"The Darwin Economy" by Robert H. Frank

Series:  Part 1Part 2  |  Part 3

When Cost-Benefit Matters …

If there is a part of The Darwin Economy that made me smile is the reasoning Frank uses regarding his discussion on morality and cost-benefit analysis.  The reason for the smile is that the argument is so remarkably beautiful, simple, and sound  (Frank, 2011, pp. 35-39).  If Frank wanted to be a philosopher, I think he would be a great one.  Contrary to appearances, philosophers search for the best possible clearest line of reasoning.  Of course, philosophy is not easy, and its level of rigor of thought leads, sometimes, to difficult discussions, not easily understood by non-specialists.  However, there are others who discuss many issues unnecessarily.  I know that Frank is not exactly impressed with many of the so-called “philosophers” today, who try their best to make their writings as confusing and obscure as possible (e.g. Judith Butler).  He thinks that in these cases, there is a positional tendency of some “philosophers” to appear scholarly by showing off their excessive use and abuse of words, when, beneath, there is next-to-no-content to offer anyone.  I agree.

Of course, I underscore the fact that I adopt a deontological point of view, Frank’s is a consequentialist view.   But, in my view, none of this diminishes at all his argument.

Following his sound line of reasoning, he confronts people who object on several cost-benefit analyses on ethical grounds.  For example, should a business owner place a blade guard for his woodworkers’ safety?  Frank argues convincingly, that the answer depends necessarily on cost-benefit analysis, since buying a blade guard and paying its maintenance costs money (Frank, 2011, p. 38).  An employee working in a risky job receives higher salary for this reason, since the owner does not have to spend money on blade guards, and there are employees willing to place their lives in risky jobs if there is more pay in salary. An employee’s safety is an ethical concern.  Yet, he or she could also trade his or her safety for higher salary.  From an ethical standpoint, many people suppose that we should respect a person’s free choice of trading salary with safety.  Then the problem ceases to be ethical, and it becomes a cost-benefit issue.  How much is safety worth?  Answer:  what employees are willing to pay for it  (Frank, 2011, p. 37-38).

The problem comes when many people need their children to go to the best school, which requires them to live in the best school districts, hence they need to buy more expensive houses.  Under such circumstances, this becomes a positional problem.  There are only so many houses in the best school districts, which leads to an exponential increase in the number of people trading safety for higher wages. This happens while this dynamic increases the market cost of the houses in the best school districts.  As time goes by, this competitive scenario leads to people spending in houses that are too expensive and adopting jobs that are too dangerous.  In other words, this is not the case of just people “freely” choosing to place their lives at risk for higher wages, but they are also people who are engaging in a competition that places the lives of other people at risk.  Negative externalities abound in such cases.  Defending such freedoms blindly, leads to a worse society … and nobody would end up better than before.  Let’s remember Mill’s harm principle, we should avoid acting in ways that lead to undue harm to others  (Frank, 2011, pp. 37-38).

This is what Darwin noted, that frequently competition among individuals can lead to results that are worse-off from a group standpoint.  Hence, as Ronald Coase suggested, the state must mimic the situation where employees as a collective would choose freely to establish a deduction in salary (willingness to pay) for greater safety …  hence states’ rules for safety.  What if salaries are too low to buy safety?…  Then the state could impose higher wages.  In any case … the state should intervene to avoid the sort of competition where everyone is worse off (Frank, 2011, pp. 38-39).

Notice that Frank’s reasoning is completely compatible with the deontological view we assumed in an earlier blog post in this series.  A comprehensive view of the complexities of society that takes into account all orders of society (technoscientific, juridical-political, ethical, etc.) will let us see clearly the nature of the problem before us, and apply the corresponding solution to the problem.  We can lead to effective results if we know which areas of the technoscientific realm (where the economy is) should be restricted by the juridical-political order for the benefit of us, the moral beings in the story.  The rest of the analyses made throughout the book regarding this reasoning (willingness to pay, income transfers in private and public spheres, steep progressive consumption taxes, taxing harmful activities, and so on) would be completely validated under this deontological framework.

Again, I strongly advise my readers to buy the book.  I guarantee you, despite any philosophical objections I might raise in my blog, it is a gem.  If I participated in U.S. elections, I would actually start an enthusiastic campaign to reform tax policies in the way suggested by Frank … plus the implementation of the majority of the policies suggested by Richard Thaler and Cass Sunstein in their book Nudge.  Hey, both books are libertarian!  So, I don’t expect libertarians in Congress to oppose their suggestions.  If you, my dear reader, live in the U.S. …  what the heck are you waiting for?!

Yet, there is a little thing I wish to address to end the series.

The Trolley Problem or its Equivalents

Frank says in his book a little comment regarding deontologists:

[Deontologists] often manage to score telling debate points by constructing examples in which the action with the best overall consequences seems clearly impermissible to most observers.

A perennial favorite describes a botanist who wanders into a jungle village where ten innocent people are about to be shot.  He is told that nine of them will be spared if he himself will shoot the tenth.  What should the botanist do?  The consequentialist framework seems to suggest that shooting the innocent man would be the right choice, because doing so would result in the net saving of nine lives.  Yet most normal sentient beings are loath to endorse that conclusion.  Deontologists insist that such examples demonstrate the bankruptcy of consequentialist moral reasoning (Frank, 2011, p. 94).

