In recent years, various scholars have revisited Adam Smith, finding much more in his work than the homo economicus obsession with self-interest. That effort raises important questions — specifically, how might economists incorporate such other moral values as empathy, regard for others, and altruism?[REITs]
Deirdre McCloskey is one of the major writers in this tradition (I, myself, have contributed to this discussion). One important new entry into this conversation is the recent book, Cents and Sensibility: What Economics Can Learn from the Humanities, by a professor of Russian literature, Gary Saul Morson, and an economist, Morton Schapiro.
Schapiro and Morson believe that both the humanities and economics could contribute much to the other. The humanities have become too arid and formalistic, they argue; economics has become too “mathematical” and focused on what can be measured than what should be achieved. Their objective is to encourage the unification of the two fields — a Herculean task, certainly, but they take some first steps in that direction.
They criticize economists for arguing that economics alone can resolve policy questions laden with ethical concerns.
Importantly, they recognize that Adam Smith, in The Theory of Moral Sentiments, values the human trait of empathy as equally important to the trait of self-interest he so well explains in The Wealth of Nations. But that emphasis leads them to view these two traits as distinct and conflicting, rather than as interrelated and complementary. Thus, they neglect the ways in which capitalism and its key institution, the corporation, integrate these two traits. A firm must focus on self-interest — how else can it survive? But its employees and managers must also become skillful at “reading” others, at developing the empathetic traits, essential to crafting win/win, mutually beneficial arrangements with its economic partners.
Morson and Schapiro cover an array of ethical issues but give economics greater attention. Specifically, they criticize economists themselves for arguing that economics alone can resolve complex policy questions laden with ethical concerns.
They agree that economics can help managers achieve greater efficiency in achieving their goals; however, they note that the emphasis on analysis and quantitative goals can lead to a neglect of ethics. “Efficiency to achieve what?” is their question. Economists, they assert, have become too “imperialistic,” too quick to convert everything into a quantifiable and solvable equation. But they also note that the humanities have been affected by post-modernist trends, even as they seek to outdo economic imperialism by quantifying the unquantifiable. Their point is that the push toward “scientification” has impoverished both fields, that each should reach out to the other to bolster their capacity to consider ethical questions.
Ethics Are Not Quantifiable, Numbers Are Not Empathetic
While agreeing that complex tradeoffs are involved, they note that too often the ethical issues are ignored.
The utilitarian bias of much economic analysis is certainly ripe for criticisms and Morson and Schapiro add to the work of Deidre McCloskey and others on that score. To illustrate their thesis, they look at an array of policy areas where economics provides a strong focus — admission selection criteria for colleges, markets for kidneys and other organs, and how poor countries might best develop (including a very good review of capital, institutions, technology, and culture). They argue that, while economics often provides guidance on how to “efficiently” address such problems, too often it runs the risk of failing to attain richer and more ethically grounded, but less readily quantified, objectives.
Their example of college admissions provides a detailed discussion. The authors — both full professors and one the Dean of Northwestern University — are well equipped to address that area. They understand the costs of over- or under-fulfilling enrollment goals. However, they warn that too often admissions officers neglect the moral and ethical challenges that prospective students face. Is it ethical for colleges to use variable pricing based on a student’s likelihood of acceptance to provide them less financial aid? Businesses, of course, use diverse price levels of necessity, but should colleges? Is their goal to educate or maximize their students’ lifetime achievements? And if so, is that interpreted in earning potential or some other metric?
While agreeing that complex tradeoffs are involved, they note that too often the ethical issues are ignored. They suggest that while university spokesmen claim to speak with moral authority, their marketing policies are more akin to those of used car salesmen.
Not Always On-Point
However, when the authors turn to areas outside their core competency, their discussion is less insightful. The discussion of the ethics of allowing markets for organs, kidneys specifically, recognizes the limits of donations based on familial or friendship ties. Tens of thousands of individuals in need of kidney transplants remain on waiting lists every year. They discuss some innovations — such as chain donations that give a donor the right to a kidney for themselves in the future — and they recognize that allowing compensation might eliminate the deficit. But they worry (as do scholars such as Harvard philosopher Michael Sandel) that confronting individuals, especially the poor, with such market choices creates avoidable ethical challenges.
A true understanding of Smith’s insights — and capitalism itself — requires a larger perspective.
What “should” or “should not” be in the market — from payday lending to kidney transplants — is an ongoing debate, but I do not view that as a conflict between an ethical and a utilitarian choice. Rather, such “economic” transactions, being cooperative and benefiting both parties, are also altruistic.
Morson and Schapiro seem to realize this point, at least in part. In their chapter, “De-hedgehogizing Adam Smith,” they note that Smith wrote extensively about ethics in The Theory of Moral Sentiments, arguing that self-interest, a trait critical for human survival, is balanced in social interaction by the other-regarding trait of empathy, or “fellow-feeling,” and that the market is made possible only by the creative synthesis of these two traits. Competition provides the discipline to keep the two traits in balance. Both are necessary for the creative voluntary system of wealth creation that is capitalism in practice.
A true understanding of Smith’s insights — and capitalism itself — requires a larger perspective. Thus, a dialogue between two large and complex fields of knowledge seems a useful, though difficult starting point. Still, this book may still encourage others to open the door to a broader understanding of the morality of markets and capitalism. On those grounds alone, it merits attention.
Fred L. Smith, Jr. is the founder of the Competitive Enterprise Institute. He served as president from 1984 to 2013 and is currently the Director of CEI’s Center for Advancing Capitalism. He is a member of the FEE Faculty Network.
This article was originally published on FEE.org. Read the original article.