense of all others. Ambedkar has the following passage in mind (which he quotes partially):

It is the worship of money that I wish to consider: the belief that all values may be measured in terms of money, and that money is the ultimate test of success in life. This belief is held in fact, if not in words, by multitudes of men and women, and yet it is not in harmony with human nature, since it ignores vital needs and the instinctive tendency towards some specific kind of growth. It makes men treat as unimportant those of their desires which run counter to the acquisition of money, and yet such desires are, as a rule, more important to well-being than any increase of income. It leads men to mutilate their own natures from a mistaken theory of what constitutes success, and to give admiration to enterprises which add nothing to human welfare. It promotes a dead uniformity of character and purpose, a diminution in the joy of life, and a stress and strain which leaves whole communities weary, discouraged, and disillusioned. Chapter 4. [emphasis in original]

Now, Russell here echoes Hobson's view that conditions of modern life homogenize. But in a clever inversion of Adam Smith -- who famously claimed that it was excessive division of labor on the factory floor that mutilates our nature -- Russell thinks this homogeneity is an effect of widespread avarice, which in turn, is the effect of the consequence of market and especially property owning society more generally even if (Russell goes on to contrast the United States and England on this point) how this general avarice manifests itself, and is motivated, may be culturally conditioned.  

Ambedkar tackles Russell's claim from both the production side and the consumption side (to which the passage quoted above this post). What's noteworthy about Ambedkar's argument is not his psychological interpretation of the law of diminishing marginal returns. But rather that he takes this law itself to be caused (most likely) by a kind of internal balancing/competition among organs of the organism (the whole human). And the appetites and desires of the general organism, and its direction/orientation, is  caused by the relative strength of the various internal organs subject to this internal balancing/competition. 

Ambedkar's model was derived from Giddings, who he probably encountered at Columbia.** Giddings himself is notable figure because he is a key figure in American early social science. The model anticipates, in rough outline, the mathematical models of decision making (with utility curves) as an internal to our brains/nervous system conflict over resources in the brain made popular by behavioral and neuro-economists in the 1990s or so.  

The interesting twist Ambedkar gives to Giddings' model (perhaps it is in Giddings) is that by denying that homogeneity is normal, he can claim that if one does observe one-sided mental development this is the effect social environment. One may think this just is Russell's point. But Ambedkar had already denied (from the production side) the plausibility of Russell's claim on other empirical grounds. (To summarize and simplify: Ambedkar thinks that all things being equal, the richer one becomes the more risk averse one becomes.) But the upshot of Ambedkar's argument is that if one does encounter a homogeneous society all one needs to do, if society has the resources, is to provide an outlet for, and satisfaction of, diversity of human passions; then a rich human diversity will reassert itself. 

 

On the Convergence of Economics and Computer Science (with comments on the role of moral reasoning in AI)

We can generalize this idea across our entire model space. Suppose we enumerated all the possible numerical pairs <error, unfairness> achieved by the models we are considering (e.g., SAT cutoffs)....

So each point corresponds to a different model; the x-coordinate of the point is the model’s error, and the y-coordinate is its unfairness score...The key thing to realize is that any model that is not on this boundary is a “bad” model that we should eliminate from consideration, because we can always improve on either its fairness score or its accuracy (or both) without hurting the other measure by moving to a point on this boundary.

The technical name for this boundary is the Pareto frontier or Pareto curve, and it constitutes the set of “reasonable” choices for the trade-off between accuracy and fairness. Pareto frontiers, which are named after the 19th-century Italian economist Vilfredo Pareto, are actually more general than just accuracy-fairness trade-offs, and can be used to quantify the “good” solutions to any optimization problem in which there are multiple competing criteria. One of the most common examples is the “efficient frontier” in portfolio management, which quantifies the trade-off between returns and risk (or volatility) in stock investing.