Well … not quite.  If you are a hardcore deontologist, perhaps you are blinded to the fact that under such circumstances, we (deontologists) still have to choose!  Yet, as the philosopher Judith Jarvis Thompson and others have pointed out, neither the consequentialist nor the deontological frameworks help us systematize situations like this, and similar (although qualitatively different) situations such as different versions of the trolley problem.

Trolley Problem:  There is a trolley going to hit five people stuck in the tracks.  You, the driver, may make a switch to another track to save the five, but there is one person  stuck in that other track.   What do you do?

There are many versions of this problem, showing different situations to let us see the problem of systematicity of the criteria we use in each case:  What happens if instead of switching, you can throw a fat man to the tracks to stop the trolley?  What if the one man in the other track is a friend?  What if the person doing the switch is not the driver or a bystander? … and so on.

Note:  Frank’s opinion on what should be done if the man in the other track is a friend appears in his book What Price the Moral High Ground?  How to Succeed without Selling your Soul, pp. 55-56.  I highly recommend this book also.  Although I don’t agree with Frank’s conclusion regarding consequentialism in this case, the book is another very big gem.  Again, everyone should read it.

I will not solve the whole variety of trolley problems here, because, honestly, it is a philosophical headache for me.  However, I just wanted to say that the botanist example brought by deontologists, according to Frank, may be an “easy” way to dismiss consequentialism, but in the end it is a simplistic reasoning for any deontologist to hold.

References

Foot, P.  (1978).  The problem of abortion and the doctrine of double effect.  Virtues and vices.  Oxford:  Blackwell.

Frank, R. H.  (2004).  What price the moral high ground?  How to succeed without selling your soul.  Princeton:  Princeton University Press.

Frank, R. H.  (2011).   The Darwin economy:  liberty, competition, and the common good.  Princeton:  Princeton University Press.

Thomson, J. J.  (1985).  The trolley problem.  Yale Law Journal, 94, 1395-1415.

Thomson, J. J.  (2008).  Turning the trolley.  Philosophy & Public Affairs, 36, 2, 359-374.

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"The Darwin Economy" by Robert H. Frank

Series:  Part 1Part 2  |

Robert Frank’s brilliant book, The Darwin Economy, a very well-argued long statement against the inanity of political and economic discussions in the United States, should be taken seriously by the political right, left, center and none of the above.  Although I differ from his consequentialist framework, I want to emphasize two things:

  1. Even though it may appear that he is not interested in issues regarding social justice, I don’t think it is the case that he is indifferent towards those issues (pp. 131, 169).  There is a feel in the book for the opposite.  He is motivated by those issues, but he is not being ideological about it.  This can be seen very clearly about his interest about labor-managed firms and their failure to proliferate in the market (Frank, 2011, pp. 30-35).
  2. It is good not to lose sight of his line of argument:  even if you become the most recalcitrant libertarian in the universe …  a John Galt, a Prime Mover a la Ayn Rand, and being totally selfish about the whole thing … you will eventually end up choosing a society very similar to a welfare state, very, very close to one that is built on principles of social justice (pp. 131, 202-207).  In other words, the most selfish of libertarians living all the Randian virtues, if he or she is intelligent, will end up in no less than a libertarian welfare-state (pp. 211-215)

Of course, for those who haven’t read the book, talking about a “libertarian welfare-state” sounds nonsensical.  Yet, everything becomes transparent when we realize that Frank’s whole argument is not solely founded on Darwin’s observation regarding individual and group interests, but also on the views of one Nobel Prize laureate, Ronald Coase.  Frank’s reasoning regarding Coase holds perfectly for the creation of a welfare-state.  Yet, there are some aspects regarding his use of Coase which, I argue, can be better understood within a deontological framework, as presented in my previous post.

Meet Ronald Coase …  and the Reason He Won the Nobel Prize …

Ladies and gentlemen … meet Ronald Coase!

Ronald Coase

This picture pretty much presents Ronald Coase as he looks today.   Did you know he was born in December, 1910?  Yep!  That makes him …. ummm…  101 years old.  Yes, he is alive … not kidding!

Anyway, Coase is famous for two great works in economics.  The first one has to do with his research on why corporations exist.  In his article “The Nature of the Firm” (1937), he discovered the obvious …  at least it is obvious to us now, but not then!  Why do corporations exist?  For one simple reason, because if production consisted solely of independent businesses specialized each in one sole activity (one for extracting metal, another business for making them into pieces for assembly, another for building the product, and so on), each one of them would have to sign contracts with the others in order to create a chain of production between them.  Even supposing that these contracts are negotiated at negligible cost and very easily, it wouldn’t be practical to negotiate all of them, and would drive product prices sky-high.  Imagine a car that is built this way, nobody will be able to buy it.  Yet, Coase realized that corporations exist because it is far easier, cheaper, and more efficient that a hierarchy of command is established, and then create a whole division of labor with a chain of workers doing different jobs … just like Adam Smith envisioned (Frank, 2011, pp. 90-91).

But the work that deserved him the Nobel Prize in 1991 was his 1960’s article, “The Problem of Social Cost“.  The statement of this article has made us understand better the relationship between the law and the economy.  Before this very important article, the law usually saw disputes within an ethical framework:  perpetrators vs. victims.  This framework does seem to hold in some cases, but in other cases, it is clearly inadequate.  For instance, the paper (and an earlier one) makes one reference to the Sturges vs. Bridgman case (1879) as an example.  In The Darwin Economy, Frank modifies it a bit, but the situation is exactly the same.

