Hoec 30 (1) - Gesamt-1

Homo Oeconomicus Volume 30, Number 1 (2013)
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Homo Oeconomicus 30(1) www.homooeconomicus.org Cover(s): Katharina Kohl The electronic archive of Homo Oeconomicus is retrievable via www.gbi.de 2013 Accedo Verlagsgesellschaft mbH Gnesener Str. 1, D-81929 Mnchen, Germany www.accedoverlag.de, info@accedoverlag.de Fax: +49 89 929 4109 Printed and bound by Books on Demand GmbH, Norderstedt ISBN 978-3-89265-106-2 ISSN 0943-0180
Homo Oeconomicus Volume 30, Number 1 (2013)

Happy Bargain: Aspiring Good or Accepting Fair Deals? FRIEDEL BOLLE AND PHILIPP E. OTTO The Precautionary Principle and the Justifiability of Three Imperatives MARKO AHTEENSUU Portuguese Inquisitorial Sentencing Trends R. WARREN ANDERSON Laws and Goodness as the Foundations of Machiavellis Republic TIMO LAINE Veblen, Commons, and the Modern Corporation: Why Management Does Not Fit Economics THIBAULT LE TEXIER Comments: The Essential Relativity of Happiness and Wellbeing. Comments on Bjorn Grindes Happiness and Mental Health as Understood in a Biological Perspective, Homo Oeconomicus 29(4): 535-556. HETA ALEKSANDRA GYLLING Meanings of Happiness. Comments on Bjorn Grindes Happiness and Mental Health as Understood in a Biological Perspective, Homo Oeconomicus 29(4): 535-556. TIMO AIRAKSINEN Poem with Endnotes and References WERNER GUETH Back Issues Instructions for Contributors 1
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HomoOeconomicus30(1):116(2013)
www.accedoverlag.de HappyBargain:AspiringGoodorAcceptingFair Deals? FriedelBolleandPhilippE.Otto*

EUVFrankfurt(Oder),Germany (eMail: bolle@europa-uni.de)
Abstract: We investigate satisfaction in bargaining, where the negotiation is followed by an individual evaluation of satisfaction and fairness levels. The strongest general determinants of satisfaction are own income and perceived fairness. Fairness perceptions again are driven by income comparisons and equality considerations (in particular equal splits), and show only a small selfserving bias. These results support the assumption that individual social utility functions are based on self-interest and fairness norms, but not (directly) on individual altruism or preferences for relative income. JEL classification: C78, I14 Keywords: Bargaining, Satisfaction Levels, Fairness Perception, Interdependent Happiness
1. Introduction Since Easterlin (1973) and Morawetz (1977) the relation between income distribution and reported happiness is increasingly investigated empirically. According to Easterlin (1995), reported happiness seems to be strongly influenced by the relative income differences in contrast to absolute income levels. Austin et al. (1980) similarly stress the importance of relative comparisons for fairness perception and fairness plus aspiration for satisfaction. But happiness or satisfaction seeking need not be a
*
Financial support by the German Science Foundation (DFG#BO747-11) is gratefully acknowledged.
2013AccedoVerlagsgesellschaft,Mnchen. ISBN9783892651062 ISSN09430180
Homo Oeconomicus 30(1)
constant sum game even if the sum of material payoffs is fixed. When other people around you are happy, this makes you feel happy as well (Raghunathan and Corfman 2006). One example is the relation between spouses' life satisfaction (Schimmack and Lucas 2007). If your wife/husband is happy, you tend to be happier too. Positive correlation can be expected in a partnership because of the consumption of shared goods and because of reciprocal relations. Furthermore, happiness increases productivity and bolsters against life-shocks (Oswald et al. 2009), as well as if spouses' satisfaction levels diverge the probability of divorce increases (Guven 2009). In most relationships, the distribution of consumption is determined (at least partly) by bargaining. The appropriation of non-public good household income is emphasized by Becker (1974) for whom bargaining about the distribution of the expected household income constitutes the marriage market. An unequal distribution of income and satisfaction, however, seems to destabilize partnerships or prevent establishing a partnership in the first place. Strategic advantages cannot be realized when regarded as unfair. Because of social preferences, satisfaction need not be monotonically related to the negotiated share of the pie. The most prominent example is the Dictator Game where dictators voluntarily share their income with others in experiments usually with strangers. In the most frequently investigated bargaining game, the Ultimatum Game (Gth et al. 1982), the strategic advantage is almost completely dominated by fairness requirements of the responder and resulting fear of the proposer that their offers will be rejected (van Dijk et al. 2008). Therefore, not only own income, but also procedural fairness, the resulting distribution, and perhaps the expected satisfaction of others (via empathy) will influence bargaining behavior, and thus, each of these factors partly determines experienced satisfaction. Different fairness considerations are discussed in the literature and intensively tested experimentally (for a recent overview see Bolton et al. 2008). Usually, the influential variable perceived fairness is not neutral or universal, but seems to vary with the available options (Binmore 1998). For being treated fair, people often show extensive (and economically implausible) search behavior for discounts and more strongly prefer discounts when these are a huge percentage rather than a huge amount (Kahneman and Tversky 1984; Darke and Freedman 1993). Thaler (1985) introduces the notion of transaction utility here the relation of a market price or negotiated price to a fair price, which also emphasizes the psychological value of having discounts on the initial price (Darke and Dahl 2003; Lichtenstein and Bearden 1989; Schindler 1998). The fair discount on initial prices in these studies are, however,
F. Bolle and P. E. Otto: Happy Bargain
exogenous and do not result from negotiation. Moreover, fairness standards could be different with regard to culture (Berman et al. 1985), social context (Butterfield et al. 2000), involvement of friends or strangers (Boza and Diamond 1998), and further factors. The importance of aspirations for the bargaining process has been investigated by Tietz and Bartos (1983) as well as Ostmann (1992). The influence of aspiration level on the resulting satisfaction has been shown by Allen et al. (1977) for negotiated prices and post-purchase satisfaction. The strength of these different influences on the resulting evaluation remains an empirical question and it needs to be quantified which of these factors account most for changes in fairness and satisfaction. Here, we investigate determinants of satisfaction for bargaining. Satisfaction is mainly influenced by own income and perceived fairness. Perceived fairness has similar roots for everyone (social norms) and subjective components. The latter appear to indicate a (in our study small) self-serving bias which makes higher incomes for oneself appear to be fairer. Further possible influences on fairness and satisfaction ratings will be discussed in detail. 2. Bargaining Experiment The experiment is a 2x2 assignment game where four players search a partner in a one-on-one matching task with unstructured bargaining. The two workers (W1; W2) have to join one of two firms (F1; F2). Every firm can approach a worker and start bargaining, and vice versa. A match means that an agreement is made about how to distribute the joint productivities (Tables 1 and 2) between the two partners. As we always have < , F1 and in particular W1 are in a weaker strategic position than W2 and F2. Workers and firms could freely negotiate their contracts and after ten minutes the negotiation phase ended. During these ten minutes, only provisional contracts were formed, which means that further negotiations with the alternative partner were possible. A new agreement automatically canceled an earlier contract. Only the final contract determined a player's income.
W1 W2
F1
F2
Table 1: The productivities of matches
Treatment Productivities Treatment Productivities 160 460 280 400
T1 400 640 T4 460 640 160 460 280 520
T2 280 640 T5 460 640 280 520 280 460
T3 460 640 T6 400 640
Table 2: Productivities (eurocents) of matches in the six experimental treatments (rows = workers, columns = firms), with efficient matches underlined This negotiation task was repeated six times so that every subject played every treatment but mostly in different roles. In treatments T1 and T2 with productivities + < + (variables as in Table 1, values of different treatments in Table 2), in treatments T4 and T5 the inequality sign is reverted, and in treatments T3 and T6 replaced by an equal sign. Furthermore, = in T1, T3, and T5, and < in T2, T4, and T6.
Table 3: Frequencies of fairness and satisfaction ratings The six different treatments appeared in random order. In an experimental session, for every treatment eight participants were rematched into groups of four, and each time player positions were assigned randomly. At the end of a negotiation phase, participants were informed
about their results for this trial and had to report their experienced satisfaction" and perceived fairness" on a five point scale (from very much to very little).1 The experiment was executed under four different experimental settings. While treatments were varied in a within subjects design, settings were varied between subjects. One setting took place as a classroom experiment with face-to-face interaction (class"). Here the workers had to approach the firms, which were represented by subjects sitting at separate tables. The experimenters took care that communication was restricted to one-on-one bargaining. Neither other subjects nor the experimenter were able to follow their negotiations. Every successful match was reported in a protocol by the firm subject, including the distribution of the joint productivity. All other settings were run in the laboratory with only anonymous interaction and free offers (and possibly acceptance of offers) by workers as well as firms. One laboratory setting was implemented under the same partial information condition as the class setting (lab), i.e. players knew the productivities of the two matches in which they were involved but not the other two productivities, one with full information (info),2 and one with partial information and the possibility to fixate a contract preventing both partners from further negotiation (fix). Only in the class setting the possibility of missing answers existed, resulting in 12 missing fairness and satisfaction ratings. In the laboratory an answer had to be entered to proceed. The number of sessions, which each consisted of eight participants, was ten, except in the fix setting where only eight sessions were implemented. Altogether, 304 students of the European University Viadrina participated in the study (36.5% male, 22.6 years average age, 55.3 economics students, 71.4% German and 17.1% Polish). With six evaluations per person, this means a maximum of 1824 satisfaction as well as fairness ratings. The students were randomly recruited from a pool of students who had declared their willingness to participate in economic experiments. Most of them were first or second year students and no one had theoretical knowledge about bargaining. Further information regarding the experimental procedure, resulting incomes of the subjects,
1 The German wording is: Bitte bewerten Sie dieses Ergebnis nach (1 = niedrig; 5 = hoch), Fairness: 1 2 3 4 5; Zufriedenheit: 1 2 3 4 5. 2 In Otto and Bolle (2011) it is shown that the negotiated results do not differ with complete information. Here we will investigate whether complete information affects satisfaction.
and a detailed description of the bargaining results is provided in Otto and Bolle (2011). 3. Influences on Satisfaction and Fairness In the following, influential factors for the individual satisfaction and fairness ratings are analyzed. Only results with complete allocations are analyzed here, meaning all four players of the experimental market formed a match with another player. As there was a substantial amount of nomatches (23.2 percent), with only two players finding a partner and two remaining single, the number of ratings available for both satisfaction and fairness reduces to 1388. Players in the laboratory often switched to another match in the last seconds, where former partners did not have sufficient time to agree to a bargain with their alternative match partner. Late switchers might experience the feeling of guilt (or malicious pleasure) because being aware that their former partner and one more player are probable to remain single. Partial allocation also results in highly diverse payments, with two players receiving zero payoffs for this period. Therefore, their satisfaction and fairness perception can be expected to be different. Reported satisfaction and fairness of matched players with non-matched co-players are significantly lower (p < .0001 according to a one sample t-test) than for players in fully formed matches. The average rating for the group with no-matches is 2.35 for satisfaction (t(423) = -8.43) and 2.31 for fairness (t(424) = -11.83). These are fundamentally lower than for the group where all players resulted in a match with 3.15 for satisfaction (t(1388)=5.27) and 3.28 for fairness (t(1388) = 6.85). Therefore we restricted our investigation to complete matches. The correlation between a subjects satisfaction and fairness evaluation is relatively strong (0.54; p < .001) and poses the question of causality. It can be expected that the correlation is partly due to common influences and partly to a causal relation. A subject may be happy because she estimates the result to be fair or she may underlie a self-serving bias (Binmore et al. 1991; Loewenstein et al. 1992; Babcock and Loewenstein 1997) and regard bargaining results to be fairer if they provide her with more income or make her happier. As the experiments were conducted under a double blind standard the strict anonymity of decisions and evaluations is expected to prevent experimenter demand effects and other extrinsic influences on the relation of the evaluations.
The effects on satisfaction and fairness are further investigated in an ordered probit simultaneous equation analysis3 where a number of possible influences on the dependent variables fairness and satisfaction are taken into account. In addition to own income these are relative income measures: Rel.Income = share of the productivity in a match, es = dummy for equal split, more = max{own minus others income, 0}, less = max{others minus own income, 0}, aspmore = max{income minus aspiration level, 0}, aspless = max{aspiration level minus income, 0} others variables: others income (IncOther), satisfaction, fairness perception dummies for settings: class, lab, info, fix dummies for positions: W1, W2, F1, F2 dummies for treatments: T1, T2, T3, T4, T5, T6 (different productivities of matches) demographic variables: gender, age, subject of study, residence, nationality dummy for the experience of not being included in a match at the end of any previous bargaining period (NmExp).
Closeness to equal splits has turned out to be the most successful characterization of bargaining results (Otto and Bolle 2011). This is captured by es and also by more and less which are positive or negative distances to equal splits and are the decisive components of the Fehr and Schmidt (1999) utility function for inequality aversion. Aspiration level bargaining has been propagated by Tietz and Bartos (1983) and Ostmann (1992). Hypothetical aspiration levels are defined here as strategic advantages measured by the Nash bargaining solution under a simplifying assumption about outside options. When W1 and F1 negotiate the distribution of , W1s outside option is assumed to be /2, i.e., half of the productivity of a match with F2, and F1s outside option is /2. Note that Selten (1972) used this simplification in the definition of his Equal Division Core. Thus, W1s aspiration level in a negotiation with F1 is /2 + /2 - /2. Aspiration levels actually require the knowledge of the partners outside option which is provided only in the experimental setting info. As, however, results do not differ between the settings (see Otto and Bolle 2011), we may assume that this information is provided implicitly in the bargaining process.
We used the program package QLIM from SAS.
Also, the fairness evaluation of the partner and his/her satisfaction could not be directly observed and had to be inferred from the received offers. Others variables may have effect via altruism (others income, others satisfaction) or because of a desire for common standards (fairness). The dummies for experimental and demographic differences serve mainly as control variables but may also provide additional information. We first estimated satisfaction and fairness in a seemingly unrelated ordered probit regression with all variables (see Appendix). Then we omitted all variables without significant coefficient (5% level) and estimated two hierarchical models with this reduced set of variables. In a model where fairness is affected by satisfaction the coefficient of fairness is insignificant, i.e., in our negotiations we can exclude a strong selfserving bias from own happiness. If we assume satisfaction to be influenced by fairness, the coefficient is positive and significant (p < 0.015). So we conclude that fairer results are more satisfactory.4 The pseudo R2 is small but highly significant as well as most other coefficients in Table 4. The significant Rho shows that the equations are not independent (residuals of endogenous variables are correlated). Faceto-face bargaining is apparently more satisfactory than anonymous bargaining via computer and the positive influence of income on satisfaction is plausible. It is surprising that W1 and F1, who are in a weak bargaining position, earn extra points for the latent variable which makes it more probable that they reach a higher level of satisfaction. The income equivalents of these additional values are 51 and 36 cent which means that in most cases W2 and F2 are nonetheless happier than their co-players. If in T1, W1 forms a match with F1, W2 with F2, and in both cases equal splits are negotiated, then W2 and F2 both enjoy 180 (= 320 - 140) cents more income. Our explanation for the extra happiness of W1 and F1 is that, on average, they got more than they expected from their weak bargaining position.5 This explanation is not supported, however, by a significant coefficient of aspmore. Therefore our conjecture can only be true if aspiration levels are determined non-strategically.