The Pareto frontier of accuracy and fairness is necessarily silent about which point we should choose along the frontier, because that is a matter of judgment about the relative importance of accuracy and fairness. The Pareto frontier makes our problem as quantitative as possible, but no more so.

The good news is that generally speaking, whenever we have practical algorithms for “standard,” accuracy-only machine learning for a class of models, we also have practical algorithms for tracing out this Pareto frontier. These algorithms will be a little bit more complicated—after all, they must identify a collection of models rather than just a single one—but not by much... 

While the idea of considering cold, quantitative trade-offs between accuracy and fairness might make you uncomfortable, the point is that there is simply no escaping the Pareto frontier. Machine learning engineers and policymakers alike can be ignorant of it or refuse to look at it. But once we pick a decision-making model (which might in fact be a human decision-maker), there are only two possibilities. Either that model is not on the Pareto frontier, in which case it’s a “bad” model (since it could be improved in at least one measure without harm in the other), or it is on the frontier, in which case it implicitly commits to a numerical weighting of the relative importance of error and unfairness. Thinking about fairness in less quantitative ways does nothing to change these realities—it only obscures them.

Making the trade-off between accuracy and fairness quantitative does not remove the importance of human judgment, policy, and ethics—it simply focuses them where they are most crucial and useful, which is in deciding exactly which model on the Pareto frontier is best (in addition to choosing the notion of fairness in the first place, and which group or groups merit protection under it, both of which we discuss shortly). Such decisions should be informed by many factors that cannot be made quantitative, including what the societal goal of protecting a particular group is and what is at stake. Most of us would agree that while both racial bias in the ads users are shown online and racial bias in lending decisions are undesirable, the potential harms to individuals in the latter far exceed those in the former. So in choosing a point on the Pareto frontier for a lending algorithm, we might prefer to err strongly on the side of fairness—for example, insisting that the false rejection rate across different racial groups be very nearly equal, even at the cost of reducing bank profits. We’ll make more mistakes this way—both false rejections of creditworthy applicants and loans granted to parties who will default—but those mistakes will not be disproportionately concentrated in any one racial group. This is the bargain we must accept for strong fairness guarantees. Michael Kearns & Aaron Roth (2019) The Ethical Algorithm: The Science of socially Aware Algorithmic Design, Oxford University Press, 80-84 [the linked page should have their diagram]

A few weeks ago, after I started blogging (here and here) about the ethics of algorithms,* I received a Facebook advertisement-notification from Amazon that Michael Kearns and Aaron Roth (the authors of The Ethical Algorithm) had become Amazon scholars. "What an interesting way," I thought, "to advertise books to me." I clicked on the link and read the corporately sponsored interview with them. Perhaps because my expectations were low , but I was surprised how thoughtful -- "the main thesis of our book, which is that in any particular problem you have to start by thinking carefully about what you want in terms of fairness or privacy or some other social desideratum, and then how you relatively value things like that compared to other things you might care about, such as accuracy" -- they sounded and how relevant to my own project. It was clear theirs was a project about thinking about trade-offs (a favored phrase of theirs) about social values in algorithm design. More important to me, since I had just argued that thinking about the ethics of algorithms seems to replicate the very social problems familiar from thinking about ethics in economics, I wanted to see if my hunch was correct. Two clicks later I ordered the book, and a day later it was delivered.

A few years ago (well back in 2012), I used to joke that as even theoretical economists become more applied, becoming (thanks to increasingly cheap computer power) experts at massaging results out of giant "administrative data-sets,"+ economics ran the risk of being displaced by statisticians and, especially, computer scientists. While then I was largely ignorant of deep learning, it was clear to me that fruitful searches for robust and surprising correlations in data didn't require (as Justin Wolfers then suggested) the restrictive assumptions of economic theory. (Think about it: econometrics and economic theory artificially restrict the search space that can be more fully explored with deep learning machinery.) And indeed deep learning can dispense with economic theory.**