Before I go into details, I wish to talk about externalities.  The term “externality” has to do with what all of us “internalize” and “externalize”, when we invest in something.  Sometimes that investment has a positive or negative effect that a third party did not consent.  For example, if I paint my house, and modify it to look good, clean, and so on, not only do I have internalized a gain from that investment, but I also externalize value to my neighbors’ houses, in this case, this is a positive externality:  my investment in my house has the side effect of increasing my neighbors’ house value.  I never sat down with my neighbors to ask their permission to increase their houses’ value, yet, in 99.99% of the time, they won’t protest because of it, they will welcome such intrusion without their consent.  However, most of the time when economists talk about “externalities”, they mean negative externalities, i.e. externalities that cost to others.

In “The Problem of Social Cost”, Coase argues that externalities are reciprocal in nature.  How so?  He uses some cases illustrate his argument perfectly.  I am going to use Frank’s version of the Sturges vs. Bridgman case.  Frank quotes Coase:

A confectioner had used certain premises for his business or great many years.  When a doctor came and occupied a neighboring property, the working of the confectioner’s machinery caused the doctor no harm until, some eight years later, he built a consulting room at the end o the garden, right against the confectioner’s premises.  Then it was found that noise and vibrations caused by the machinery disturbed the doctor in his work.  The doctor then brought an action and succeeded in securing an injunction preventing the confectioner from using his machinery.  What the courts had, in fact, to decide was whether the doctor had the right to impose additional costs on the confectioner through compelling him to install new machinery, or move to a new location, or whether the confectioner had the right to impose additional costs on the doctor through compelling him to do his consulting somewhere else on his premises or at another location (Coase, 1959, p. 26).

If we use the perpetrator vs. victim ethical framework, we have a problem.  As Frank argues very well in The Darwin Economy, it is not clear, from an ethical standpoint, who is the perpetrator or the victim (Frank, 2011, pp. 85-95).   The situation for the doctor is the following:  the noise costs him $20,000 in damage.  The doctor could move at a cost of $10,000, or he could install soundproofing machinery at $5,000.  In light of this scenario, there are two possibilities:

  1. The state could make the confectioner liable, in which case, he would have to install soundproofing machinery at $5,000 as the most efficient solution.  After that, the confectioner would not have to compensate the doctor for the damage.
  2. If the state did not make the confectioner liable, the doctor’s best option is that he himself would have to install the soundproofing machinery at $5,000.

Most people find (2) troubling.  Why should the doctor have to pay to the confectioner?  Yet, as noted, no one is perpetrator or victim in this scenario. In case the state did not hold the confectioner liable, the confectioner would not have to pay, making the doctor adopt the most efficient solution to the problem (Frank, 2011, pp. 88-89).  This is the problem of reciprocal externalities, where a simple and at low-cost negotiation would have been enough to solve without state intervention.

Of course, libertarians took Coase’s solution as if he had said that the state were not necessary, and that the state were actually hindering the market.  Yet, as Frank notes, this could have not been Coase’s message at all.  Actually the moral of the story is not that the state is not necessary in such situations.  As we have stated above, Coase has studied the need for corporations to solve the problem that arises when negotiations among parties are impractical.  In such cases a corporation establishes an authority which facilitates the whole process of production very efficiently.  What happens regarding the confectioner and the doctor when negotiations become impractical?  Very simple!  It becomes the role of the state to mimic the situation where free parties would have negotiated if it were practical.  That would be the best possible solution (Frank, 2011, pp. 89-91). If we generalize this situation, then we will end up in a libertarian welfare state.

Frank states that such a view would be classified as consequentialist (Frank, 2011, pp. 93-94).  Yet, I see no reason why this should be the case.  Referring to my earlier post, the problems considered here belong to the techno-scientific stratum of society, not to the ethical stratum.  Why?  Because this is not an ethical problem:  again, none of the parties can be classified as perpetrator or victim.  So, from a deontological point of view, there is no ethical principle to defend here.   This is a market problem, to be solved in the most efficient way possible: there are reciprocal externalities, so the best possible way to solve this problem is the Coase’s approach.

Misapplications of Coase’s Approach

Before I make my core-criticism, I want to point out that Frank is being careful with many of his statements.  Although he suggests Coase’s approach, he also says:

It isn’t my claim that the Coase framework is the uniquely correct way of thinking about such decisions.  But to the extent that we can agree that the costs and benefits of the alternatives we face matter to at least some extent, I hope we can agree that the Coase framework might often facilitate clearer thinking about the relevant trade-offs  (Frank, 2011, p. 98, my emphasis).

