Sunday, April 09, 2006

The Virtues of Capitalism

Deirdre McCloskey kicked off the first annual James Buchannan seminar this past Friday. I've only known McCloskey through the book she wrote on the rhetoric of economics (entitled The Rhetoric of Economics) and naturally assumed this was to be her topic on Friday. It is, after all, one of her most famous and important areas of research.

I was completely wrong: McCloskey instead tackled the virtues of economics and how economists focus too much on "prudence." Prudence is a strange virtue in that it descibes a sort of patience and sound judgement, in other words things that are smart to have in them of themselves. The other virtues are good--if that's the right word--because they help others. Prudence, in its most basic form, helps the actor only.

Economists talk about prudence a lot and we have different names for it. Self interest. Risk-aversion. Rational expectations. The other thing we talk a lot about is greed, much to McCloskey's dismay.

She feels greed is not a dimension of capitialism and capitalism requires all the virtues. Vices have no place in genuine free market activity. I take issue with this. Not only does greed play a fundamental (and moral) role, the flavor of greed economists talk about captures the very virtues McCloskey thinks we are ignoring.

Greed can be quite holy. Most generally it is about desiring a better life (usually for yourself, but it can also be for others). This is Hope. It also must, by definition, include the idea that people believe money (or whatever tickles their fancy) is a means to the end that is the better life. This, for a lack of a better word, is Faith. (We can expand the means framework beyond "money" to explain suicide bombers and so forth, again finding they have faith that their strategy will grant them what they hope for.)

We economists talk about the ethics of greed, we do not say greed is always good. We agree that taking others' stuff by force is not a moral manifestation of the so-call vice. Greed must be the motivation for trade (not theft) for it to be ethical. This is Justice. Greed also generates Courage, for it is what motivates people to take chances and stand up for what they believe in, and Temperance, for those that are too "couragous" don't achieve their desires. Love is perhaps the most closely connected to Greed itself: Love for money, Love for fame, Love for others.

It's just like Quark (from Star Trek: Deep Space Nine) said. "Greed is the purest, most noble of emotions."


ryan said...

But if greed is the most noble of emotions, how can it be a vice so often? It seems odd to say that we just need Greed, but then say that by “Greed” we mean “self-interested behavior on the part of loving, hopeful, courageous, temperate, law-abiding, moral individuals with integrity” – who do you think you are, Humpty Dumpty? Just for clarity, why not just say market economies require individuals with at least a couple of those things normal people (read: not us) think are virtues? Anyway, if you start allowing “self-interest” to mean being just, altruistic, loving, affectionate, romantic, faithful to a particular identity, or courageous, is the statement “people are self-interested” a falsifiable statement anymore? Forget about being *falsifiable* – is there any conceivable universe in which that statement would not be true? Does it really mean anything anymore?

Brian said...

David, I'm afraid I have to agree with Deirdre McCloskey on this. I just wrote up my counter-points to your post over on my blog.

I'd love to hear your thoughts on what I wrote.

jeremy h. said...


ryan said...

Incidentally, I think a bit of the problem with the "love" discussion would be cleared up if we realized the English word conflates four Greek words (which is ultimately where McCloskey is getting all these virtues). If I'm not mistaken, the love in "love of money" is philos, while the "love" in the seven virtues is agape. (They used to translate agape as "charity", but then that word started meaning giving money, which is an odd sort of circle.) Note that agape is not something you can have for a specific thing -- it's universal and unconditional. And both these words are different than the love you have for yourself/life, or romantic love.

Anyway, point is, it's sort of hard to get from self-interest to the "seven virtues" love, so you either have to say that latter isn't necessary to civil society or that we need something other than self-interest.

David said...

I think the key point of confusion is stemming from what people mean by greed, a word that's been used in so many different ways it's virtually ambigious. I wrote an extensive post on this last year, saying "If we constrain our definition of greed to merely taking unearned property, then it is always evil. But if we accept more popular perceptions—greed as desire beyond need or as the want of excess—then we have to acknowledge it is not always immoral. In fact, the rewards of wealth are a power motivator that makes society as a whole richer and happier. That is the hallmark of a positive sentiment: surely greed can be ethical as well as evil."