But in reading their interview and their splendid The Ethical Algorithm I realized that back in 2012, I had missed a crucial issue: that algorithmic design is conceived in terms of optimization problems under constraints. Since Lionel Robbins (back in the 1930s) this just is the definition of economics (and it enabled a split between ethics and economics). And once in algorithmic design you are interested in more than predictive accuracy, and so have to deal "with multiple competing criteria," a whole set of mathematically precise diagnostic tools familiar from economics can be imported into algorithmic design (as the passage quoted above suggests). So, I now realize that increasingly computer science and economics will merge (as presumably is happening already in finance-notice the passing mention of "portfolio management" in the block quote above). 

The previous is sufficient for a digression. But I also want to call attention to how moral issues are conceived, and not, in the (ahh) paradigm articulated by Kearns and Roth. And, in particular, I want to call attention to four levels, or sites, where they enter in. So, formally moral issues enter into two sites of algorithmic design: (i) first a choice in setting a goal (such as privacy or fairness) or success criterion for the algorithm. In general, Kearns and Roth view this as a constraint on accuracy that generates a trade-off among accuracy and other possible criteria. Kearns & Roth are very good at explaining that the way one makes precise these moral goals need not be univocal or can be very context sensitive. (So, there are different ways to think about fairness or privacy in algorithmic settings.) 

In turn, these trade-offs can be modeled in terms of pareto frontiers. And this generates the second site: (ii) at the level of a decision about ''which model on the Pareto frontier" to use in practice. Conceptually that's a distinct choice from how to encode 'fairness' into an algorithm, but obviously one can imagine that in practice, in the spirit of experimentation, there are going to be interactions between (i) and (ii) within a general goal-oriented design process. (Recall that an algorithm can be understood, even identified, in terms of the functions and goals it serves--something I have promised to return to.) 

Some time soon, I hope to write some more critical posts about their hope of turning algorithm design into a kind of dream of turning ethics into an optimization problem. (That way of putting it is indebted to Kathleen Creel, a young scholar who has written a gem of a paper on opacity in computational systems.) And one can see how the combination (i) and (ii) lend themselves, despite the situationism in (i), to a form of moral reasoning familiar from (and analogous, if not identical to) utilitarianism. Of course, one can let other values enter into the decision of (ii). 

Now, in their argument (ii) tends to happen in algorithm design/development process within, say, a company. But the choice one makes about which model on the Pareto frontier to inhabit generates (ahh) consequences to wider society. Some of these wider consequences -- laws, regulations, social norms, etc. -- are already internalized as constraints, but some are simply outside the company's mission/attention and not anticipated by the legislature.

The point in the previous paragraph fits their general argument. Because the "core concern" of their book is that "optimizing" on some explicit social goals, predictably and foreseeable, has (even in the relatively short term) unintended and perhaps ex ante unknowable side effects. (188) There is, thus, not just (as Kearns & Roth note) a (iii) a prior moral and political decision to be made whether or the extent to which algorithms are permitted or primarily responsible for decisions in a domain or (as they often describe it) norm enforcement (177). In the book they offer as an example, of the former "automated warfare," (175; 178).  But there is also (IV) a question how society should think about, and perhaps compensate for or mitigate, these entirely unintended and perhaps unknowable side effects that are a foreseeable outcome pattern from embracing algorithmic practices. This matters especially if such outcome patterns (recall) create  asymmetric harm patterns to vulnerable populations.

And, not unlike the economists, the way Kearns & Roth have set up their conceptual scheme (IV) turns out to be delegated to policy and so is not part of the ethical algorithm at all (or the responsibility of the firms that profit from them). To put this in their terms, we (now) know that a system with the very best portfolio management can create unexpected, general externalities. Something similar is now foreseeable in their field. (I am not sure what the equivalent term of true Knightian uncertainty in AI is, but they need it!) So given (IV), it would be good to prevent regressive forms of socialization of risk while privatizing profit.