Despite this, I have a disagreement with Frank regarding a misapplication of the Coase framework.  For example, should it be applied to interracial hand-holding?  Let’s imagine that in the south, in the 1960s, each interracial couple would be willing to pay $100 a week for the right to hold hands in public.  If there are 100 interracial couples, then that would be a total of $10,000 a week for the city or the state.  Yet, there are a million whites willing to pay $1.00 a week to avoid the sight.  If negotiations may have been practical, each white may have paid or $0.10 a week for a total of $100,000 which would finance a payment of $1,000 a week to avoid holding interracial hand-holding.  That would mean that each interracial couple would be $900 better than before ($1,000 a week they receive minus the $100 they suffer from not holding hands).  Each offended white would be $0.90 better than before.  Therefore, this is a good deal for both parties … or is it?  (Frank, 2011, pp. 95-96)

Of course, Frank makes it clear that such an arrangement is completely unacceptable (Frank, 2011, p. 96).  Yet, what would prevent such thing from happening?  Why wouldn’t it be ethically right for interracial couples or whites to carry out this transaction?  What is the ethical reasoning that would make us regard this as unacceptable?  Again, Frank uses a particular consequentialist framework.  He explains his position to be against this arrangement in the following way:

… the analysis completely ignores the fact that people adapt over time in dramatically different ways to different forms of real or imagined injuries.  The cumulative amount that white residents o Atlanta in the 1960s would have been willing to pay to avoid the sight of interracial hand-holding probably did outweigh the cumulative amount that the small number of interracial couples would have been willing to pay for the right to hold hands.  But as interracial relationships have become more common during the intervening years, attitudes have changed dramatically, and in ways that were completely predictable at the time  (Frank, 2011, p. 96).

As a deontologist, I cannot avoid thinking that Frank’s heart is in the right place, but this reasoning is not.  I think that he implicitly carries out another misapplication of the Coase framework.  Does Frank mean that if people are not able to adapt over time to interracial hand-holding, then the Coase framework would be ethically acceptable?  Even if we were to argue that in such circumstances whites and interracial couples were to end up economically “better” under the Coase framework, it really strikes our moral sense to actually consider interracial hand-holding as being subject to negotiations.

As Frank does recognize, the Coase framework works very well when allocating scarce resources, which is what the market is all about.  Yet, the example of interracial hand-holding is an ethical and not a market problem.  From a deontological standpoint, we are treating a couple’s legitimate loving expression as being subject to commercial exchange, as if it had a price (in the Kantian sense).  Yet it is not subject to price, because it involves dignity (see my previous post regarding the difference between price and dignity).

We have seen that in most of the cases, consequentialism and deontology usually end up in almost the same place, to account for what, phenomenologically, strikes our moral sense.  Yet, here deontology has a very clear-cut criterion to establish why the Coase framework should not be applied in the case of interracial hand-holding, and why the consequentialist criteria don’t seem to work very well … at least the way Robert Frank applies them.

References

Coase, R. H.  1937.  The nature of the firm.  Economica, 4,  386-405.

Coase, R. H.  1959.  The Federal Communications Commission.  Journal of Law and Economics, 2, 1-40.

Coase, R. H.  1960, October.  The problem of social cost.  Journal of Law and Economics, 3, 1-44.

Frank, R. H.  2011.  The Darwin economy:  liberty, competition, and the common good.  Princeton:  Princeton University Press.

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The Darwin Economy


Introduction

Many people who have heard about the terms “deontological theory” and “teleological or consequentialist theory” in the field of Ethics, usually have a very particular way of understanding the debates engaged by ethicists on both sides of the field.  Sometimes the image people have about it is a caricature of the more nuanced views in both sides.  Let me give you an example of what I mean, in the movie Robin Hood:  Men in Tights, there is a scene where Robin Hood, Achoo and Blinken want to cross a bridge.  Robin assumes what we could call a deontological approach to the problem, while Achoo chooses a more consequentialist and more efficient approach.

At least in the Anglo-Saxon environment, there is a lot of favor for consequentialist approaches to problems.  At the same time, there is an image of deontological approaches as being noble in spirit, but inherently stupid in practical terms … much like the way suggested by Robin Hood:  Men in Tights.

A similar perspective is shared by Esperanza Guisán with her highly critical exposition of Immanuel Kant’s philosophy and his pure deontological views.  In fact, she alleges that Kant was moved by his pietist prejudices against inclinations and emotions in general as being inherently “evil”.  These are the grounds with which she practically insults Kant’s philosophy to the ground in a very aggressive criticism.  Since Kant’s proposal is, for all practical purposes, religion in disguise, and she is absolutely unable to stand any religious view in any way throughout her book, then she gives the impression that no one should pay any more thought on the subject, and apparently the discussion ends there (Guisán, 1995, pp. 170-189).

Other authors who actually admire Kant’s contributions, and assume a deontological view (like myself), are more moderate.  In fact, as the eminent bioethicists Jorge José Ferrer and Juan Carlos Álvarez point out, rarely can you find today a “purist” deontological philosopher, all of them incorporate consequentialist aspects to their philosophy in one way or another (Ferrer & Álvarez, 2003, pp. 113-114).  In this case, I wish to talk about a deontological approach that I think is adequate to understand many of the proposals of The Darwin Economy from a deontological framework.

The Ethical Points that Kant wanted to Make

Kant has been damnable in the minds of many consequentialists.  Some of their complaints are well founded, especially regarding the inflexibility of what should be done under specific circumstances.  Others, like Guisán’s attacks, are unwarranted.  It may be that Kant was playing a closet pietist while writing his ethics, yet that should be irrelevant when we are evaluating the validity of his contributions.

