Liberty Matters

Rushing in where economists fear to tread: Continuing our conversation on models and complexities

At the beginning of our enjoyable and instructive conversation, Mikko Tolonen enticed us to follow a revisionist path. Besides the self-interest motive, Mandeville’s analysis – Tolonen suggested – had “a further dimension,” which rested on the passion of pride: “people need to survive, but more important is their social existence based on self-esteem.” With different qualifications, Jimena, Andrea and I were glad to follow Tolonen on the same path. Now, he has upped the stakes. He wants us to “encourage [economists] to advance their thinking” by moving away from their conception of rational self-interested agents to “a more sensible theoretical setting about human nature.” I am reminded of a line in Alexander Pope: “fools rush in where angels fear to tread.” With the economists playing the cautious “angels,” we risk making fools of ourselves. So be it, I’ll take the risk.
Here are my three easy lessons for “economists,” partly building on things already said in the course of this conversation. In such a foolish enterprise, you will allow me, I hope, to enlist several economists on my side, who, like Hayek, tend to trespass into other disciplines. After all, the true topic of our conversation is social order and human action. 
The first lesson is, once again, about complexity. Tolonen is right: the intricate complexity of the intellectual historian sounds faintly antiquarian, when sketching general models for understanding human action. My brief excursus on the languages of self-love and self-approbation was not intended to offer the fine-grained complexity of historical context and reconstruction as a model. It was meant to suggest that even abstract models of human passions have their complexity because of the way we interpret and reinterpret them. Such complexity needs to be internalized in our social and theoretical research. Economists are not strangers to such considerations. In his acute essay “Against parsimony,”[1]Albert Hirschman suggests that the “parsimonious postulate” of the self-interested, rational, and isolated individual of much economic thinking may be too clever by half. He illustrates this by showing how three important categories of economic thinking, such as preferences, work output, and scarcity of resources are not as straightforward as it seems. He analyses the implications of distinguishing between first- and second-order preferences, and how such a distinction illuminates the common phenomenon of preference change, which is otherwise unexplained by treating preferences as those merely revealed by agents’ choices. He also refers to Amartya Sen’s introduction of the idea of “commitment” in the analysis of self-interested behaviour, and to his suggestion that there are three different ways of conceiving one’s “self” in the calculations of what is in one’s “interest.”[2]  Both complications rest on the fact that human beings have a self-evaluating capacity, which, I would argue, is intrinsic to the idea of “self-esteem.” In short, arguing for greater complexity in some economic categories, such as preferences and self-interest, is my first easy lesson.
The second lesson is equally related to the self-evaluating capacity of human beings, something that Mandeville, in his professional capacity as a physician working on the distempers of the mind was well aware of. Mandeville’s preferred therapy for diseases such as melancholy was not pharmacological, but based on language, through a dialogue between the physician and the patient aimed at the latter’s self-understanding and the repairing of his or her self-esteem.[3] This is a method that can be related to what Jimena Hurtado says in her first intervention in this conversation, when she insists that the “politics of self-esteem opens the door to a more active part for human wisdom.” Arguably, the learning and creative capacities of human beings, and the socially accumulated wisdom over time, are essential to solving the social trap dilemmas into which self-interested rational choosers tend inevitably to fall. Such a capacity for mutually interested cooperation is well illustrated by the work that won Elinor Ostrom the Nobel Prize in Economics. Her research turns the social dilemma of the ‘tragedy of the commons” into an illuminating analysis of how people “change the constraining rules of the game to lead to outcomes other than remorseless tragedies.”[4] One important element in this transformation lies in taking a less calculative and more deliberative (i.e. open to verification, communication, and reflection) view of how human beings reason in social contexts. Such a more deliberative understanding of rationality is my second easy lesson.[5]
The third lesson follows from what Elinor Ostrom calls the “lattice of interdependence” in which collective action takes place. Interdependence is intrinsic to a conception of human nature that gives relevance to the passion of pride alongside that of self-interest and self-preservation: the two-model approach Tolonen proposes. In my first reply, I argued that the inter-subjectivity of the language of pride, approbation and self-esteem (Mandeville’s self-liking) implies a reflective conception of the self as the product of social mirroring and recognition, since the individual cannot be understood outside the “lattice of interdependence.” But there is another aspect to this reflective language, which is central to the institution of politeness, and to a modernized conception of honour. As much as revealing our “disposition not to offend” others (as Locke pus it),[6] it masks our most inner selves by providing “acceptable and agreeable” but institutionalized forms in which to express that disposition. Most modern institutions are the stage (or the masks) through which we hide as well as reveal our “authentic” selves.[7] In modern societies, the construction of our identity is a game of mirrors, but real nonetheless. These mirrors provide social agents with rules, roles, and possibilities for collective identification and recognition, all of which contribute to the agents’ self-esteem. My third easy lesson is that economists may do well to pay attention to the institutional embeddedness of economic transactions, and to how the quest for recognition and self-esteem equally determines human choice.[8]
[1] Albert O. Hirschman, “Against parsimony: Three easy ways of complicating some categories of economic discourse,” Economics and Philosophy, 1, 1985, pp. 7-21.
[2] Amartya Sen, “Why exactly is commitment important for rationality?” in F. Peter and H. B. Schmid (eds.), Rationality and Commitment, Oxford: Oxford University Press, 2007, pp. 17-27. Sen distinguishes three ways in which “self-interested” behaviour can be understood: self-centered welfare; self-welfare goal; self-goal choice (p. 18). Sen’s argument is an extension of Bishop Butler’s type of criticisms of the selfish systems, which, directly or indirectly, prompted Mandeville to elaborate his own distinction between self-love and self-liking.
[3] Bernard Mandeville, A Treatise of the Hypochondriack and Hysterick Diseases, London, J. Tonson in the Strand, 1730. See also Mauro Simonazzi, Le Favole della Filosofia. Saggio su Bernard Mandeville, Milano, Franco Angeli, 2008, pp. 134-51.
[4] Elinor Ostrom, Governing the Commons: The evolution of institutions for collective action, New York, Cambridge University Press, 1990, pp. 6-7. The kind of changes in the rules of the game analysed by Ostrom are very similar to those mentioned by Andrea Branchi in his second intervention, when he refers to the “public goods game,” where changes in the rules activates reputational and monitoring mechanisms, changing the game’s dynamics, thus producing more socially efficient outcomes.
[5] Given the limits of space, I take the liberty of a self-citation. For a fuller discussion of how the work of Elinor and Vincent Ostrom go beyond the economistic paradigm, see Dario Castiglione, “Social learning and the bonds of self-governing communities,” in F. Sabetti and D. Castiglione (eds.) Institutional Diversity in Self-Governing Societies. The Bloomington School and Beyond, Lanham, Lexington Books, 2017, pp. 129-55. Another example of a more deliberative and reflexive conception of rationality can be found in Albert Hirschman’s distinction between exit, voice and loyalty as strategies that individuals can adopt vis-à-vis a group or an organization.
[6] See the citation provided by Andrea Branchi’s in his second reply.
[7] For a discussion of the social role of the “mask” (meant in a more anthropological sense), in connection with processes of identity and recognition, see Alessandro Pizzorno, “The mask: An essay,” International Political Anthropology, 3, 1, 2010, pp. 5-27.
[8] It is not without significance, perhaps, that an economist like Thorstein Veblen was both attentive to the importance of institutions in economic life and of approbative sentiments. As for the importance of identity, recognition and self-esteem in economic activities, see Hirschman’s distinction between instrumental and noninstrumental forms of activities in “Against Parsimony”, pp. 11-15.