4 We arrive at the same conclusion if we apply this procedure with the full number of variables. After the elimination of insignificant variables we again get the same strongly significant variables (p < .001) as in Table 4.
Satisfaction Param. Intercept Fairness Income NmExp IncomeOth Rel.Income less es Sex German Polish W1 F1 class info T4 Limit 1 Limit2 Limit3 Limit4 Pseudo R Rho
2
Fairness Std.Err. 0.253 0.079 0.0005 0.073 0.003*** 1.509*** -0.003*** 0.673*** 0.116* 0.191* 0.162 0.0004 0.329 0.0006 0.078 0.058 0.085 0.102 Param. -0.259 Std.Err. 0.238
-1.370*** 0.192* 0.008*** 0.114
0.461*** 0.287** 0.465***
0.092 0.090 0.074 0.462*** -0.151* -0.237** 0.065 0.077 0.076 0.047 0.055 0.063
0 0.905*** 1.753*** 2.670*** 0.099 0.365***
0.056 0.079 0.105
0 0.803*** 1.634*** 2.453***
Table 4: Hierarchical ordered probit regression results for 1388 satisfaction and fairness ratings from 304 subjects in 38 independent experimental groups, with * p < 0.05; ** p < 0.01; *** p < 0.001. The pseudo R2 is calculated according to McFadden with adjustment for degrees of freedom. Further influences on satisfaction are provided only indirectly via the fairness evaluation. It is interesting that, with the exception of the class
5
Such a dependency of happiness on aspiration levels is found by Stutzer (2004).
10
dummy, there are no common influences on the satisfaction and fairness ratings. Fairness is influenced by four groups of variables: others income, three variables measuring relative income, three demographic variables and three experimental variables. Note that the influences of IncOther, Rel.Income, less, and es have to be evaluated jointly.6 There is a rather small self-serving bias7 involved in the fairness ratings of the players, but it is practically impossible to offset the negative impact of leaving an equal split match in favor of higher relative income. Demographic variables are only weakly significant. Men and Germans have higher ratings than women and non-Polish foreigners. Face-to-face communication in the class setting not only improves satisfaction, but also the fairness perception. T4 may diminish the fairness ratings because of the large differences of productivities to the lowest productivity (although this difference is not much larger than in T5). The information about all match productivities (info setting) also has a slight negative influence. It is worthwhile to mention some non-significant coefficients. Satisfaction is not directly influenced by measures of relative income, and fairness not by absolute income. Neither altruistic motives (IncOther) seem to play a role in the form of direct compassion, and only prevents a strong self-serving bias in fairness rating. At last, let us make a methodological remark. In our investigation we have not considered the cluster structure of our data. Eight subjects formed an experimental group. Every subject in this group participated in six markets and interacted with every other subject in the group at least once. Testing these two cluster structures separately8 did not change our results except that standard errors are slightly larger.
If the distribution of a productivity of 400 shifts from (210, 190) to (230, 170) then the advantaged players fairness scores increase by 1.509*20/400 - 0.003*20 = 0.015 and the disadvantaged players fairness scores decrease by 0.015 + 0.003*40 = 0.135. As the width of the intervals for the transfer of latent variable scores (see limits in Table 4) into ratings is about 0.8 the probability that the advantaged player increases his rating by one category is about 1.9% and the probability that the disadvantaged player decreases his rating by one category is about 17.9%. 7 A self-serving bias may be defined as a standard that is different when applied from the viewpoints of the two bargaining partners. The (in terms of income) advantaged partner attributes higher scores to this situation than in the disadvantaged case. Bargainers do not strive to maximize fairness but, if at all, then only satisfaction. 8 SAS does not offer a random effects simultaneous equations ordered probit model and STATA allows only one cluster structure here.
11
4. Discussion It is not surprising that satisfaction is strongly influenced by the bargaining result (own income), but it is new that fairness is the only other important systematic determinant of satisfaction. Under the assumption that people are maximizing satisfaction, its dependence on fairness may describe social pressure. Other regarding preferences do not seem to play a decisive role. Social norms of fair behavior have a general core, but there is also some individual variability. The former is expressed by the dominant influence of equal splits and situational frames (experimental settings class and T4). The latter seems to be accompanied by a self-serving bias which is expressed by the asymmetric dependency of one's fairness perception on relative income measures. In the field of bargaining, selfserving biases concerning social norms are reported by Binmore et al. (1991) and Loewenstein et al. (1993). The influence of different positions and, thus, resulting differences in fairness perception might be more variable and ambiguous in other situations than the one considered here. Reported satisfaction and fairness can supplement investigations of bargaining behavior. Our study reveals the strong influence of fairness considerations on satisfaction and presumably on bargaining results in general. This does not directly suggest a new bargaining theory, but adds support for the inclusion of general social norms in utility functions (Cappelen et al. 2010; Krupka and Weber 2008) rather than individual empathy. Fairness perceptions, however, are only partly determined by objective norms and seem to also underlie a small self-serving bias. This bias is weaker here than might be expected from the numerous detections of such a bias. On the background of the attempts to model social behavior on the basis of an altruistic or inequity averse utility function, it is surprising that satisfaction if it is measuring utility underlies no direct influences from others income or others satisfaction, be it in absolute or relative terms. All these influences are comprised in the fairness perception. This result may stimulate research about the principle variables of social utility functions. Are these functions generally based on individual emotions (i.e., altruism, envy, a desire for revenge, etc.), or are they essentially determined by social norms? This investigation supports the latter. References Allen, B., Kahler, R., Tatham, R. and Anderson, D. (1977), Bargaining process as a determinant of postpurchase satisfaction, Journal of Applied Psychology 62, 487-492.
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Austin, W., McGinn, N.C. and Susmilch, C. (1980), Internal standards revisited: effects of social comparisons and expectancies on judgments of fairness and satisfaction, Journal of Experimental Social Psychology 16, 426-441. Becker, G.S. (1974), A theory of marriage, in: Economics of the Family: Marriage, Children, and Human Capital (National Bureau of Economic Research), 299-351. Berman, J., Murphy-Berman, V. and Singh, P. (1985), Cross-cultural similarities and differences in perceptions of fairness, Journal of Cross-Cultural Psychology 16, 55-67. Binmore, K. (1998), Egalitarianism versus utilitarianism, Utilitas 10, 353-367. Binmore, K., Morgan, P., Shaked, A. and Sutton, J. (1991), Do people exploit their bargaining power? An experimental study, Games and Economic Behavior 3, 295-322. Bolton, G., Brandts, J., Katok, E., Ockenfels, A. and Zwick, R. (2008), Testing theories of other-regarding behavior: A sequence of four laboratory studies, Handbook of Experimental Economics Results 1, 488-499. Boza, M.-E. and Diamond, W. (1998), The social context of exchange: transaction utility, relationships and legitimacy, Advances in Consumer Research 25, 557-562. Butterfield, K., Trevin, L. and Weaver, G. (2000), Moral awareness in business organizations: Influences of issue-related and social context factors, Human Relations 53, 981-1018. Cappelen, A.W., Konow, J., Sorensen, E.O. and Tungodden, B. (2010), Just luck: an experimental study of risk taking and fairness, MPRA Paper 24475, University Library of Munich, Germany. Darke, P.R. and Dahl, D.W. (2003), Fairness and discounts: The subjective value of a bargain, Journal of Consumer Psychology 13, 328-338. Darke, P.R. and Freedman, J.L. (1993), Deciding whether to seek a bargain: Effects of both amount and percentage off, Journal of Applied Psychology 78, 960-965. Easterlin, R. (1973), Does money buy happiness?, Public Interest 30, 310. Easterlin, R. (1995), Will raising the incomes of all increase the happiness of all?, Journal of Economic Behavior & Organization 27, 35-47. Elster, J. (1996), Rationality and the Emotions, Economic Journal 106, 1386-1397. Fehr, E. and Schmidt, K.M. (1999), A theory of fairness, competition, and cooperation, Quarterly Journal of Economics 114, 817-868.
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Gth, W., Schmittberger, R. and Schwarze, B. (1982), An experimental analysis of ultimatum bargaining, Journal of Economic Behavior & Organization 3, 367-388. Guven, C. (2009), Reversing the question: Does happiness affect consumption and savings behavior?, Technical Report 219, DIW Berlin, The German Socio-Economic Panel (SOEP). Kahneman, D. and Tversky, A. (1984), Choices, values, and frames, American Psychologist 39, 341-350. Krupka, E.L. and Weber, R.A. (2008), Identifying social norms using coordination games: Why does dictator game sharing vary?, IZA Paper 3860, Bonn, Germany. Lichtenstein, D.R. and Bearden, W.O. (1989), Contextual influences on perceptions of merchant-supplied reference prices, Journal of Consumer Research 16, 55-66. Loewenstein, G., Issacharoff, S., Camerer, C. and Babcock, L. (1993), Self-serving assessments of fairness and pretrial bargaining, Journal of Legal Studies 22, 135-159. Babcock, L., and Loewenstein, G. (1997). Explaining bargaining impasse: the role of self-serving biases, Journal of Economic Perspectives 11, 109-126. Morawetz, D. (1977), Income distribution and self-rated happiness: some empirical evidence, Economic Journal 87, 511-522. Oswald, A., Proto, E. and Sgroi, D. (2009), Happiness and productivity, IZA Paper 4645, Bonn, Germany. Ostmann, A. (1992), The interaction of aspiration levels and the social field in experimental bargaining, Journal of Economic Psychology 13, 233261. Otto, P.E. and Bolle, F. (2011), Matching markets with price bargaining, Experimental Economics 14, 322-348. Raghunathan, R. and Corfman, K. (2006), Is happiness shared doubled and sadness shared halved? Social inuence on enjoyment of hedonic experiences, Journal of Marketing Research 43, 386-394. Schimmack, U. and Lucas, R. (2007), Marriage matters: spousal similarity in life satisfaction, Journal of Applied Social Science Studies (Schmollers Jahrbuch) 127, 105-111. Schindler, R.M. (1998), Consequences of perceiving oneself as responsible for obtaining a discount: evidence for smart-shopper feelings, Journal of Consumer Psychology 7, 371-392. Selten, R. (1972), Equal share analysis of characteristic function experiments, in: Beitrge zur experimentellen Wirtschaftsforschung (Contributions to Experimental Economics) 111, 130-165.
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Stutzer, A. (2004), The role of income aspirations in individual happiness, Journal of Economic Behavior and Organization 54, 89109. Thaler, R. (1985), Mental accounting and consumer choice, Marketing Science 4, 199-214. Tietz, R. and Bartos, O. (1983), Balancing Aspiration Levels as Fairness Principle in Negotiations, in: R. Tietz (Ed.), Aspiration Levels in Bargaining and Economic Decision Making, Lecture Notes in Economics and Mathematical Systems, Vol. 213, Berlin-HeidelbergNew York-Tokyo, 52-66. van Dijk, E., Kleef, G.A.v., Steinel, W. and Beest, I.v. (2008), A social functional approach to emotions in bargaining: When communicating anger pays and when it backfires, Journal of Personality and Social Psychology 94, 600-614. Appendix Full bivariate regression results with endogenous variables satisfaction and fairness, with standard errors in parenthesis, * p < .05, and ** p < .01. For testing the hierarchical models as fairness being based on satisfactory or vice versa, the number of variables was reduced by retaining only those variables which are significant with p < 5%. The cluster structure of the data in terms of either the individuals or the sessions does not change the significance for the 1% level.
Satisfaction Intercept Income aspmore aspless mean Rel. Income IncOther less -1.3158
(2.9615)
Fairness 2.1140
(2.9320)
0.0080**
(0.0011)
0.0009
(0.0010)
-0.0001
(0.0004)
-0.0002
(0.0004)
0.0003
(0.0004)
0.0002
(0.0004)
0.0007
(0.0146)
-0.0128
(0.0145)
0.4858
(0.6692)
1.2950*
(0.6415)
0.0004
(0.0010)
0.0028**
(0.0009)
-0.0005
(0.0008)
-0.0029**
(0.0008)
15
efficient match a es satisfaction other fairness other age sex semester German Polish Frankfurt (Oder) Berlin Economics NmExp lab class info T1 T2 T3 T4 T5 W1
-0.0192
(0.4422)
0.4988
(0.4382)
-0.1320
(0.0694)
-0.1059
(0.0679)
0.1513
(0.0826)
0.6780**
(0.0837)
0.0550
(0.0308)
-0.0159
(0.0307)
-0.0101
(0.0301)
0.0241
(0.0299)
-0.0009
(0.0150)
0.0006
(0.0149)
0.0978
(0.0643)
0.1778**
(0.0639)
-0.0274
(0.0150)
-0.0229
(0.0148)
0.1028
(0.0933)
0.2248*
(0.0923)
0.0015
(0.1470)
0.3034*
(0.1460)
-0.1685
(0.1131)
-0.0159
(0.1126)
-0.2370
(0.1255)
0.1251
(0.1251)
0.0691
(0.0631)
0.0653
(0.0625)
0.1679*
(0.0789)
0.0660
(0.0779)
-0.1057
(0.0936)
-0.1679
(0.0926)
0.5544**
(0.0878)
0.4603**
(0.0871)
0.0381
(0.0972)
-0.2047*
(0.0959)
0.1094
(0.1000)
-0.0035
(0.0995)
0.1371
(0.1036)
0.0671
(0.1027)
0.0083
(0.0985)
0.0130
(0.0979)
-0.0511
(0.1084)
-0.2440*
(0.1069)
-0.0084
(0.1077)
-0.0919
(0.1065)
0.5520**
(0.1247)
0.0955
(0.1250)
16
W2 F1 Limit 1 Limit 2 Limit 3 Limit 4 Rho Pseudo R 2
0.0608
(0.0853)
0.0078
(0.0847)
0.4339**
(0.1188)
0.1993
(0.1188)
0
(0)
0
(0)
0.8216**
(0.0475)
0.8216**
(0.0475)
1.6651**
(0.0560)
1.6651**
(0.0560)
2.4803**
(0.0648)
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(0.0648)
0.5460**
(0.0230)
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17
www.accedoverlag.de ThePrecautionaryPrincipleandtheJustifiability ofThreeImperatives MarkoAhteensuu

UniversityofHelsinki (eMail: marko.ahteensuu@helsinki.fi)
Abstract: This paper argues for the Triad Thesis, the claim that the acceptability of the precautionary principle depends on the justifiability of three imperatives. The precautionary principle calls for early measures to avoid and mitigate serious environmental and health effects in the face of scientific uncertainty. The imperatives are as follows: First, the onus of proof should fall on risk imposers; they need to show that a proposed activity is safe enough. Second, indications of danger that do not qualify as scientific knowledge should be taken into account and may be decisive. Scientific proof is not a prerequisite for taking pre-emptive actions to mitigate risks. Third, serious and irreversible environmental and public health hazards override economic benefits related to an activity. Applying standard Cost-Benefit Analysis is misplaced. The Triad Thesis points to the need for a careful assessment of the nature and extent of justification that the three imperatives can provide. JEL codes: D81, K32 and Z18 Keywords: precautionary principle, burden of proof, standards for evidence, costbenefit analysis, normative underpinnings
1. Introduction In this paper, I will discuss how three imperatives related to the onus of proof, proof standards, and weighing costs and benefits pertain to the much-debated precautionary principle. The triad is as follows: First, the onus of proof should fall on risk imposers rather than the potentially affected parties and public authorities; they need to show that a proposed activity (such as a new experiment, technology or product) is safe enough.