The question we should ask is what did Kant want to do with his philosophy.  I have written about this before, and I invite the reader to read that article on deontological ethics, but I will repeat the main idea.  In Kant’s Groundwork for the Metaphysics of Morals, Kant points out that we all have the equivalent of what David Hume called “moral sense”, a very basic instinctual knowledge of what is good or bad, right or wrong.  Yet, the major problem everyone has is that we, humans, are the masters of deception and self-deception.  Sometimes, demagogues, religions, politicians, or even our own friends, can deceive us to make us do what is wrong or evil.  It may well be that even though we believe that we are doing something inherently good, in another level we know it is wrong.  What Kant said was that his proposal should be taken like a sort of compass to point to a secure ethical north (AK:404-405).  He may have gone too far dismissing inclinations altogether, but this dismissal is not an issue of piety, but an issue of the subjectivity of inclinations.  Today we know that we are unable to make rational decisions without emotions, nor with too much emotions.  Still, Kant’s point is still valid, in the sense that too many times our inclinations can lead us astray.  Instead by operating by inclinations, Kant is saying that we should use the rational compass of his proposal.

Also, it is worth noting that Kant “was not born yesterday”.  He did say that good actions carried out contrary to inclinations are more ethically praiseworthy than those when we act in full agreement with inclinations.  Yet he did not really pretend that every single human being can act from duty all the time.  Sometimes we will act in conformity with duty, sometimes from duty, sometimes none.  Yet, if we are confronted with a situation when we need to act the best way possible, Kant says that we should keep in mind the formulae of the categorical imperative to discover which maxims are the actual ethical laws to follow.

A More Contemporary Deontological Model

After G. E. Moore’s Principia Ethica, metaethics has become important, and its distinction from normative and the applied levels of ethics is far more significant in this process.  So, the framework I am proposing for the discussion is the following:

  • We can assume the formulae of the categorical imperative as Kant proposed or certain revised versions other people have made on them as our metaethical criteria to establish which are the objective ethical norms.
  • At the normative ethical level, we can adopt all of the maxims that are consistent with our metaethical criteria as being objective ethical norms.  These are the sort of norms which we should follow from duty, as Kant would say.
  • In the practical or applied level, we deal with black and white situations and all of the grayish area in between.  It is the juice of ethical discussions in philosophy.

In the normative levels, the ethical norms have their own rational foundation and can be assented and recognized as valid by all rational moral beings.  I add here the term “moral”, because as Robert Frank says in another work of his, the term “rational” is often used in equivocal ways, which is one of the reasons he points out that “rational” choice models used by economists can be wrong very often.  Some define rational as “intelligent selfishness”, yet humans do not always behave in such ways.  The way I use the term “moral” in “moral being” is a person you can consider responsible for his or her actions, who is able to choose in terms of right and wrong according to a set of values, and is aware of the consequences of his or her actions.

Every rational being is moral, but do not always act ethically.  I contrast moral with ethical.  An act is moral if it follows the norms and values of a given society.  On the other hand an act is ethical if the actions are made from objective norms and values which may or may not coincide with moral norms and values.  Acting ethically is objectively good, acting morally is not always good.  The ethical norms and values are themselves prescribed metaethically, set in the normative ethics arena, while applied ethics seeks the best objective criteria to act the best possible way given certain circumstances.

Given that by extension moral beings can be also ethical beings, and given that there is a distinction between acting in conformity with duty and acting from duty, the question is:  which of the norms should prevail given certain circumstances?  In this case, the Formula of Humanity can be our guide.

Act so that you use humanity, whether in your own person or in the person of any other, always at the same time as an end, never merely as a means.  (AK 4:429)

We can polish Kant’s Formula of Humanity in such a way as to replace “humanity” with “moral rational beings”, which would save us from specismI wrote about a way we can phenomenologically provide the adequate foundations to determine who is a rational moral being and who is not, while not falling into specism.  Other eminent bioethicist, like Diego Gracia, have also made similar approaches from the phenomenology of Xavier Zubiri, but the discussions on these matters are beyond the scope of this blog post.

For now, we should remind ourselves that rational moral beings can claim slight (but only slight) superiority from non-rational non-moral beings.  We have the capacity to make rational and intelligent decisions that have great impact on non-rational non-moral beings as a whole.  Yet, this superiority is not an argument in favor for “raping the Earth” as Ann Coulter so colorfully described it, or doing with it “whatever the heck we please”.  And even if we were to have that sort of gross position, it is a poor approach, since we cannot claim absolute superiority above everything else.  As environmentalists, religious naturalists, process theologians and many others have pointed out, we are all connected to the Earth in some way.  If we do “whatever the heck we please”, the joke will be on us in the end, especially if we don’t decide to establish unsustainable policies.  The religious naturalist, Michael Dowd, reminds us that we can’t live without bacteria, yet they can live fine without us.

Finally, the formulas of Humanity and Autonomy imply the Kantian distinction between price and dignity.  For Kant, price is a property of that which can be replaced by something else as its equivalent.  He makes a distinction between two sorts of prices:  market price is the price that is related to general human inclinations and needs; and fancy price, is the property of something which conforms with a certain taste, with a delight in the mere purposelessness play of our mind.  Yet, for Kant, dignity is the property of those beings whose value cannot be replaced by something else, and which can only be ends-in-themselves.  In other words, dignity is the property of those who have no price, which means necessarily that every other being does (AK 4:434-435).  For Kant, moral rational beings have dignity, nothing else does.

Part of respecting the dignity of moral rational beings is the respect on people’s own freedom, and the people’s ability too choose among some options.  In this sense, Mill’s harm principle is perfectly compatible with this notion of dignity, and we can state with perfect consistency that we can create a society whose economy and jurisprudence is based on people’s freedoms, but we should exclude from them all of those unwarranted liberties which create undue harm to others.  As Robert Frank has explained extensively in his book The Darwin Economy, this principle of harm does not say that nobody should do any harm to others:

As John Stuart Mill argued in On Liberty, it’s permissible to constrain an individual’s freedom on action only when there’s no less intrusive way to prevent undue harm to others (Frank, 2011, p. 9).