It's true that in the most stringent definition of "greed" restricts it to material gain, in which case it's not very helpful for the many things economists want to apply theories to (such as religion, politics, etc.) At the same time, if I try to have several relationships with many different girls, I could be called "greedy" and few would think that's unappropriate even though they don't think of women as property. So why not extend it a bit farther as economists extend economic theory?

The point is we--"we" being economists that think greed (or self-interest) is quite useful to explain economic behavior--have always included all the virtues in our analysis. We've just stripped them down to the elements we care about and lumped them under the general term "greed."

Bruce said...

I prefer the more accurate term, "homicide bomber", their point is not to kill themselves but their purpose is to kill others. Their death is incidental to the mission.

Mike said...

But "homicide bomber" does not distinguish from a bombing in which suicide is not a part of the mission--it's rather useful to differentiate between a man who puts a bomb in a car and a man who wears the bomb himself, and changing suicide to homicide only blurs this line. In that regard, "homicide bomber" is far less accurate than "suicide bomber." The "bomber" part of the phrase rather clearly states the intent, adding homicide just sounds redundant. Would you also say a homicide sniper, a homicide knifer, or a homicide ninja? Or (to pick a real fight here), homicide soldier?

I only take the bait from this question because it seems that clarity in language is rather important here. The question, I think, is whether we ought to divide the definition of greed: can it be comprised of virtuous and non-virtuous forms? Or, rather, ought we to just divide the two into "greed" and "self-interest?" The problem, as always, is that along with the rest of economic virtue, the language is hijacked rather quickly and efficiently; to address the love question (thanks for the info, Ryan, I'd never known about that), it's rarely mentioned that the phrase is "the love of money is the root of all evil," somehow the first three words are dropped.

My question for you, David, is why you would wish to preserve the word greed but abandon other words, like liberal, or libertarian? Knowing that the battle over language and definitions is the first key to turning people back to the virtuous side, how do we determine when to abandon words that have been corrupted?

ryan said...

If we want to fight to keep the original meaning of words, then shouldn't we hold on to the original meaning of "liberal" (libertarian) and acknowledge the original meaning of "greed" (excessive pursuit of money)? Or we could be utilitarian instead of originalist and pick our battles -- but that too would suggest that there might be a point to reclaiming "liberal" but not "greed." We want to get "liberal" because people think that's a good word. People think greed is bad, so we'd have to convince them of a different meaning *and* convince them to invest it with positive emotions. Why bother? In any event, I think this was McCloskey's primary point -- when we use the words "greed" and "self-interest" all the time, people think we're being silly and small-minded. If we actually do think that those things that normal people call "Justice" and "Love" and "Faith" and "Courage" are all sometimes required to explain the world (and certainly at least one to explain how governments can possibly exist), isn't everything a lot easier if we just use those words instead of wasting time with semantics?

(90% of the military is "support" rather than "combat" [i.e., guys with actual weapons] so maybe "homicide soldier" really might be a useful locution. Think about an aircraft carrier -- thousands of sailors, but only a couple dozen people [pilots] whose job involves occasionally blowing stuff up.)

David said...

I wouldn't consider greed's defintion to be corrupted, just vague. So vague, it deserves an additional level of interpretation. "Liberal" on the other hand is (a) politically charged in a way "greed" is not (in which case why bother) and (b) generates completely different responses from different people. The term liberal is certainly less vague than greed; but the meaning connected to the definition is tainted and distorted.

I admit, one of the reasons I like using "greed" in a positive light is, for the lack of a better word, the shock value. When I say greed can be quite moral, people ask why. They ask. It not only offers an opportunity to point out the definitions ambiguity but lets me teach a little economics, too. "Self-interest" doesn't do that.

Bridget said...

This has been so interesting! I am currently researching and writing a speech for a debate coming up. Our topic is:

"That greed is the ultimate evil"

We are the negative team.