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Second, scientific proof of a causal relationship between an activity and its presumed harmful effect(s) is not a prerequisite for taking pre-emptive actions to mitigate the risk. Besides available scientific results, indications of danger that do not qualify as scientific knowledge should be taken into account and may be decisive in the decision-making process. Third, serious and irreversible environmental and public health hazards override economic benefits related to an activity. Applying standard Cost-Benefit Analysis is misplaced. The precautionary principle calls for early measures to avoid and mitigate serious environmental damage and health effects in the face of uncertainty. My argument, which I call the Triad Thesis, is that the three imperatives underlie the precautionary principle. In particular, the thesis implies that the principle can be justified only if the imperatives prove right. Were they insupportable, any formulation (or specific interpretation) of the principle would unavoidably lack an adequate foundation. A crucial test to the precautionary principle lies not so much in particular criticisms levelled at it, nor in problems with its interpretation and implementation, but in the justifiability of the triad. This point has been missed in the discussions on the precautionary principle. The paper is structured in the following way: I will first highlight the double nature of the precautionary principle and then move on to consider more specifically the three imperatives and their justification. The arguments for and against each of the imperatives would warrant a booklength discussion, at the very least. My aim is not to provide a detailed overview, but to point to these discussions that have been insufficiently combined with the precautionary principle. Lastly, I will defend the Triad Thesis against possible objections and discuss its implications. 2. Double Life of the Precautionary Principle In his review on the precautionary principle, Wiener (2007: 599) suggests that it is the most prominentand perhaps the most controversial development in international environmental law in the last two decades. The precautionary principle, indeed, leads a double life. On the one hand, the principle has taken a fast track to become a fundamental principle in environmental law and policy. This can best be seen in numerous declarations and other soft law instruments that include the principle in their objectives or general principles (e.g., UNCED 1992). Many states (such as Australia, Finland, France, Germany, Sweden, and UK) have adopted the principle in their domestic environmental legislation. International treaties (e.g., CPB 2000) enshrine the principle. The precautionary principle also plays a role in case-law. It presents a
M. Ahteensuu: The Precautionary Principle
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frequently cited argument in international legal disputes. The principle has been recognizedat least implicitlyin many court and tribunal decisions.1 The precautionary principle has been invoked in a wide variety of contexts. These include marine protection and disposal of hazardous wastes, fisheries management, protection of the ozone layer and chemicals regulation, conservation of the natural environment and biological diversity, climate change and global warming policies, and regulation of genetically modified organisms (GMOs). Besides the environmental protection, the principle is applied to public health policy. On the other hand, the precautionary principle remains a matter of an ongoing debate and controversy. Academic scholars from various disciplines (e.g., risk analysts, legal theorists, economists, political scientists, and ethicists), decision-makers, industry representatives, spokespersons for environmental organizations, and lay people continuously argue about the principle. Opponents of the principle contend that it is vague, incoherent, unscientific, and counterproductive. (I have defended the precautionary principle against common criticisms in Ahteensuu 2007; see also Sandin et al. 2002.) Proponents typically point to past regulatory failures (i.e. not taking early precautions despite early indications of danger or damage) and their devastating consequences, and to the possibility of irreversible harm to the nature. The academic debate is mainly centered on two interrelated issues. First, despite the efforts to clarify the precautionary principle and established policy documents, consensus has not been reached concerning the exact definition of the principle. Second, it is still disputed how the precautionary principle should be put into practice. There are no commonly accepted guidelines for the implementation of the principle. This even holds in the European Union (EU) where the principle has gained attention and popularity the most. In spite of the communication on the precautionary principle (CEC 2000), which was introduced by the Commission of the European Communities in order to standardize the use of the principle, the adopted national precautionary policies within the EU have varied in a wide range (see, e.g., Levidow et al. 2005). Virtually every paper on the precautionary principle stresses that there is no agreement on its right meaning or formulation and that it lacks commonly agreed-on guidelines for its implementation. (For books on the two issues, see Fisher et al. 2006; ORiordan et al. 2001; Freestone and Hey 1996; Raffensperger and Tickner 1999.)
1
Admittedly, it remains under debate whether the precautionary principle has already become a principle of customary international law (or general principles of law).
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3. Taking the Normative Background Seriously In light of an ever-increasing number of analyses of the precautionary principle, one might well think that there is neither need nor room for another contribution on the subject. Academic discussion has already peaked and matured. I disagree with this, though only partially. It seems to me that many recent contributions really come close to inventing the wheel again, but the irony and basic message of the present paper is that overlooking the Triad Thesis in the discussions of the precautionary principle has resulted in reinventing the wheel(s) in these discussions. The imperatives and their justification have been extensively discussed before and independently of the precautionary principle.2 The Triad Thesis takes the normative background of the precautionary principle seriously. Thisalthough emphasized by many authorshas been lived up to by only a few in the discussion (for a review of the academic discussions, see Ahteensuu and Sandin 2012). As noted, the thesis implies that specific understandings of the principle and precautionary decisionmaking in general can be justified only if the imperatives are wellfounded. If the principle is acceptable, it is so to the extent that the three imperatives are justifiable. A related point is that the very introduction of the principle may be seen as a response to two sources of dissatisfaction: First, the prevalent risk decision-making framework in which preventative actions could be taken only after scientific proof of a risk. Second, the use of standard Cost-Benefit Analysis (CBA) in environmental and public health decision-making.3 Note a subtle difference between two forms of my argument. The weaker one says that the triad forms inseparable part of the precautionary principle without necessarily exhausting its whole meaning. The stronger one says that the principle is reducible to the three imperatives. There is
2 Needless to say, I do not suggest that there is no need to discuss these questions anymore. Given the foundational nature of the issues and the fact that any decision on them (i.e. adopting or rejecting the imperatives as a basis for actual policy) affects large segments of society, disagreements are probable to prevail and new ways to think about the questions are welcome. 3 These two factors do not provide a full historical account (see Ahteensuu and Sandin 2012). Recent decades of risk research and discussions have, no doubt, helped to refine and enrich the precautionary principle. There are connections between the principle and inclusive risk governance, the intricate issue of trust, and different forms of scientific uncertainty. (See, e.g., ibid.; Lemons, ShraderFrechette and Cranor 1997; see also Funtowicz and Ravetz 1993; Ravetz 2004. For an extensive discussion on the developments in risk research, see Hillerbrand et al. 2012.)
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no remainder. The stronger argument might be defended given the rather unspecified nature of the imperatives, but for the purpose of this paper it is enough to settle for the weaker one. The triad plays a central role in the justification of the precautionary principle. I think that it would be difficult to argue convincingly against this. The take-home lesson: the focus should be on the three imperatives, not only on the principle. This contrasts with the common approach absorbed in the right interpretation of the principle and problems with its implementation. What we need instead or, more accurately, in addition to the common approach is a clear idea of the nature and extent of justification that the triad can offer. 3.1. Shifting the Burden of Proof on Risk Imposers The burden of proof is concerned with two interrelated questions: (1) Who is it that has to prove something? (2) What is required for that something to be shown? In risk discussions, an answer to the first question has often been framed as a choice between risk imposers on the one hand and the potentially affected parties on the other. Either it is the job of the government agencies and the general public (including the nongovernmental organizations) to show that a proposed activity is (unacceptably) risky, or the risk imposer needs to show that the activity in question is safe. Conventional wisdom has it that there has been a transition from the former to the latter. This dichotomy is, strictly speaking, a strawman. The burden does not and does not have tofall on one party alone. The issue is not who should bear the burden, but how it should be divided among the parties. In a common setting, producers need to carry out safety tests (e.g., toxicological tests for new pharmaceuticals, food additives and pesticides) and provide information on which government agencies base their risk assessment and regulatory approval. The more stringent these tests, the heavier burden is placed on risk imposers. In a sense, the very existence of an approval mechanism before placing products on the market reflects a reversal of the burden of proof by a legislator. Products are deemed (potentially) dangerous unless and until their safety is demonstrated. Another problem with the dichotomy is that total reversal of the burden of proof in the form of requests for absolute safety is untenable. The best that can be done is to (try to) show that the activity in question does not have the harmful consequences identified in scientific risk assessment (or to show that the risk can be mitigated to an acceptable level by targeted risk management measures). It is not possible to test risks that nobody knows about. We cannot rule out the possibility of harmful consequences because we do not know what we do not know (i.e. the exact scope of our
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ignorance). So, for us there are no risk-free alternatives. Even if there were risk-free alternatives out there, we would not know about them because we are not able to rule out the very possibility of harmful effects.4 An answer to the second question pertaining to the burden of proof which is about proof standardstells us what needs to be shown (e.g., acceptable risk) and when the available evidence is sufficient for that. It binds the first and second imperatives underlying the precautionary principle together. The relationship between the two questions of the burden of proof is, to put it briefly, that the burden placed on the shoulders of one or the other party becomes heavier or lighter depending on the stringency of the standards for proving safety or riskiness. Imposing high proof standards for showing riskiness of an activity places the burden more on government agencies and the public. Imposing high proof standards for proving safety to a sufficient degree places the burden more on industry. (I will come back to this in more detail in the discussion of the second imperative.) Shifting the burden of proof from the risk-exposed and public authorities more onto the risk imposers may appear an unquestionably good thing. This could explain why appeals for it are often being made without paying attention to its justification. Why, then, should risk imposers bear a heavier burden of proof? The rationale is the following: Risk imposers typically gain benefits from their activities. They should be held responsible for all of the effects of these activities including externalities and risks. Risk imposers also have more resources to study and manage the risks than the public does. A protection argument says that placing the burden more on the risk imposers serves protecting public healththe present and future public and the environment. It might also be considered in terms of sensible balancing between risks and benefits: lost monetary benefits due to the situation in which a risk imposer cannot introduce an activity (because the evidential burden is not met and the following regulatory disapproval) are overweighed by the possible infringements of peoples rights and irrevocable damage to nature. Past regulatory failures have shown that the total cost of not regulating can be of a different league than the cost of something being wrongly, i.e. unnecessarily, regulated. An epistemic argument says that risk imposers may, at least sometimes, be best informed about the risks related to their activities.
Despite these problems, sustaining the crude distinction seems well-placed in contexts where there are substantial difficulties to identify and quantify complex causal networks. The effects of dumping toxic waste at sea present an example.