Also, as Frank argues very persuasively, we as social animals, cannot establish the harm principle only to direct harm (e.g. hitting a person with a stick, robbing a bank).  For the harm principle to have coherent meaning, we should also include indirect harm.  For instance, if an athelete, say a runner, has worked hard for so many years to reach a certain level in a championship, and there is another player who decided to use steroids, there is no direct harm on the former, but there is indirect harm.  If the runner has to choose to use steroids too to win, it will lead to serious health and social risks.  If her or she decides not use steroids, then, in all likelihood, he or she will lose.  No one can argue that there is no undue harm being done here.   Frank says:

If Mill’s harm principle is to have any coherent meaning, indirect forms of harm must count.  My conception of what constitutes harm to others strike some as expansive.  But it’s one that even libertarians will find difficult to challenge in their own terms …  Even if libertarians had complete freedom to join others in forming any sort of society they pleased, they’d find compelling reasons for joining one that gave indirect harm equal footing with direct harm.  (Frank, 2011, p. 12)

No matter how much is an athlete willing to defend his freedoms to choose, he or she will ever join a competition where there are no rules and penalties against using steroids to win a championship.  He or she would love to participate in a competition where such rule is enforced.  Hence, from a deontological standpoint, this rule would be completely consistent with the dignity of the rational beings participating in it, because it takes away a freedom that prevents undue harm to all participants.

If this is the case, from a deontological standpoint, economic and political institutions built to guarantee people’s freedoms and help them make better choices without taking people’s freedoms away.  In this sense, I wholeheartedly agree with Frank in recommending the book Nudge by the economists Richard H. Thaler and Cass R. Sunstein (follow their blog here).

How would We Organize Conceptually a Deontological Approach to Society

Unfortunately due to language and ideological leanings, some of the social philosophy being elaborated in Europe never reach the United States.  For example, the thinking of philosopher André Comte-Sponville on this matter is pretty much unknown in North America.  One of the best books he wrote is Le capitalisme est-il moral? (2004), which I have discussed extensively in other blog posts.  He proposes four different conceptual strata in order to understand social complexities.  Here, I will change the terminology of some of the strata to adjust it to the discussion, but the idea is more or less the same.  Here is the illustration:

Comte-Sponville Social Model

From bottom-up direction, we can distinguish the following four strata:

  1. The Techno-Scientific Stratum:  It involves techniques which have their own logistics, i.e. their own intrinsic problems, and their own solutions to those problems.  Among these we can find the different natural sciences, technology, and the economy.  For Comte-Sponville, all of these mechanisms are amoral, hence none of their mechanisms can be considered themselves ethical in any way.  Since amoral processes generate good and ill for society, it needs an external social force to diminish the ill (the negative externalities) and increase society’s welfare (the positive externalities).
  2. Juridical-Political Stratum:  The juridical-political stratum consists of the law and the state.  It is up to the juridical-political stratum to restrict externally the processes of the techno-scientific stratum.  However, this stratum also needs several restrictions.  According to Comte-Sponville, laws are not equivalent to ethical norms, which means that unethical people can indeed follow the law verbatim, and still be evil.  Also, at the level of the state, which he understands within Rousseau’s conception of what the Republic should be, it is important to point out that the people or the state should not have all the powers.  It should have the power to guarantee its citizens’ welfare, but it should never have power against minorities, nor should it have the power to establish concentration camps.  Therefore, it also needs the external restrictions established by another social force.
  3. Ethical Stratum:  Comte-Sponville calls it the “moral stratum”, but it is the same idea.  This is the stratum of ethical norms as well as the rational beings (as ends-in-themselves), who can establish these external restrictions through their votes, the courts, or even on the street, creating political pressure.  It is the stratum where responsible decisions are made regarding the law, and the techno-scientific stratum.
  4. Emotional Love:  Comte-Sponville is based on some of the Christian philosophy regarding what should move us to act ethically.  Yet, the “emotional love” in a very loose sense of the term as a way to promote ethical behavior is exactly what cognitive scientists and neurologists have been studying for years.  Love for our neighbor, for a nation, for God, can be powerful means to move us to act ethically.  He points out three sorts of love that should be at the very top of all emotions that lead us to act ethically:  love towards truth, freedom, and humanity.

According to Comte-Sponville, we make a mistake if we want to moralize the economy (which Marx tried to do), i.e. to adjust the economy to be forcibly fair and just using internal, not external, mechanisms.  It is equally a problem to eliminate the needs of the ethical stratum and let the dog of the techno-scientific stratum loose (which is the movement-libertarians’ mistake).  The state must have a role in the interaction between the techno-scientific stratum and the ethical stratum.

Finally, Comte-Sponville tells us about the importance of taking into account all four strata when making a decision that is going to affect society.  We should prioritize one or the other depending on the circumstances, and have the best welfare of humanity when making the decisions.  To omit the importance of each one, would lead to irresponsible decisions.  Therefore responsibiity, should take into consideration the ethical ideals for society as established metaethically and by normative ethics, but taking into account the consequences that lead society to the best welfare possible.

This is not incompatible with the “libertarian welfare-state”, which Frank advocates, or even the “libertarian paternalism” as Thaler and Sustein advocate.