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These arguments fall short of being conclusive. As noted above, the very framing of the issue of burden of proof has been somewhat misplaced. Furthermore, it is necessary to distinguish between the execution of the required safety tests and their payment. Even if risk imposers are responsible for the risks and they should pay the costs of the safety tests, this does not imply that they are the ones who should carry out the tests. The protection argument, in its turn, needs to be backed up by empirical evidence. Noteworthy is also that imposing strict regulation runs a risk of preventing the development of new safer technologies. What undermines the epistemic argument is that risk imposers may lack incentives to reveal fully their information on the risks. The independence of industry (funded) risk studies has been called into question. (For a more detailed discussion, see, e.g., Shrader-Frechette 1991.) 3.2. Acting before Scientific Proof and Consensus Hypothesis testing may involve two kinds of mistakes. One is accepting a hypothesis when it is, in fact, false. This amounts to concluding wrongly that there is a phenomenon or an effect. The other one is rejecting a hypothesis when it is, in fact, true. This amounts to missing an existing phenomenon or an effect. In statistical studies, the first kind of mistake takes place when one rejects the null hypothesis when it is true. The second kind of mistake takes place when one accepts the null hypothesis when it is false. These mistakes are commonly called false positives (typeI error) and false negatives (type-II error). Risk assessment, risk identification in particular, is overshadowed by analogical mistakes. A new chemical may wrongly be believed to be a carcinogen, while another might wrongly be regarded as safe. On the one hand, setting up risk assessment procedures to minimize the first kind of errors would reduce the chance of accepting false identifications of risk, i.e. false alarms, as the basis of decision-making. This involves imposing high proof standards for positing an effect and, thus, places the burden of proof more on the ones who postulate some, rather than no, severe effects. To continue the above example, weighty evidence is required before concluding that a new chemical isor, at least, should be treated as potentiallycarcinogenic. On the other hand, setting up risk assessment procedures to minimize the second kind of errors would reduce failures to identify real risks with repercussions. Causal pathways and scenarios positing indirect, delayed, cumulative and synergistic effects with little evidence in their support need to be taken seriously before concluding safety. This practice, then, places the burden more on the ones who needs to demonstrate safety, i.e. on risk imposers, rather than the general public and officialsas commonly
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portrayed. Indications of danger that do not qualify as scientific knowledge suffice for treating the chemical as a (potential) carcinogen. Why, then, should measures be taken before scientific proof and consensus? An argument from history draws on the fact that waiting for scientific proof or consensus before taking preventative action has, too many times, resulted in calamities. European Environment Agencys report Late Lessons from Early Warnings: The Precautionary Principle 1896-2000 (2001) reports fourteen case studies on taking no precaution in the face of uncertainty and the serious consequences of these omissions. The crux of the matter is that scientific proof and consensus present an inadequate arbiter of regulating an activity and not regulating it. A related point is that scientific proof standards are not risk neutral, as perhaps mistakenly presumed by many. Imposing scientific purity on standards of proof and evidence, rather unintuitively, submits risk analysis to questionable assumptions of error avoidance. This is because scientific practices have been adjusted to avoiding and minimizing the first kind of errors. Accepting preliminary findings and speculative conclusions as prevailing truths in the scientific community would threaten the credibility of all subsequent research based on them. In risk assessment, the situation is different. Unwarranted allegations of risk may be costly, but missed real dangers can have devastating effects. It makes good sense to consider scenarios and causal pathways with only a little evidence on their side. In other words, it is important to pay attention and avoid the second kind of errors. Science and risk analysis, consequently, require different balance of error avoidance. If one thinks about the ultimate aims of science and risk analysis, truth and safety respectively, this conclusion becomes less surprising. The fact that both kinds of mistakes cannot be minimized at the same time makes the point even more pressing. It should be emphasized, however, that the issue is not simply whether one or the other type of mistakes should be minimized, but rather where to strike a reasonable balance. Reporting the rate of the second kind of errors is a good place to start. Although such measuresmost notably statistical powerare well-known and readily available, this is often omitted. At a theoretical level, it seems rather obvious that different proof and evidential standards apply to forming reasoned beliefs and making reasoned practical decisions under uncertainty. Applying this insight into practice is not a straightforward task. Using different proof standards in applied contexts may be taken to jeopardize scientific integrity. Restricting the use of readjusted proof standards only to the realm of applied science appears insufficient and practically impossible. As Hansson explains,
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a complete reform of the standards of evidence would not only affect the interpretation of individual results in toxicology, but also our views on more basic biological phenomena. As an example, if our main concern is not to miss any possible mechanism for toxicity, then we must pay serious attention to possible metabolic pathways for which there is insufficient proof. Such considerations in turn have intricate connections with various issues in biochemistry, and ultimately we are driven to a massive reappraisal of an immense mass of empirical conclusions, hypotheses and theories (Hansson 1997: 227). Another issue is that even if one accepts that the evidential standards for environmental and public health decision-making do not coincide with the ones employed in science, one still needs to determine the level of proof that is required. Regulating activitiesi.e. restricting people and industrys choicesbased on the use of standards other than the ones employed in science may be well-founded in some cases. But it calls for an argument and any choice of the required level of proof needs to be coupled with an explanation for why it is not arbitrary. Setting a sensible limit might only be possible on a case-by-case basis in relation to the regulatory context in question. (For discussion on the reversal of the burden of proof and changing the proof standards in risk analysis, see Hansson 1997; Lemons et al. 1997.) 3.3. Against Cost-Benefit Analysis versus Trumping Economic Benefits Cost-Benefit Analysis (CBA; the form Risk-Benefit-Cost Analysis, RCBA, is also employed) refers to a bunch of decision-making techniques for evaluating and comparing policies. A basic tenet of these techniques is that costs should be weighed against benefits. In order to make this possible, all the kinds of costs and benefits including those not traded on markets, such as human lives, clean air and safety at work, need to be expressed in a common denominator. A typical practice is to use dollar values assigned on the basis of willingness to pay measures. The presumption is, then, that a particular policy should not to be undertaken unless its expected total benefits outweigh the expected total costs. More generally, implemented policies should maximize the expected net benefits. CBA has widely been used in public policy, for example, in government agencies decisions whether or not to undertake environmental, safety and health regulations. CBA has been criticized on different grounds. A focal problem is the incomparability of different kinds of costs and benefits, more generally,
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disvalues and values. As an example, there is no straightforward and commonly agreed-on way to weigh and balance between the disvalue of species loss and economic recession, nor between increase in mortality and faster transportation. Moreover, assigning a value to human life may be considered a doomed attempt to value the invaluable. What should be noted is that the basic problem is not about expressing benefits and costs in dollars or in any other currency, nor about assigning a monetary value on the basis of willingness to pay measures, but about an irreducibility of different kinds of disvalues and values into a onedimensional measure. Whilst the former practices have their drawbacks as pointed out by the critics, the latter presents a fundamental problem. Another issuewhich connects the third imperative with the second oneis that unproven causal relations do not count. In practice, CBA means evaluating different decision alternatives against each other by quantifying their respective outcomes and probabilities. Common forms of CBA cannot be applied to outcomes to which probability cannot be assigned. It is useful to make a distinction between two versions of the third imperative. The first one says that straightforward weighing expected costs and benefits is impossible because some possible outcomes are incomparable and/or because their probability cannot be assigned. Common criticisms against CBA provide support for this version of the imperative. The second version says that there are environmental and public health ills that trump the economic benefits related to introducing an activity. This does not mean that costs and potential unwanted consequences of regulatory measures or the option of regulatory inaction need not be considered. Indeed, they should be taken into account. It is simply that specific environmental and public health risks related to an activity weigh more than economic benefits resulting from the activity in question. It is also noteworthy that nothing is said about trade-offs between environmental risks and public health threats. Sometimes one option (proceeding with an activity) imposes the former, whilst the alternative (regulating it) introduces the latter. This is recognized in environmental health ethics discussions (see, e.g., Resnik 2012). Similarly, the imperative keeps silent about situations in which there is one environmental risk against another environmental risk as well as about situations in which there is one public health threat against another public health threat. Two finishing remarks: First, defending the latter version of the third imperative successfully is enough for the precautionary principle. Adopting this road, admittedly, results in probability-oblivious weighing. However, it is not clear whether this can be considered
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problematic as the precautionary principle is typically applied exactly when the probability of the calamity is not quantifiable. Second, putting aside the problems pertaining to CBA as typically employed, its basic tenet bears compelling plausibility. Some evaluation of costs and benefits in the risk decision-making seems necessary (from the ethical point of view). It seems misguided (and unethical) not to consider the costs and benefits even if our estimates of them provide only rough guides, and however many other factors there are that determine the end result of the (ethical) appraisal. (For arguments for and against CBA, see Arrow et al. 1996; Shrader-Frechette 1985; Hansson 2007; Sunstein 2005; Kelman 1981; see also Posner 2004; Munthe 2011.) 4. The Triad Thesis in Practice The Triad Thesis says that the precautionary principle is inextricably linked with the three imperatives. In the strongest sense, the imperatives may be considered to constitute the principle. The weaker form, as noted, says that the triad plays a central role in the justification of the principle. In any case, the intimate connection is visible (to some extent) in the formulations of the precautionary principle found in environmental laws, declarations and statements. Consider the Wingspread Statement on the Precautionary Principle (1998) that was introduced at a conference organized by the Science and Environment Health Network (SEHN). This well-known formulation states that [w]hen an activity raises threats of harm to human health or the environment, precautionary measures should be taken even if some cause and effect relationships are not fully established scientifically. The paragraphs following the definition set out criteria for application of the principle. These include the following: [i]n this context the proponent of an activity, rather than the public bears the burden of proof. There is no mention of balancing the environmental and health hazards against economic benefits. There are admittedly other (revisionist) formulations and interpretations of the principle to which the Triad Thesis do not seem to apply. Another well-known formulation, which was adopted at the United Nations Conference on Environment and Development in Rio Janeiro, includes the qualification of cost-effective measures to prevent[ing] environmental degradation (UNCED 1992: Principle 15). In its communication on the precautionary principle, the Commission of the European Communities (2000) maintains that precautionary regulation must be based on an analysis of costs and benefits and tries to reconcile the principle with the principle of proportionality. Some authors have also tried to formulate tempered versions of the precautionary principle
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compatible with CBA (for discussion, see Sunstein 2005; see also Nollkaemper 1996). The Triad Thesis can account for these kinds of formulations and interpretations in two ways. First, one of the imperatives may be further specified. Costs related to regulatory actions, such as forgone innovations (which could also have benefitted public health and the environment), and the option of regulatory inaction can be taken into account even if it is the case that some environmental and public health ills trump economic benefits. The Commissions communication, for instance, accepts the second version of the third imperative. It reads as follows: the protection of public health should undoubtedly be given greater weight than economic considerations (CEC 2000: 20). Safety margin-based understandings of the precautionary principle may be subsumed under the second imperative. Presumptions to err on the side of safety are common, for example, in fisheries management. Regulatory controls incorporate a margin of safety when they prescribe that activities should be limited below a level at which no adverse effect has been observed or predicted. Related to this is the adoption of conservative presumptions, i.e. default assumptions and methods, for calculating risks. An example from toxicology is assuming animal carcinogens to be human carcinogens too unless there is a sufficient reason not to do so. Requests for more inclusive risk assessments often linked to the precautionary principle can also be neatly dealt with specifying the second imperative. Inclusive risk assessments may consist of extending the assessments to take into consideration more complex cause-effect relationships and alternative framing assumptions, but also to include a wider peer community and even non-scientists (i.e. stakeholders and the general public). In regard to the last-mentioned, Lemons, ShraderFrechette, and Cranor suggest that a fundamental dilemma surrounding () the use of a precautionary approach is how to balance the need for expert scientific knowledge with the need to involve the public in the decisionmaking process (Lemons et al. 1997: 233; see also Funtowicz and Ravetz 1993; Ravetz 2004; Fiorino 1989; Slovic, Fischhoff and Lichtenstein 1980; Cvetkovich and Lofstedt 1999). The second strategy to account for the revisionist formulations consists of denying that the precautionary principle is present in the first place. Outlandish understandings may simply fail to represent the principle. They encapsulate something else, for example, a version of CBA. Sunstein (2005a: 383; 2005b) argues that the tempered precautionary principles are not versions of the precautionary principle, as mistakenly claimed by some authors. He calls these versions the anti-catastrophe principles supplementing CBA. Another example is as follows: When the probability of the calamity can be assigned, measures to avoid and
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mitigate the possible damage fall into the scope of the prevention principle, not the precautionary principle. The close relationship between the imperatives and the precautionary principle has been noted in the relevant commentary literature. In regard to the first imperative, Van den Belt and Gremmen (2002) propose that the precautionary principle can fruitfully be reframed as a debate on the proper division of the burdens of proof. de Sadeleer (2002) discusses the issues of burden of proof at length in his Environmental Principles: From Political Slogans to Legal Rules. Presumably the most exhaustive examination of the onus of proof in legal context is by Foster (2011) in her Science and the Precautionary Principle in International Courts and Tribunals: Expert Evidence, Burden of Proof and Finality. In regard to the second imperative, Hansson (1999) argues that implementing the precautionary principle requires adjusting scientific practices, for example, by supplementing significance tests with measures of type-II errors such as the detection level. Lemons et al. (1997) maintain that there is a tension between the use of the 95% confidence rule as a normative basis to reduce speculation in scientific knowledge and the use of it as the proof standard when deciding on public policy. They also point to the fact that the moral concerns embodied by the adoption of the precautionary principle run against adopting the confidence rule. Buhl-Mortensen and Welin (1998) similarly suggest that the precautionary principle is closely connected with reducing the risk of committing type-II errors (missing real dangers in risk assessment) and that the traditional way of securing the certainty of results (the 5% rule) is in conflict with the goal of a precautionary strategy for environmental management. In regard to the third imperative, Nollkaemper (1996) discusses the cost-obliviousness of the precautionary principle. He notes that the principle has been formulated in absolutist terms in several treaties and identifies policy considerations mitigating this absolutism. Sunstein (2005a) contrasts CBA and the precautionary principle. Chauncey Starr (2003) argues that rational decision-making implies benefit/cost/risk assessment, not the precautionary principle. My suggestion is that although each of the three imperatives have been discussed in relation to the precautionary principle, their exact relation to the principlei.e. their triple role as a normative basishas been overlooked. Belt and Gremmen (2002), for example, fail to acknowledge the third imperative. In their view the principle is reducible solely to the questions of the burden of proof. As for Nollkaemper (1996), he highlights the cost-obliviousness of the principle, but pays insufficient attention to the first and second imperatives.
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Often one or the other imperative is discussed as a version of the precautionary principle. Wiener (2007) identifies three archetypal versions of the principle: (1) uncertainty does not justify inaction, (2) uncertainty justifies action, and (3) shifting the burden of proof. A related point nicely highlighted by Wieners classification is that the focus of the debate has been somewhat misplaced. The question is not only whether to take action in the face of scientific uncertainty, but also what action should be taken given the degree and nature of uncertainties related to the cause-effect relationships (e.g., to the probability, characterization, severity, and timing of the effects).5 Another example relates to the most common distinctionthat between strong and weak interpretations of the precautionary principle. Soule (2002) describes the strong interpretation to restrict regulators to considering environmental risk in isolation from possible benefits. There is also a total reversal of the burden of proof implying that a risk imposer needs to demonstrate a zero risk. This amounts to ascribing all the three imperatives to a specific understanding of the precautionary principle. Thinking of the precautionary principle in terms of the Triad Thesis is useful in three ways. First and most obviously, if the imperatives cannot be backed up in our socio-political or moral systems, implementing the precautionary principle unavoidably lacks adequate foundation. This cannot be fixed by simply focusing on the formulations of the principle and their implementation. Above I have outlined typical arguments for each imperative, but it should be clear by now that none of them is without problems. Two further remarks are in order: There are other arguments (not directly related to the triad) that may be thought to provide normative
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A further complicating factoradmittedly insufficiently addressed in the present analysisis that scientific uncertainties take many forms. They result from a multitude of sources: On the one hand, some natural and social processes present high complexity. They may include non-linearities and systemic indeterminacy. On the other hand, there are different sciences with their own problem-framings and methods. Multitude of models with different assumptions (e.g., about model structures and parameter values) is being employed. There is often lack of or gaps in available data. We make extrapolations (e.g., from effects on animals to effects on humans and from higher to lower exposure or doses). There is conceptual imprecision. Consequently, in the end there may be contradictory information, results and conclusions. (For discussion on different kinds of scientific uncertainties and uncertainty categorizations, see, e.g., Ascough et al. 2008; Bedford 2001; Beven 2009; Knight 1921; Regan, Colyvan and Burgman 2002; Myhr 2010; Rowe 1994; Shrader-Frechette 1996.)
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foundation for the precautionary principle. If these arguments do not have a bearing on the three imperatives, it is doubtful that the principle should be accepted based only on those arguments. Ethical and socio-political systems may pull to opposite directions. It is possible that the precautionary principle would be defendable ethically but not politically, or vice versa. Second, specifying the most plausible versions of each of the three imperatives bears implications for the acceptable formulation and implementation of the precautionary principle. This does not result in one correct formulation of the principle, but, at the very minimum, some of its understandings can be ruled out. Strong versions of the principle that invoke a total reversal of the burden of proof in the form of requests for an absolute proof of safety have to go. Versions that do not require any evidence for triggering the precautionary response are untenable. The same applies to the generally cost-oblivious interpretations. Defensible formulations prescribe provisional precautionary measures. Besides moratoria, these may consist of pre-market testing, labelling, and requests for additional scientific information. Some formulations of the precautionary principle include problematic phrases and needs to be revised. An obvious example of this is the use of the phrase full scientific certaintyan oxymoron. In a strict sense, a cause-effect relationship is never conclusively established by evidence. Third, the Triad Thesis ties the precautionary principle more tightly to the earlier theoretical work. It puts the principle into context. The imperatives and their justification have been discussed before and independently of the precautionary principle. Page (1978), for example, discussed early the preferable balance between the two kinds of errors in the environmental (law) context. And philosophers of science debated the issue in terms of intra- and extra-scientific values in scientific research already in the 1950s. Similarly most of the discussions about CBA and its drawbacks have been unrelated to the precautionary principle. These debates can offer valuable insight into the current dispute. Acknowledging their relevance to the precautionary principle might prevent reinventing the wheel(s) in the current discussions on the principle.6
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Besides a top-down perspective taken in this paper, it is important to undertake bottom-up analyses of the precautionary principle. These two approaches complement each other. On the one hand, there is a need to address specific applications of the precautionary principle one by one and in relation to the regulatory context in question. I have argued elsewhere (Ahteensuu 2008) that the debate on the precautionary principle needs to be shifted from the question of whether the principleor its weak or strong interpretationis well-grounded in
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Acknowledgements: I would like to thank the three anonymous referees of Homo Oeconomicus, the managing editor Manfred Holler, and Per Sandin for their insightful comments to improve this paper. Comments on an earlier version of the paper by participants of the SORU Conference Risk and Uncertainty: Ontologies and Methods, University of Amsterdam, the Netherlands, 23rd-25th January 2013 and the YHYS Autumn Colloquium Environmental Justice and New Metaphors, University of Turku, 22nd-23rd November 2012, were also highly appreciated. Thanks to Susanne Uusitalo for making valuable remarks on the language of this paper. This work was completed while working at the Academy of Finland Public Choice Research Centre (PCRC).
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general to questions about the theoretical plausibility and ethical and sociopolitical justifiability of specific understandings of the principle. Different formulations, contexts and regulatory cultures give rise to different forms of the precautionary principle and its implementation. It is not only that there is no concise statement, or commonly accepted definition, formulation or mode of implementation of the principle. Nor is it only that it is vague or ambiguous. The very meaning of the precautionary principle is in dispute. The bottom-up analyses start with the assumption that it is redundant to search for one right formulation of the principle. On the other hand, the present analysis is premised on the common features or lines of argumentation shared by all precautionary decision-making. I have tried to show how three imperatives inextricably linked with the precautionary principle provide a framework to view its normative foundation better. This kind of a top-down perspective can facilitate the evaluation of acceptability of specific understandings of the principle. It also provides insight into the definition and implementation of the precautionary principle.
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Arrow, K.J., Cropper, M.L., Eads, G.C., Hahn, R.W., Lave, L.B., Noll, R.G., Portney, P.R., Russell, M., Schmalensee, R., Smith, V.K. and Stavins, R.N. (1996), Is There a Role for Benefit-Cost Analysis in Environmental, Health, and Safety Regulation?, Science 272 (12th April): 221-222. Ascough II, J.C., Maier, H.R., Ravalico, J.K. and Strudley, M.W. (2008), Future Research Challenges for Incorporation of Uncertainty in Environmental and Ecological Decision-Making, Ecological Modelling 219: 383-399. Belt, H. van den and Gremmen, B. (2002), Between Precautionary Principle and Sound Science: Distributing the Burdens of Proof, Journal of Agricultural and Environmental Ethics 15: 103-122. Bedford, T. and Cooke, R. (2001), Probabilistic Risk Analysis: Foundations and Methods, Cambridge: Cambridge University Press. Beven, K. (2009), Environmental Modelling: An Uncertain Future, London: Routledge. Buhl-Mortensen, L. and Welin, S. (1998), The Ethics of Doing Policy Relevant Science: The Precautionary Principle and the Significance of Non-Significant Results, Science and Engineering Ethics 4: 401-412. CPB (Secretariat of the Convention on Biological Diversity) (2000), Cartagena Protocol on Biosafety to the Convention on Biological Diversity: Text and Annexes (Montreal). CEC Commission of European Communities (2000), Communication from the Commission on the Precautionary Principle (Brussels 2nd Feb. 2000 COM[2000]1). Cvetkovich, G. and Lofstedt, R.E. (eds.) (1999), Social Trust and the Management of Risk, London: Earthscan. European Environment Agency (2001), Late Lessons from Early Warnings: The Precautionary Principle 1896-2000. (<URL:http://reports.eea.eu.int/environmental_issue_report_2001_22/e n/Issue_Report_No_22.pdf>) Fiorino, D. (1989), Technical and Democratic Values in Risk Analysis, Risk Analysis 9: 293-299. Fisher, E., Jones, J. and Schomberg, R. von (eds.) (2006), Implementing the Precautionary Principle: Perspectives and Prospects, Cheltenham: Edgar Elgar. Foster, C.E. (2011), Science and the Precautionary Principle in International Courts and Tribunals: Expert Evidence, Burden of Proof and Finality, Cambridge: Cambridge University Press. Freestone, D. and Hey, E. (eds.) (1996), The Precautionary Principle and International Law: The Challenge of Implementation, The Hague: Kluwer Law International.
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Regan, H.M., Colyvan, M. and Burgman, M.A. (2002), A Taxonomy and Treatment of Uncertainty for Ecology and Conservation Biology, Ecological Applications 12: 618-628. Renn, O. (1998), Three Decades of Risk Research: Accomplishments and New Challenges, Journal of Risk Research 1: 49-71. Resnik, D.B. (2012), Environmental Health Ethics, Cambridge: Cambridge University Press. Rowe, W.D. (1994), Understanding Uncertainty, Risk Analysis 14: 743750. Sadeleer, N. de (2002), Environmental Principles: From Political Slogans to Legal Rules, New York: Oxford University Press. Shrader-Frechette, K. (1985), Risk Analysis and Scientific Method: Methodological and Ethical Problems with Evaluating Societal Hazards, Boston: Kluwer. Shrader-Frechette, K. (1991), Risk and Rationality: Philosophical Foundations for Populist Reforms, Berkeley: University of California Press. Shrader-Frechette, K. (1996), Methodological Rules for Four Classes of Scientific Uncertainty, in J. Lemons (ed.), Scientific Uncertainty and Environmental Problem Solving, Cambridge, Mass.: Blackwell: 12-39. Sandin, P., Peterson, M., Hansson, S.O., Rudn, C. and Juthe, A. (2002), Five Charges against the Precautionary Principle, Journal of Risk Research 5: 287-299. Slovic, P., Fischhoff, B. and Lichtenstein, S. (1980), Facts and Fears: Understanding Perceived Risk, in R. Schwing and W. Albers (eds.), Societal Risk Assessment: How Safe Is Safe Enough?, New York: Plenum Press: 181-216. Soule, E. (2002), Assessing the Precautionary Principle in the Regulation of Genetically Modified Organisms, International Journal of Biotechnology 4: 18-33. Starr, C. (2003), The Precautionary Principle versus Risk Analysis, Risk Analysis 23: 1-3. Sunstein, C.R. (2005a), Cost-Benefit Analysis and the Environment, Environment 115: 351-385. Sunstein, C.R. (2005b), Laws of Fear: Beyond the Precautionary Principle, Cambridge: Cambridge University Press. UNCED Rio Declaration on Environment and Development (United Nations Conference on Environment and Development, Rio de Janeiro, 3rd-14th June 1992). Wiener, J.B. (2007), Precaution, in D. Bodansky, J. Brunne and E. Hey (eds.), The Oxford Handbook of International Environmental Law, Oxford: Oxford University Press: 597-612.
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Wingspread Statement on the Wisconsin, 26th January 1998).
Precautionary
Principle
(Racine,
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www.accedoverlag.de PortugueseInquisitorialSentencingTrends
R.WarrenAnderson
DepartmentofSocialSciences,UniversityofMichiganDearborn (eMail: randersc@umich.edu)
Abstract: Sentencing trends of three individual characteristics of the Portuguese Inquisition is analyzed. During times of (relatively) pro-Jewish kings inquisitors would substitute away from those of Jewish decent to homosexuals; but not to other groups. An employment comparison shows that from a fiscal stance this substitution was imperfect as the gays had lower levels of wealth. Second, folk healers were typically accused of witchcraft and their persecution increased with the capture of the inquisition by non-Jewish doctors. Lastly, the Inquisitor General Verssimo de Lencastres father fought against Spain for Portuguese independence and his rule as Inquisitor General saw increases in sentencing of Spanish nationals. Portuguese Inquisitorial sentencing follows a rational pattern and shows that inquisitors maximized power and wealth under their given constraints. JEL Codes: N13, Z12 Keywords: Inquisition, Portuguese History, Rent Seeking
1. Introduction The Portuguese Inquisition primarily persecuted those of Jewish descent New Christians with sentencing beginning in 1540. However, inquisitors innovated and diversified their persecutions to include other defects (reason why sentenced), such as homosexuality, bigamy, atheism, freemasonry, etc. Persecution was not limited to Portuguese natives; Spaniards, English, French and others were sentenced as well. This article finds patterns in the sentencing of three non-Jewish characteristics by the
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inquisition.1 All three patterns are consistent with self-interested behavior of inquisitors. At times when the king backed the New Christians, inquisitors had substitute deviants to sentence. In analyzing inquisitorial records, it is found that homosexuals but not other groups were used as substitutes for those with Jewish ancestors. The second characteristic is witch sentencing, which followed an explicit rent seeking story. After Old Christian (those with no Jewish ancestry) doctors captured the inquisitorial bureaucracy, persecution of poorer folk healers who competed with the Old Christian doctors were sentenced at higher rates. Lastly, Spanish national sentencing spikes during the rule of an Inquisitor General whose father was targeted by Spain. Punishments levied by inquisitors included jail, whipping, banishment, exile and death (Anderson 2012). However, it was confiscation that led to skewed incentives for inquisitors. When sentenced, ones goods were typically confiscated; thereby giving an impetus to persecute the richest. This confiscation prevented the king from gaining tax revenue. At times the king would sell amnesty from the inquisition to New Christians if he needed revenue. This led to tensions between the crown and the inquisitorial bureaucracy when royalty viewed revenue as more meaningful than piety. Employment data not actual wealth is provided and it seems that in sentencing Jews and gays were imperfect substitutes. It appears that the substitution left the inquisition poorer than it otherwise would have been but it allowed inquisitors to display power and control even in a time of anti-inquisition sentiment without fully challenging the anti-inquisition royalty. 1.1 Brief History In 1497 all Jews had to be baptized, leave or be killed in Portugal. The king purposefully tried to prevent migration to not lose their wealth. Those who were baptized and their descendants became known as New Christians, as opposed to those with no Jewish blood Old Christians. In 1536 the inquisition was established in Portugal to combat cryptoJudaism, with the institution lasting until 1821. Beyond keeping religion pure, sentencing allowed inquisitors to display power. The inquisitorial bureaucracy became a powerful force that defied the king and even the pope in their quest for power.
For analysis on overall sentencing trends, which is dominated by New Christians, see Anderson (2013).