Why Teleological-Based Models do not Work for Me

Of course, Robert Frank seems to favor a teleological model.  His main objection to deontologists, at least as it appears in The Darwin Economy seems to be the following:

Deontologists face other hurdles, such as how to explain where the bedrock moral principles they invoke come from.  (Frank, 2011, p. 94).

Of course, this is not the whole objection, which we will discuss in our next blog post on the subject.  Yet, he knows that at a practical level, deontologists and consequentialists (teleologists) are almost in the same place:

Consequentialist and deontologists have been at each other’s throats for millenia.  Nothing I say here could possibly settle the issues that divide them.  But because I will advocate policy claims that follow from Coase’s consequentialist framework, it’s important to emphasize that the two frameworks are less squarely in conflict than may often appear  (Frank, 2011, pp. 94-95).

Yet, although there is little difference in extension, there is a difference in intension.  I think that the objection quoted above actually is better understood from a consequentialist framework.  For example, at all times consequentialism posits the importance of happiness of most individuals possible as the guide for all ethical decisions.  Yet, stating this begs the question as for why should we should use this as a criterion for any decision.  There is a problem de jure, regarding why should our happiness or interests (in the language of Peter Singer) be considered superior to all other beings, or even if there were no other being, why is happiness and interests good?  How do you establish this as an objective criterion when whatever especially when this is moved by subjective inclinations that do not necessarily have a tendency towards ethical behavior.  G. E. Moore’s criticisms to the naturalistic fallacy in all modalities, does include pleasure and happiness as identical to being good.  He advocated a form of utilitarianism, but a platonist utilitarianism, where happiness alone is not the sole value to be sought by our actions, but many objective abstract values as well.

Deontology, since Kant, has provided an adequate response.  The preference of rational moral beings should be preferred because it is us who are the ones who have the ability to make the best decision for society and the world.  Also, notice that in all of this there is a consequentialist component of deontology.  All non-rational, non-moral beings serve as means, such as the economy as a whole, the jurisprudence and political body (the state), and all the sciences.  In this sense, we have provided a more complete deontological model for ethical behavior, especially regarding the economy, in contrast with some other consequentialist models.

In my next blog post on this subject, I will examine other objections by Frank to deontologists, and the consequentialist approach of Ronald Coase.

References

Comte-Sponville, A.  (2004).  El capitalismo, ¿es moral?.  España:  Paidós.

Guisán, E.  (1995).  Introducción a la ética.  Madrid:  Ediciones Cátedra.

Ferrer, J. J. & Álvarez, J. C.  (2003).  Para fundamentar la bioética.  España:  Universidad Pontificia Comillas & Desclée de Brower.

Frank, R. H. (2011).  The Darwin Economy:  Liberty, Competition, and the Common Good.  Princeton:  Princeton University Press.

Kant, I.  (1999).  Groundwork of The metaphysics of morals.  In M. J. Gregor & A. Wood (eds.),  The Cambridge edition of the works of Immanuel Kant:  practical philosophy.  (pp. 37-108).  US:  Cambridge University Press.

Moore, G. E.  (1903).  Principia Ethicahttp://fair-use.org/g-e-moore/principia-ethica.

Moore, G. E.  (1912).  Ethicshttp://fair-use.org/g-e-moore/ethics/.

Paton, H. J.  (1971).  The categorical imperative:  a study in Kant’s moral philosophy.  US:  University of Pennsylvania Press.

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Book Review: “The Darwin Economy” by Robert H. Frank

On December 28, 2011, in Economy, by prosario2000

"The Darwin Economy" by Robert H. Frank

In my dreams would I have imagined that I would read a book like this, especially during my research regarding applications of Darwinism to social.  I know that in some tangential way, Darwin’s theory of evolution was related to the way we create economic systems.  Darwinian natural selection has to do with the competition among individuals and groups for scarce resources.  Humanity’s economic systems have to do with the distribution of scarce wealth.  Also, we have to look at the fact that we inherit much of our behaviors from our ancestral animal behaviors regarding scarce resources.  Yet, economic systems are conventional and, in a way, unrelated to nature.

Yet, there is a challenge being made by Robert H. Frank in his new book, The Darwin Economy: Liberty, Competition, and the Common Good.  He predicts something rather odd:  in a hundred years from now, if you ask professional economists who do they consider the father of their own discipline, instead of Adam Smith, most of them would say “Charles Darwin”.

Charles Darwin??!!!

Yeah, Charles Darwin!

Before you place Frank in a psychiatric facility (at least in your imagination), he invites us to take a look at the way Darwin describes natural selection processes.  He reminds us of Darwin’s initial development of multilevel group selection, and how individual interests relate to group interests.  For example, how did the gazelle accomplish its current average speed?  Classic Darwinian natural selection would tell us that it is the result of species warfare.  Nature selects gazelles who have the ability to escape predators using fast speed.  In this case, through reproduction, the fastest gazelles pass on genes that will benefit the group.  In this case, individual interests and group interests agree completely, since the group on average is better able to escape predators.

The same happens at the economic level.  Adam Smith’s “invisible hand” of the market works perfectly in this case, because the competition among individuals or among companies benefit both individuals and groups.