R.W. Anderson: Portuguese Inquisitorial Sentencing Trends
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Sentencing took place in a spectacle called an auto-da-f. The huge ceremonies attracted thousands and could last for days as the masses gathered for entertainment. During times of an auto, inquisitors held all the power; not even the king could commute a death sentence. Beyond the financial gains of being an inquisitor, it was associated with large and significant powers. 1.2 Confiscations Kings tolerated Jews before their forced conversion in exchange for money, as they were a great revenue source (Tavares 1970: 51). Kings, and later inquisitors, acted as stationary bandits extracting wealth from New Christians. In establishing the inquisition, the papacy initially rejected the crowns request as they felt it would simply be a bureaucracy to rob New Christians. This opinion was most likely influenced by Jews and New Christians who funneled money to Rome to buy off the church (Anderson 2013). Inquisitors did not live on bread alone; they acted as wealth maximizing agents. Upon arrest, the accuseds goods were immediately confiscated and inventoried. After a guilty sentence the property was sometimes sold at a private auction with silver, gold and gems kept by inquisitors (Hanson 1981: 79f). This incentive structure led inquisitors to target the richer, a famous example being Ferno Rodrigues Penso. Charged with being a crypto-Jew, his belongings were estimated at 9,000,000 reals with 90,000,000 in state debts owed him; compared to the 1665 expenses of the Lisbon Municipality of 9,600,000 reals (Saraiva 2001: 186). He was sentenced to imprisonment and confiscation of property in 1682, and inquisitors noted he was rico. While the inquisition took lucre seriously, discussing it was grounds for punishment. In 1642, Christovo Cerveira was sentenced for stating that New Christians were arrested so the Holy Office could take their farms (Oakley 2008, vol. 1: 55). In 1627, King Philip II launched an investigation that inquisitors arrested for pecuniary gain (Saraiva 2001: 188ff). A lawyer who had been arrested but dismissed petitioned to reclaim his books. However, they were not on the inventory of confiscated goods, but found in the Inquisitor Generals library at his estate auction. An inquisitor, who eventually became an Archbishop, had valuable confiscated objects fill house. An inquisitorial treasurer took sixty pieces of silver and attempted to have the prisoners name erased. In 1621, a letter was written to the king asserting the Portuguese Inquisition was on the verge of ruin because of the corruption of Inquisitor General Fernando Martines Mascarenhas (Green 2007: 235f). Francisco de Castro, the Inquisitor General after King Philip
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IIs investigation, lived extravagantly, owning a silver spittoon, a silver urinal, golden dinner plates and an excessive wardrobe (Green 2007: 236). Philip II had a long running conflict with inquisitors. In 1627, he had issued an edict of grace for New Christians in exchange for money. In 1628, he allowed them to marry Old Christians, contradicting the laws of limpeza de sangue (purity of blood) and ordered the Portuguese Inquisition to follow rules of the more benign (at this time) Spanish Inquisition. In return the New Christians were to be allowed to create an East India Company; with any invested money immune from inquisitorial confiscation. This privilege was granted with the intent that some of the revenue from New Christian trading would be transferred to the crown. The Inquisitor General balked and stated confiscated property was spiritual property and therefore subject to spiritual control and hence illegal for the king to interfere. Popular opinion turned against the crown and the king had to relent to the inquisitors (Shaw 1998: 24). The extravagant behavior of inquisitors was well known. The Jesuit Antnio Vieira is quoted as stating the difference between the Jesuits and the inquisitors is that the former die for the Faith while the latter live off it (Saraiva 2001: 213). Kamen (1965: 512) summarized: the inquisitors were as discerning in points of property as they were in points of theology. The New Christians could prevent extraction by emigrating; which kings illegalized so as the New Christian wealth would remain a revenue source. As mentioned above, New Christians were thwarted from fleeing Portugal during the time of forced baptism. The New Christian slaughter in 1506 led the crown to ease on migration, but in 1532 it was banned again under the threat of death and confiscation (Herculano 1968: 178). In 1598, they bought the right to migrate from the king (Alpert 2001: 39). In 1628, New Christians purchased the right again to migrate (Kamen 1997: 289f). The king would sell the right to migrate to the New Christians, over inquisitors objections, as after confiscation was established inquisitors kept the money and left the king with almost none. The seventeenth century Jesuit Antnio Vieira estimated that by about 1680 the inquisition had confiscated 25 million cruzados, with less than 2 percent going to the royal treasury (Lea 1907, vol. 3: 282). In an Olsonian framework (Olson 2000), the king and inquisitors were both stationary bandits wanting to plunder the New Christians, with inquisitors keeping the lions share of the wealth. This forced the king to bypass the inquisition and sell migratory rights directly in increase his revenue. While this potentially could leave the king poorer in the future with lost taxation, his discount factor was sufficient for the king to accept a large payment instead of a possible future income stream. As Saraiva
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(2001: 198) explained, It became a rule of Portuguese history that every time there was a financial crisis, there would be a contract between the king and the New Christians. Kings would allow inquisitors to act as the stationary bandits as for sufficiently pious royalty there was utility gained from Jewish persecution. The masses highly enjoyed the autos-da-f and hence the king had more support with higher persecutions. When the king did protect the New Christians, he faced stiff popular opposition.2 However, for less religious rulers confiscation lowered their revenue streams without the offsetting rise in utility from persecuting Jews. For the first century and a half of the inquisition, New Christians lobbied the king for inquisitorial respite in exchange for large sums of money (Anderson 2013). Three rulers in particular, Joo IV, Pedro II and Pombal fought hard against the inquisitorial bureaucracy and supported the New Christians, or at least, New Christian wealth. During these times, inquisitors still wished to display power to denote their relevance; as power displays were a significant role of the inquisition. With royal support of New Christians, inquisitors could substitute away to another group to persecute to display their power. The next section analyzes this substitution effect. The following two sections then test for rent seeking in different characteristics of the sentenced. 2. Substitution between Jews and Gays After Judaism, sodomy was the most persecuted defect whereby sodomy, different from todays usage, described homosexual practices. Portuguese law stated, Above all other sins, the vilest, dirtiest and most dishonest is Sodomy and no other is as abhorrent to God and the world that the mere mention of this sin without any other act is already so serious and abhorrent that it putrefies the air and because of it God sent the flood over the earth, destroying Sodom and Gomorrah and the Knights Templar (Mott 2000: 471f). Penalties did not stop at the accused; relatives of sodomites sentenced lost their civil rights for three generations. In 1640 the Inquisition Byelaws discussed those who confessed of sodomy and had specifications on those who were openly gay (Higgs 2006: 47).
Two anti-inquisition kings had unsuccessful assassination attempts against them supported by inquisitors.
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2.1 Substitutions There were three main political leaders who fought against the inquisition: Joo IV, Pedro II and the Marques of Pombal. During the times of royal New Christian backing it is hypothesized that inquisitors would find substitutes to persecute in the Jews place. Testing for the Jew-Gay and other substitutions will focus on these three reigns. Starting in 1580 Portugal was ruled by the Spanish crown. In 1640 the Duke of Bragana declared himself to be King Joo IV and ruled until 1658. After the restoration of Joo IV there was an effort to abolish the inquisition and to deprive it of confiscation power. But opposition from the inquisition and popular support was too strong and prevented the crown from ending it (McClintock and Strong 1894, Vol. 4: 604). The king threatened incarceration and even death for inquisitors who opposed him but they stood their ground and refused (Llorente 1843: 74). Inquisitors turned against Joo IV to such a degree that the Inquisitor General Francisco de Castro was involved in a plot to assassinate the king. While others in the plot were beheaded, hung and quartered; the Inquisitor General had such power that he was only imprisoned for a year and a half and maintained his post (Saraiva 2001: 172). Joo did have marginal success and suspended inquisitorial confiscation, although this was not entirely respected by inquisitors. The Evora tribunal in 1655 was close to collapsing with lack of funds and stated they would defy the crown and confiscate wealth to survive (Hanson 1981: 78). Inquisitors persuaded the pope to excommunicate Joo IV, but the king died before its enactment. Instead, inquisitors posted an edict of excommunication of secular officials who worked during the suspension of confiscation during the kings rule (Saraiva 2001: 214). The second king to challenge the inquisition was Pedro II. He took power from his unstable (living) brother Alfonso in 1667. Initially Pedro II and his influential minister seemed to favor leniency towards the New Christians; especially as a method to aid the economy (Birmingham 2003: 56). During his reign the inquisition was suspended by the papacy with the Pedros support. However, an assassination attempt was made in an attempt to restore his brother to the crown. This was encouraged by priests who riled the masses in hatred against the New Christians, especially during the time of inquisitorial suspension. Pedro turned against his favorable stance on New Christians and backed the reinstatement of the inquisition. Following the death of Alfonso, however, Pedro returned to his earlier sympathetic New Christian views (Anderson 2013). The last political dummy is the Marques of Pombal, who came to power in 1750. He was adamantly and forcibly anti-inquisition and attempted to terminate it. While not entirely successful in eliminating it,
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his reforms had a huge negative impact on sentencing and helped lead to the abolishment of the institution in 1821. Data for regressions comes from the Lists of the Portuguese Inquisition (Oakley 2008) which contains records of more than 17,000 people sentenced. There were three tribunals in Portugal (Coimbra, Lisbon, Evora); however data in the published lists are available only for Lisbon and Evora. The first year is 1636 as consistent data on the reason why sentenced was not recorded until then. There are two dependent variables absolute and percent. Absolute is the simply the number of people sentenced that year with the germane characteristic. As sentencing fluctuated greatly, a percentage terms are also used. To calculate percents, the number of people with the given characteristic is divided by the total sentenced with that characteristic listed. In this section sodomy is the characteristic of interest, below witchcraft, being a doctor and location born are used in a similar fashion. For example, if for a given year 120 people were sentenced, 100 had a defect and 90 were New Christians, 2 were sodomites and 8 had other reasonings, then the dependent variable of would be 2 percent for homosexuality and 8 percent for other. The two series for sodomy are correlated; the correlation coefficient between absolute and percent is 0.67. Figure 1: Five Year Averages of Sodomy Sentencing
[Absolute is the total number of sodomizers sentenced, and Percent is the number of sodomizers divided by the number sentenced. The y-axis is both the absolute number of sentences of homosexuals and the percent of those sentenced that were gay. Data is from Oakley (2008)]
David Higgs (2003: 165) linked politics to sodomy for the years shortly after 1640, when Portugal became independent from Spain. He noted that there was a spike in homophobic activity in the 1640s corresponding to regime uncertainty. However, Higgs does not develop this notion enough.
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Some decades later during the suspension of the Portuguese Inquisition during Pedro IIs rule there was uncertainty if it would be permanently abolished or be reinstated. After the reinstatement and time of greater regime uncertainty inquisitors turned their focus away from Judaizers and towards sodomites. The number and percentage of sodomites punished is shown in Figure 1 with the reigns of anti-inquisition rulers. The spike in the 1640s and starting in the 1690s were during the rule of Joo IV and Pedro II. This coincidence is of interest it implies that inquisitors substituted away from the more costly New Christians to the unorganized homosexuals to demonstrate their power in the face of anti-inquisitorial backlash from the crown. Table 1: Sodomy Sentences 1636 to 1763
Table 1 shows the effects of uncertain inquisitorial times on homosexuals. Regressions were run of the following form:
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(1)
Sodomy Sentencing = 0 + 1 * Joo IV+ 2 * Pedro II + 3 * Pombal + X +
with the three political variables the ones of interest. X is a vector of controls, explained and sourced in the Appendix. Controls are excluded here except for an overall sentenced and population. As population is always insignificant whereas sentencing is, population is not included in later regressions. The Durbin-Watson statistic for (1) to (3) are each about 2, implying no autocorrelation and Dickey-Fuller tests reject that unit roots are present. For OLS estimates, standard errors are robust for all tables. For absolute sentencing total sentencing was controlled for in (2) and population in (3). Bounded Tobit regressions were run on (4) and (5) for the percent effects. Joo IVs rule saw six or so more sodomites sentenced per year during his rule; or a 20 percent increase. Pedro IIs rule was smaller with an increase of 2 people per year or a 10 percent increase. All told, Joos rule was for 17 years and sentenced 80 sodomites, whereas Pedro ruled for 24 years and sentenced 39. A total of 155 gays were sentenced in this dataset; meaning nearly 80 percent were sentenced in 32 percent of the years of greater inquisitorial uncertainty. The coefficients on Pombals rule are all highly insignificant. During his rule he diminished the inquisition to such an extent that during the last decade of his reign there was zero sentencing in Lisbon. Therefore, the substitution effect is insignificant as sentencing zero people clearly means no substitution can occur. 2.2 Occupational Comparison Unfortunately, data on the value of wealth confiscated by those sentenced is not available. However, inquisitors kept records on the occupation of those sentenced. While not recorded for everyone, there is enough data available to make some elementary comparisons. Data is not consistently recorded until 1636, but there is some from 1600 to 1635. As mentioned, the richer were targeted by inquisitors; especially merchants and businessmen. However, Jewish businessmen were targeted at lower rates during the rule of Joo IV; his protection seems to have worked to some degree. Pedro II, however, was not as effective. So few gay businessmen were sentenced that it does not carry any significance. Pedro II attempted to increase Portugals textile production by protecting New Christian mills. There is a noticeable drop in cloth sentencing during his rule. Interestingly, homosexual textile workers were
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more frequently targeted over this time, although the small sample size makes it hard for definite conclusions. For the two-time periods of greater royal New Christian support gay military and religious workers were targeted more often. Gays in the military were really only persecuted at these times (9 of 11). More sentenced homosexuals worked as religious figures (priests, friars) than any other profession; with 16 of 23 being sentenced during Joo IV and Pedro IIs rules. Table 2: Total in Each Occupation Sentenced Per Annum
Various people sentenced were listed as being unemployed or beggars; which I categorized as poor. After wars in the mid-seventeenth century beggars became more numerous and in 1671 they were to arrested if they were found without a license to beg. Several of those unemployed were former soldiers. The abundance of beggars lasted at least until 1685 (Hanson 1981: 63). The inquisition apparently worked in conjunction with the government to eliminate the beggar problem as many more were sentenced over the time when politicians persecuted them more. The rise of military sentencing during Pedros rule could relate to former soldiers poverty. Overall sentencing declined during the rules of Joo IV and Pedro II, but there was a substitution to gay religious and military workers. Most likely they had lower levels of wealth than New Christians, implying they were imperfect substitutes from a financial aspect. However, inquisitors
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still were able to display power and control on society to some extent to fight against the king at these times of heightened uncertainty. Table 3: Total in Each Occupation
2.3 Non-Gay Substitutions To test for Jewish substitutes besides those guilty of the nefarious sin I grouped other defects together and ran similar tests to above. The other defects were soliciting (priests asking for sexual favors), apostasy, bigamy and other random offenses (e.g., false witness, atheism).3 In general, there was no significance. The lack of any significance implies more randomized persecution of these groups; or they were not suitable substitutes during times of increased New Christian royal support. The inquisition relied on the masses for popular support. If inquisitors targeted defects that many could potentially be guilty of some support could have been lost. Hence the focus on homosexuality, a politically feasible target that many supported in its persecution.
3
Witchcraft follows a different path explained below.
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3. Witch Persecutions Witches have long been persecuted in Europe, with witch hunts executing 40,000 to 50,000 people in early modern Europe (Rowlands 1998: 300). Economists have found economic rationale for this persecution. Emily Oster (2004) found that from 1520 to 1770 a standard deviation decrease in temperature led to roughly a 0.2 standard deviation increase in trials. As temperatures fell, food production decreased, leading to widows and the poor to be accused of being witches. Witch hunts gave a justification for killing the more unproductive members of society as food became scarcer. Similarly, Baten and Woiteck (2001) find that higher grain prices led to more witch accusations in Bavaria. Johnson and Koyama (2012) show that in France witch trials declined as the state increased in fiscal capacity and could decrease trials. Relatedly, Anderson et al. (2013) find that Jews were more likely to be expelled from European cities over the fourteenth to the sixteenth centuries when temperatures declined. In most of Europe, witch hunts declined in the eighteenth century; whereas in Portugal they increased over the first half of the century. This anomaly is explained by rent seeking. Witches were often folk healers who competed with Old Christian doctors. After Old Christian doctors gained more power within the inquisitorial bureaucracy in the early eighteenth century, they persecuted their competitors to a greater extent than before, as seen in Figure 2. Figure 2: Witches Sentenced
[The solid line is the total number of witches sentenced, given on the y-axis. Data is from Oakley (2008)]
The medical profession rose to inquisitorial prominence during the reign of King Dom Joo V (1705 to 1750) and the corresponding rule of
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Inquisitor General Dom Nuno da Cunha de Atade e Mello (1707 to 1750; the dotted line on Figure 2). The king was trained in enlightened thought and increased scientific learning in Portugal. He brought Italian physicians to his court to train doctors in empirical methods. The king had a close relationship with the Holy Office and made no efforts to stop the persecution of healers which he viewed as beneficial to increase medical wellbeing (W156-162).4 Despite being the Inquisitor General, Dom Nuno da Cunha de Atade e Mello was a product of the enlightenment. He was friendly with advocates of intellectual openness and had a cosmopolitan education (W165f). He knew Alexandre de Gusmo, the kings personal secretary, who advocated diminishing inquisitorial activity, relaxing censorship laws and lowering Jesuit power. Gusmos stance led other inquisitors to attempt to silence him by accusing him of being a crypto-Jew, but Dom Nunos friendship granted him immunity (W172). A few examples will show the methods of folk medicine. Midwife Joana Baptista was arrested in 1747. She would make a wreath shaped loaf of bread with flour from three different Marias. Joana would pass the ill child through the rosca de trs Marias three times while chanting. She was tortured and imprisoned for two years before being exiled, incarcerated and receiving religious instructions (W36f). Antnia Nunes da Costa had two inquisitorial trials before her banishment to Brazil. To treat a headache she would apply the hot entrails of a male sheep, opened, at the base of [the victims] neck, and put milk from the breast of a woman into [the patients] ears, along with some small sprigs of wormwood, increasing the amount until a good result is achieved. A toothache would get hot embers soaked in wine (W63f). These kinds of healers were popular because they did not resort to draining blood of patients and cures rarely hurt. Furthermore, eighteenth century patients of folk healers testified they had no faith in professional healers during inquisitorial trials (W75ff). During the rule of Dom Nuno da Cunha trained licensed physicians and surgeons increased in power within the Portuguese Inquisition as familiares (secular inquisitorial bureaucrats) and at the royal court (W181). With greater power within the organization, the Old Christian medical profession could direct the inquisition to eliminate their competition. This, combined with support from the Inquisitor General and king for a more enlightened approach to medicine, culminated in increased persecutions of witches.
4 With many references to Walker 2005 in this section a W will be used as the reference.
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Old Christians also faced competition from New Christian doctors. Maria Arajo (1989) reviewed cases in Evora of medical New Christian persecution. New Christian doctors generally offered better service with superior techniques and kinship organization. New Christians would maintain contact outside of Portugal to learn the most advanced practices and would pass the information through their familial networks. Instead of competing on quality and improving their product, Old Christian doctors found it more prudent to eliminate competition via the inquisition, especially younger doctors (Arajo 1989: 65). To better test the effects of rent seeking, doctors on inquisitorial activity, regressions were run with the inclusion of a dummy for King Joo Vs rule when the inquisition was captured by Old Christian doctors. He became king before Dom Nuno da Cunha was Inquisitor General, thereby biasing the results against finding rent seeking. The dependent variables are witches (folk healers) and New Christian doctors in both absolute and percentage terms.5 Joo V had positive and significant impacts on sentencing for witches in both absolute and percentage terms. Joos reign saw roughly 4 more witches sentenced per year, or an 8 percent increase. Unlike witches, the New Christian medical community was affected by rent seeking only after controlling for overall sentencing levels, with an increase of slightly more than a person per year or about a 5 percent increase. Regressing both witches and medical together in (5), (6) and (9) they are all positive and significant. This rent seeking had negative effects on the Portuguese medical profession. Large numbers of New Christian doctors had been persecuted for many years prior and many emigrated, creating a shortage of doctors. While only two to three hundred New Christian physicians fled the country, there were only two medical schools in Portugal for the first half of the eighteenth century and usually graduated less than a dozen students per year (W52-3). Portuguese medicine, despite its focus on science, was still obsolete and focused on Galen techniques. New methods were viewed as foreign, or worse, as Jewish. The hospital in Lisbon, the most innovative, did not seem to have changed much until the 1760s (W78). Hence, this rent seeking over time led to huge negative effects for the medical community.
New Christian doctors are those whose profession was listed as doctors, surgeons and barbers. Barbers historically acted as surgeons and dentists.
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The inquisition as relating to witches and New Christian doctors over this time frame is best explained in economic terms. Poor folk healers and New Christian medics were arrested for competing with Old Christian doctors. As Old Christians gained more power, they eliminated more of their competition with the support of the crown and Inquisitor General. 4. Spanish Nationals Many sentenced by the Portuguese Inquisition were Spaniards, or even if born in Portugal were listed as being Spanish.6 Spanish national sentencing fluctuated consistent with rent seeking and anti-foreign bias. Spanish New Christians were foreign in two regards: their (supposed) religion and home country. Not only were they foreigners, but Spain ruled Portugal from 1580 to 1640 and hence viewed as being from a former occupying enemy state. Tests on Spanish persecution are performed below, but new variables need to be explained prior to the results. The Inquisitor Generals Francisco de Castro and Verssimo de Lencastre had differing views on Spanish occupation and were the head inquisitors at the time of the break from Spain and shortly afterwards. From 1580 to 1640 Spain ruled Portugal under a united crown. Jos Ramos-Coelho (1889) described the situation of Portugal before the Restoration in 1640. The discontentment had engrossed with intense vigor in the heart of the Portuguese, always restless, always irreconcilable, always anxious for liberty, under the nefarious rule of the foreigner, it was accumulating more and more, exacerbating day by day by the continuing vexing tyrannical orders with which they tried to destroy an entire nation, destined to reacquire its place in the assembly of the people of Europe, and to fulfill the honorable purpose, which destiny it had distinguished among them (Ramos-Coelho 1889: 278). The animosity had grown between the two peninsular people culminating in a war of hidden plots. The Spanish to fulfill their barbaric ideas had to deprive Portugal of its moneyed men, the easiest way to weaken it. Ramos-Coelho (1889: 279) provides a list of the Spanish targets, including Dom Francisco Luiz de Lencastre, the Chief Commander of Aviz. The Order of Aviz was military religious organization that greatly aided the king in the war against Spain and deemed necessary to continue fighting the crowns enemies. Hence, in 1648 it was mandated that Dom Francisco receive an income of 8,000 cruzados to continue being the Chief Commander of the Order of Aviz. If any money was lacking he was
6
For ease, anyone from modern Spain is Spanish, instead of Castilian, Galician, etc.
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to be paid from the order itself (Silva 1856: 9-10). Dom Francisco Luiz de Lencastres son was Verssimo de Lencastre, the Inquisitor General from 1676 to 1692. It is reasonable to conclude that Verssimo would have hostilities towards the Spanish for targeting his father and to preserve family wealth and prestige. While many in Portugal, like Dom Francisco Luiz de Lencastre, wanted freedom from Spain in 1640, inquisitors at that time were more reluctant. Francisco de Castro was the Inquisitor General from 1630 to 1653 and implicated in a 1641 regicidal conspiracy against Joo IV to restore the crown to Spain. To improve state financing Dom Joo IV suspended inquisitorial confiscation in 1649. Inquisitors and the crown engaged in a power struggle, described above. This was supported by the pope, who did not recognize Joo IV as king (Green 2007: 235). Besides the rulings of these two Inquisitor Generals, warfare with Spain would influence popular opinion on Spanish nationals. Portugal and Spain fought various wars after 1640; the War of Spanish succession also saw Portugal and Spain on opposite sides of the allied forces. However, they were allies in between during the War of Grand Alliance (Dincecco 2009: 92). Table 5: Spanish National Sentencing 1636 to 1778 in Lisbon Tribunal
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Table 5 shows the results on Spaniard sentencing. Dummies were included for Castro, Verssimo, war against Spain and war allied with Spain. Percents are similar to above. These results are limited to the Lisbon Tribunal which persecuted most of the Spanish nationals and had superior origin data availability. Warfare is measured in war severity; or the coefficient is the effect of 1,000 more casualties in battle. Verssimos tenure as Inquisitor General saw statistically significant increases in Spanish persecution percentage terms. His rule had approximately 11 to 16 percent more Spaniards sentenced in Lisbon. Inquisitor General Castro did not have significant results. Even though he wanted Portugal to remain joined with Spain his preference for persecuting Spanish nationals seems not to have been much influenced by this. Warfare with Spain led to some statistically significant increases in absolute terms. A thousand more casualties in war led to about a 0.2 more Spanish sentences. When allied with Spain, the effect was typically negative and outside of standard significance levels. Only five years of Pedro IIs rule were not during wars against or with Spain or with Verssimo as Inquisitor General and hence his exclusion (1), (3) and (5). When included, his rule is always significant and leads to greater Spanish persecution, about 4 more people per year or a 20 percent increase. This corresponds to the rise of homosexual persecution during Pedros rule. With higher levels of uncertainty persecution shifted away from Portuguese and towards foreigners, which could easily increase popular support for the institution. However, this substitution could not have happened during Joo IVs rule as sodomy did due to the pro-Spain Castro being the Inquisitor General at this time. The inquisition acted in a systematic rent seeking fashion towards Spaniards. Inquisitor General Verssimo saw increases in persecution; correspondingly his father fought against Spain. Warfare with Spain saw slight increases in sentencing whereas when allied with Spain saw decreases, albeit statistically insignificant. Pedro IIs rule during a time of inquisitorial uncertainty saw increased persecution of the foreign population, a substitution of Portuguese natives during a time when the inquisition needed more popular support. 5. Conclusion In The Marrano Factory Antnio Saraiva frames the inquisition as Marxist class warfare with the richer New Christians persecuted by those envious of their wealth and status. Israel Rvah countered there were many poor sentenced as well and the inquisition had to pay for their stay in the jails; hence, the inquisition could not have been class warfare
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(Saraiva 2001: 241). The framework of this article provides a missing component that better explains why the inquisition would arrest the poor: rent seeking. However, no statistical testing of rent seeking has been performed in inquisitorial studies. Here evidence is provided that the inquisition acted as a bureaucracy and engaged in systematic self-interest. Such activity by the inquisition is consistent with Ekelund et als (1996) work on the medieval Catholic Church as a firm acting rationally with economic considerations. When persecuting New Christians became more costly, the inquisition shifted to cheaper but still politically feasible homosexuals. Such a substitution is not found for apostasy, bigamy or other offenses that many in the masses could potentially be guilty of as that would be a less effective way to maintain their support. Medical professionals captured the Inquisition and led to elimination of folk medicine competition in addition to New Christian doctors. The Inquisitor General Verssimo prosecuted those from Spain at a much higher rate, consistent with his fathers standing in fighting against Spain for Portuguese independence. Inquisitors were rational actors. Their main targets were richer New Christians who the masses liked to see persecuted. When shielded by the king, inquisitors simply shifted their focus to a different group that kept popular support without further exacerbating the power struggle with the crown. When convenient to the bureaucracy other groups were targeted and inquisitors gained on margins other than just financial. While Jesus said you cannot serve God and Mammon the inquisition used its powers to defend God to maximize their own objectives to enrich and empower themselves. Data Appendix The main independent variables of interest were all political. As New Christians clearly could not dictate who became king, all of these shocks are taken to be exogenous. Table A1 gives the years of the political variables and controls used. Those arrested by inquisitors could spend years languishing in prisons before being sentenced; implying that only looking at the reign of the king instead of his reign plus some years afterwards understates his significance. This is apparent from the graphs of sodomy and witches where there was still higher than average sentences following the deaths of Joo IV and Joo V, respectively. All dependent variables are from Oakley (2008).
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Table A1 Variable Sodomy Witch Medical Spanish Description Dependent Variables Number (or percent) of people sentenced for sodomy Number (or percent) of people sentenced for witchcraft Number (or percent) of New Christian doctors, surgeons or barbers sentenced Number (or percent) of people sentenced from modern day Spain Independent Political Factors Castro Joo IV Verssimo Pedro II Joo V Pombal War 1634 1653; Inquisitor General pro-Spain 1641 1656; King (became king December 1640) antiInquisition 1676 1692; Inquisitor General anti-Spain 1683 1706; King anti-Inquisition 1706 1750; King Inquisition captured by medical interests 1750 1777; when the Marques of Pombal ruled Portugal anti-Inquisition Years at war; Intensity of war from Levy (1983); years Portugal was at war from Dincecco (2009) and Dupuy and Dupuy (1986) Independent Non-Political Factors Lagged Population Portuguese Grain Sentencing Prior year dependent Portuguese population, from McEvedy and Jones (1978) and linearly interpolated for annual data Portuguese wheat and barley prices averaged; from Prices, Wages and Rents in Portugal 7 Number of people sentenced for that year, from Oakley (2008)
http://pwr.dev.simplicidade.com/000000/1/index.htm
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Table A2: Summary Statistics of People Sentenced in Lisbon and Evora Total Sodomy Witches New Christian Doctors From Spain Sentenced 155 304 295 255 8,569 Annual Mean 1.20 2.36 2.29 1.98 66.43 Standard Deviation 4.33 3.40 2.87 4.38 68.82
Source: Oakley (2008), for the years 1635 to 1763.
References Anderson, R. W. (2012), Lisbon and Evora Inquisitorial Punishments, e-Journal of Portuguese History 10, 1, Summer. Anderson, R. W. (2013), Measuring the Portuguese Inquisition, Working Paper. Anderson, R. W., Johnson, N. and Koyama, M. (2013), From the Persecuting to the Protective State? Jewish Expulsions and Weather Shocks from 1100 to 1800, George Mason University Department of Economics Working Paper No. 13-06. Arajo, M. B. (1989), Mdicos e seus familiares na inquisio de vora, Inquisio: comunicaes apresentadas ao 1o. Congresso LusoBrasileiro sobre Inquisio, realizado em Lisboa, de 17 a 20 de fevereiro de 1987 (Vols. 1-3, Vol. 1: 4973). Baten, J. and Woitek, U. (2001), Grain Price Fluctuations and Witch Hunting in Bavaria, Working Papers 9, Department of Economics, University of Glasgow. Bethencourt, F. (2009), The Inquisition: a global history, 1478-1834. (J. Birrell, Trans.), Cambridge, UK; New York: Cambridge University Press. Birmingham, D. (2003), A Concise History of Portugal, Cambridge Concise Histories. Cambridge [England]; New York: Cambridge University Press. Dincecco, M. (2009), Fiscal Centralization, Limited Government, and Public Revenues in Europe, 1650-1913, The Journal of Economic History 69: 48103.