Yet, there are other scenarios.   The cover of Frank’s book tells us all about it.  Consider the bull elk.  They have antlers which function as weapons in order to compete with other males for female.  The winner, gets to pass on genes.  So, from the point of view of the interest of the individual bull elk, the bigger the antlers, the better!  This leads to the prevalence of larger and larger antlers. Yet, the process cannot continue ad infinitum.  Having very big antlers is a disadvantage from a group standpoint:  large antlers increase the risk of getting stuck among tree branches in densely wooded areas, hence the risk of being eaten by wolves.  If those genes are passed along, they would compromise the group.  In this case, individual and group interests diverge.

The same thing happens with the economy.  Too much competition among individuals or corporations can lead to the sort of negative externality which can be a real problem, even a threat, to the group.  In this case, when too much competition happens, and the interests of the individuals and groups diverge, Smith’s “invisible hand” breaks down.

Frank even adds another imaginary, amusing, but interesting statement.  If bull elk were to be asked in a referendum whether to reduce their antlers by half, they would overwhelmingly favor it!  Of course, such experiment cannot be carried out with actual bull elk, but we can do so with humans.  We don’t have antlers, of course, but we are often found in competition, sometimes too much competition.  Frank gives the example of an actual experiment being carried out with hockey players. Thomas Schelling, an economist, has pointed out the fact that when hockey players are individually given the choice of using their helmets or not, they usually tend not to wear helmets, yet, when they are asked to vote to implement a rule for the group to wear them or not, they invariably vote in favor of wearing helmets.   Why is that?   If you make individuals choose whether or not to wear helmets, they will choose not to, because not wearing a helmet increases a player’s advantage.  Maybe he can see or hear better than players who are wearing helmets.   As a result, those players who use to wear helmets will now choose not to, to gain that advantage.  At the end of the day, no one will wear helmets, and everyone would end up having equal advantage.   The downside of not wearing helmets, though, is that everyone is at risk of serious head injury.  Everyone is worse off.  This is similar to the bull elk having horns too big, there is excessive competition.  So, when hockey players are asked whether to implement a rule requiring everyone to wear helmets, they will vote in its favor.  A simple nod or loose agreement among players is not enough, they need a collective mandate.

The same thing happens to states.  During the Cold War there was a huge amount of waste due to the arms race.  In this sense, the U.S. and the Soviet Union were incredibly wasteful.  In order to control that, they couldn’t control that race just with winks among their representatives and diplomats, but rather by signing treaties to slow the pace of  competition or to disarm very harmful weapons.  The treaty would include checking on each other’s facilities in order to be certain that this would be carried out.   That’s how they could use enough money for education, health care, utilities, and so on, without spending it most or all on the arms race.

Frank argues persuasively that, contrary to what many progressives think, many of the ills of the economy are not produced by the prevalence of monopolies and oligopolies, but rather by too much competition.  Libertarians are usually right when they say that government is wasteful.  Yet, excessive competition can be incredibly wasteful too, in ways that are many times more harmful than government.  Just one example (of the many offered in the book) when rich people celebrate parties for children’s birthdays.  Here another element creeps in the competition process, the degree in which people spend on those kinds of parties is not based on absolute position, but on relative position.  As a result, if you are a millionaire who celebrates their fifteen years-old birthday with a $5 million party, perhaps your neighbor will want to do it better and spend $6.5 million party for his fifteen-years old.  This process will go on indefinitely leading to big waste of money.  This is not a hypothetical situation, this really happens!  At the end of the day, the children will be just as special, nobody is happier no matter how much money has been spent, so the money is … wasted … literally!

In these cases, Frank does not suggest that we forbid $5 million parties, but rather establish a steep progressive consumption tax that will persuade rich people not to spend too much.  The state or federal income obtained through this consumption tax will serve for roads, bridges, security, firefighting, police, and so on. This will benefit both the rich and the poor.  Frank argues that if you are a smart rich man, you would love to live in a place with those sorts of rules and laws.

Of course, libertarians and people of the Tea Party will say that all tax is theft, that we should diminish the government.  Interesting thought, but, as Frank points out, we need to tax something.  If we don’t tax, there can’t be a state, if there is no state then another country will invade … and you’ll end up paying taxes to that country.

Frank shows that in many cases, taxes are a unintrusive way to stir corporations and businesses away from the sort of harmful behavior which arises due to too much competition.  The problem that we have now is that we are usually taxing the wrong thing:  the payroll tax or the savings tax.  Yet, we don’t tax harmful behavior enough.  We usually penalize them, but don’t tax them.

The author of The Darwin Economy uses this Darwinian framework to evaluate the economy.  Unlike bull elks or gazelles, who can’t communicate and cannot act in ways which are against their nature, we can make better choices.  Darwin helps us evaluate these competitive dynamics that occur even in the economy, lets us evaluate the problem, while simultaneously helping economists point out possible ways of solving these problems. Within this framework, Adam Smith’s “invisible hand” insight is just a special case of a broader and more general understanding of competition. There are criticisms to both progressives and libertarians alike.

He applies this reasoning to lots of cases:  such as pollution control, employees competition for better salary and safety, housing, alcohol, among many other aspects o the economy.  It is also an invitation to many in the right wing to really think about how taxes can be beneficial for society as a whole when done the right way.  Tax should not be a forbidden subject, especially in the United States.  Let’s scap taxes to all useful activities, and tax to discourage activities, especially those which can cause harm to others:  noise, carbon dioxide, road congestion, etc.  Have a progressive consumption tax, not an income tax.

This is a fascinating book and I highy recommend it.  For me, it has been very illuminating.

Video – Part I

Video – Part II

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