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Dupuy, R. E. and Dupuy, T. N. (1986), The Encyclopedia of Military History from 3500 B.C. to the Present, New York: Harper & Row. Ekelund, R. B., Hbert, R. F., Tollison, R. D., and Davidson, A. B. (1996), Sacred Trust: the Medieval Church as an Economic Firm. New York; Oxford: Oxford University Press. Green, T. (2007), Inquisition: the Reign of Fear, London: Macmillan. Haggerty, G. E., (ed.) (2000), Gay Histories and Cultures: An Encyclopedia, New York: Garland. Hanson, C. A. (1981), Economy and Society in Baroque Portugal, 16681703, Minneapolis: University of Minnesota Press. Herculano, A. (1968), History of the Origin and Establishment of the Inquisition in Portugal, (J. C. Branner, Trans.), New York: AMS Press. Higgs, D. (2003), Tales of Two Carmelites: Inquisitorial Narratives from Portugal and Brazil, Infamous desire: male homosexuality in colonial Latin America (p. 152167). Higgs, D. (2006), The Historiography of MaleMale Love in Portugal, 15501800, in: Queer Masculinities, 1550-1800: Siting Same-sex Desire in the Early Modern World (p. 3757). Johnson, N., and Koyama, M. (2012), Taxes, Lawyers, and the Decline of Witch Trials in France, Manuscript. Kamen, H. (1965), Confiscations in the Economy of the Spanish Inquisition, Economic History Review 18: 511525. Kamen, H. (1998), The Spanish Inquisition: An Historical Revision, London: Weidenfeld & Nicolson. Lea, H. C. (1907), A History of the Inquisition of Spain (Vols. 1-4, Vol. 3, book VIII), New York [u.a.]: Macmillan. Levy, J. S. (1983), War in the Modern Great Power System, 1495-1975, Lexington, Ky: University Press of Kentucky. Llorente, J. A. (1843), The History of the Inquisition of Spain, from the Time of Its Establishment to the Reign of Ferdinand VII., Composed From the Original Documents of the Archives of the Supreme Council and from those of Subordinate Tribunals of the Holy Office, Philadelphia: James M. Campbell & Co. McClintock, J., and Strong, J. (1894), Cyclopaedia of Biblical, theological, and ecclesiastical literature (Vol. 4, 7), New York: Harper. Mott, L. (2000), Inquisition, Portugal, (J. N. Green, Trans.), in: Gay histories and Cultures: an Encyclopedia, (p. 471-472). ODonnell, K., and ORourke, M. (eds.) (2006), Queer Masculinities, 1550-1800: Siting Same-Sex Desire in the Early Modern World, Basingstoke [England]; New York: Palgrave Macmillan. Oakley J. L. (2008), Lists of the Portuguese Inquisition (Vols. 1-2), London: The Jewish Historical Society.
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Olson, M. (2000), Power and Prosperity: Outgrowing Communist and Capitalist Dictatorships, New York: Basic Books. Oster, E. (2004), Witchcraft, Weather and Economic Growth in Renaissance Europe, Journal of Economic Perspectives 18: 215228. Ramos-Coelho, J. (1889), Historia do Infante D. Duarte, irmo de el-rei D. Joo IV. ... Com desenhos do architecto ... L. Beltrami, etc. 2 tom, Lisboa, Por Ordem e na Typographia da Academia Real das Sciencias. Rowlands, A. (1998), Telling Witchcraft Stories: New Perspectives on Witchcraft and Witches in the Early Modern Period, Gender & History 10: 294302. Saraiva, A. J. (2001), The Marrano Factory the Portuguese Inquisition and its New Christians 1536-1765. (H. P. Salomon & I. S. D. Sassoon, Trans.). Leiden; Boston: Brill. Sigal, P. (ed.). (2003), Infamous Desire: Male Homosexuality in Colonial Latin America, Chicago: University of Chicago Press. Silva, J. J. D. A. E. (ed.) (1856), Colleco Chronologica Da Legislao Portugueza. Lisboa, Imprensa F X De Souza. Tavares, M. J. P. F. (1970), Os judeus em Portugal no sculo XIV. Lisboa: Instituto de Alta Cultura, Centro de Estudos Histricos. Walker, T. D. (2005), Doctors, folk medicine and the Inquisition: the repression of magical healing in Portugal during the Enlightenment, The Medieval and Early Modern Iberian World, Vol. 23. Leiden; Boston: Brill.
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www.accedoverlag.de LawsandGoodnessastheFoundationsof MachiavellisRepublic TimoLaine

Department of Political and Economic Studies, University of Helsinki (eMail: timo.mz.laine@helsinki.fi)
Abstract: This essay is an attempt to uncover a deductive argument underlying the general project of Niccol Machiavellis Discourses on Livy. While laws are a prominent presence throughout the work, the argument is crystalized in Machiavellis assertion that laws make men good. The idea that laws turn men into moral agents provides a consequentialist moral justification for Machiavellis republic: if as a matter of moral psychology laws make men good, it is the primary task of a government to establish a system of law. Keywords: Machiavelli, republican liberty, rule of law, ethics, moral psychology
1. Introduction Along with The Prince, the Discourses on Livy is one of Niccol Machiavellis two major works in terms of impact. Formally it is a commentary on the first ten books of Ab urbe condita, Livys work on Roman history, but in practice Machiavelli does not simply comment on Livy but uses him to his own ends. It is not enough simply to read old books and learn things for the sake of learning. Instead, Machiavelli (1971: D I Pr; 76) believes that we need to know the history of the Roman Republic to make ourselves a republic. When he writes in The Prince that he leaves out republics from that work because he has already discussed republics at length another time, he is referring to the Discourses (Machiavelli 1971: P 2; 258). The work consists of three books. The first of the books aims to show, in Skinners (1978: 158) words, how Rome was able to dispose of its kings and grow to greatness under a system of Republican liberty. The second is about how the Romans organized their military campaigns. Thus
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together the first books treat the two ends that Machiavelli (1971: D I 29; 111) ascribes to a city that lives free: one [is] to acquire, the other to maintain itself free.1 Finally, the third book explores the role of individual leaders, taking up some of the themes of The Prince. Most modern interpretations do not treat the work as an independent whole but in conjunction with The Prince, roughly as if they formed a single work. This synthetic approach has its own virtues. Hulliung (1983: 229) describes it as seeing all the different works as interrelated parts of a whole and does not refrain from using one work to assist in elucidating the meaning of another. Hulliung contrasts this with the genetic approach (favored by Skinner and others) that tries to trace the development of Machiavellis ideas from earlier works to the later ones. Both the synthetic and the genetic approach try to make sense of Machiavelli by comparing the different works to each other, and they may be successful in trying to make sense of what went on in Machiavellis head. But they have drawbacks too. Despite their differences, they are similar in the way that sometimes they both lose sight of the individual arguments that are developed within the books. Instead of weighing the rational force of the authors arguments, they try to complete a puzzle that represents the authors ideas. I am not concerned with such puzzles, because they too often result in vague and non-specific outlooks or worldviews. In this essay I am more interested in the explicit reasoning in one work, the Discourses. I therefore leave The Prince aside and treat the Discourses as a whole that is self-sufficient at least when it comes to the arguments I am trying to recover. In section 2, I deal with the interpretation of the Discourses as a republican work. This interpretation has to be considered as it offers virtually the only possibility of a non-consequentialist ethical reading of the Discourses. I point out important problems in the interpretation, and I do not believe such an interpretation can be adequately defended. In section 3, I present the idea that the fundamental basis of the Discourses is that laws make people good. This means that laws make moral agency possible on a large scale. In section 4, I consider the idea of Machiavelli as a theorist of rule of law. If we take law to be constitutive of moral life as I suggest, it might be
1
I cite the Martelli edition of Machiavellis collected works. In addition to the page number I include in the citations the work (D for the Discourses, P for The Prince) the book and chapter number. I have consulted the English translations, particularly those of Mansfield and Tarcov (Machiavelli 1996; Machiavelli 1985), but I take responsibility of the modifications I have made to the translated passages.
T. Laine: Laws and Goodness as the Foundations of Machiavellis Republic
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tempting to say that laws have moral authority as well. However, I demonstrate that there are reasons to believe this is not the case. In section 5, I weigh some of the implications of my reading on how we read The Prince and Machiavelli in general. The conclusion is that since Machiavelli is contradictory on the topic of law, my reading cannot be the full truth about his views on the topic. 2. Republican liberty Skinners interpretation is a natural starting point because it is (in its various forms expounded in different books) the most prominent modern version of the classic view of the Discourses as a straightforwardly republican work. Skinner (1978: 156ff) writes that while The Prince is organized around the basic value of security, the basic value in the Discourses is that of liberty. He then illustrates this idea with a few good examples that present Machiavelli as someone who values liberty. Finally he defines liberty as entailing both independence from external aggression and tyranny and the power of a free people to govern themselves instead of being governed by a prince. Apparently liberty is thus something like the sovereignty of a state with republican (as in nonmonarchical) institutional arrangements. Skinner is of course right in saying that liberty is important for Machiavelli. Yet, the point should not be overstated: one can value liberty like one can value good ice cream, just as a means to an end. While good ice cream serves the intrinsic value of pleasure, liberty can be valuable as a means to improve the stability of a government. Skinner does not commit himself to a clear position on the value of liberty. He clearly affirms the value of liberty as a means but does not specify whether it is also an end. Skinner can be criticized for his ambiguity, but this ambiguity makes it possible to read him the way I do: since he uses concepts such as basic value that hint at liberty as not simply a means but also an end, I will weigh the plausibility of such an interpretation of Machiavelli. Such an interpretation is problematic because of the ambiguity of two related concepts, liberty and republic. Although it seems clear that liberty and republic are incompatible with tyranny, neither concept implies specific institutional arrangements. For example, Colish (1971: 336f) writes that liberty for Machiavelli is not incompatible with monarchy, as Machiavelli asserts that Rome enjoyed liberty under monarchical rule, at least until Tarquinius Superbus despoiled her of all the liberty she had possessed under the other kings. Kings can therefore run free governments, although they generally perhaps do not. Further, Colish (1971: 345) adds that Machiavelli feels free to apply the term republica to any kind of commonwealth regardless of its
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constitutional form and that he does not hesitate to call a monarchy, that of ancient Rome, a republica. Not only can a king run a free government, but it seems he can in fact run a republic too. Ultimately, what distinguishes a republic from other kinds of states according to Colish is therefore not its institutional form but its concern for the common weal: only republics work for the common good. In this light it is obvious that Machiavelli does not view liberty as an end in itself, but values it because of its beneficial effects on the individual and the community (Colish 1971: 349). These conclusions contradict the second part of Skinners definition of liberty, that of popular self-government. They also seem to eliminate the possibility of the non-consequentialist reading of liberty: if liberty is not an end in itself, it can only be valuable as a means. Actually, even the consequentialist reading is somewhat problematic because of certain ambiguities. Common good seems like a morally good effect that could be used to justify political choices morally. However, as Strauss (1958: 256f) has noted, republics are in Machiavellis view to be preferred with a view to the common good in the amoral sense, or in other words for their capabilities, resilience and adaptability. Republics tend to work better in a technical sense, but there is no moral difference between them and other kinds of governments. In a later statement of his interpretation, Skinner himself seems to have resolved the ambiguity by making it explicit that liberty is just a means. While still putting a lot of emphasis on liberty, he writes, citing the first chapter of the first book of the Discourses, that Machiavellis aim is to discover what made possible the dominant position to which [the Roman Republic] rose (Skinner 2000: 57). The goal is not liberty but glory and imperial greatness; Hulliung (1983: 221) who has a similar consequentialist view writes that glory needs no excuses; it requires nothing outside itself to justify its ways. But even this reformulation of Skinners views has the problem that Machiavelli (1971: D I 1; 77) does not talk about his aims in this context at all: he only writes that those who read about the beginnings of Roman history are not surprised of the success that republic went on to have. More broadly, although Skinner is not alone in making Machiavelli a theorist of greatness, I know of no convincing account of the difference between theory and rhetoric in Machiavelli. Such an account would be needed to ward off the simple objection that words like glory and greatness seem more naturally to fall into the category of rhetoric not intended rationally to persuade but to appeal to emotions. In conclusion, although republican liberty is important for Machiavelli, I think its importance is often exaggerated as a result of methodological choices. Machiavelli obviously cared about liberty and I do not mean to attack the idea of Machiavelli of liberty as a figure in the history of
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ideas. My goal is more specific: what I hope to have shown is that Machiavellis ideas related to liberty and the republic are conceptually so problematic that it is philosophically risky to anchor an interpretation to them. Machiavelli writes about liberty so often that if you only look at quantity and not quality, it would seem like something crucially important. But even if someone writes about something a lot it does not mean that the thing is crucially important. For example, it may be just that it takes a lot of space to discuss that thing, or that it is used for rhetorical reasons. But no matter what the reason, Machiavelli does not seem to indicate anywhere that the basic justification of a government is in its republican institutions or in its promotion of liberty. Just like many interpretations of Machiavellis ethics tend to exaggerate the role of virtue, discussions of his political theory tend to exaggerate liberty or republicanism. 3. Laws and goodness It is probably true that according to Machiavelli only a republic that defends liberty can be justified as a political order. But because these terms are so vague, such an assertion does not tell us much. I believe there is another more fundamental level of justification that in a way frames the question to which republican liberty is (part of) the answer. Machiavelli (1971: D I 3; 81) writes that it is necessary to whoever disposes a republic and orders laws in it to presuppose that all men are bad. Like Holler (2008: 61) points out, it is important to note that this is just a methodological assumption. Good men may in fact exist, but it makes no difference to those who want to establish a political order. A legislator may not rely on peoples goodness: where no well-ordered state exists, he has to assume an overwhelming badness. What this specifically means is not clear: it might be immorality, idleness, ignorance or perhaps more likely all these combined. Men, it seems, should be understood as naturally bad, and they never work any good unless through necessity [. . . ]. Therefore it is said that hunger and poverty make men industrious, and the laws make them good (Machiavelli 1971: D I 3; 82). Essentially people are incapable of living in complete freedom, because such freedom leads to confusion and disorder. Although Machiavelli does not speak of the state of nature, the idea is the same. For those theorists that are pessimists about human nature, the state of nature is intolerable because people are bad. Machiavelli appears to be one such theorist. But people are only bad in absolute freedom, when it is not necessary for them to be otherwise.
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Machiavelli presents two kinds of such necessity: the first is hunger and poverty and the second laws2. They have different effects too: hunger and poverty produce industry while laws produce goodness. Since industry is obviously a good thing as well, it seems as if laws not only make people good in an unspecific, undifferentiated sense but good in some specific sense that goes beyond to what hunger and poverty can produce. It is normal for Machiavelli to leave his terms undefined and use words in many different senses, and goodness is no exception. Slightly surprisingly he even uses it in a pejorative sense: writing that goodness is not enough he ridicules the naive kindness of Piero Soderini3 (Machiavelli 1971: D III 30; 237). Men like Soderini cannot survive in politics because they are good in the wrong way.4 It is obvious that if laws make men good, it does not mean that men thus become naive. The goodness laws produce is good goodness. But what is it? According to Strauss (1958: 265) definition, goodness for Machiavelli is the sum of habits which the majority of men living together must possess in order not to be disturbed by one another and by their government in the enjoyment of life, liberty and property. This definition captures something about the idea. Instead of being inhabitants of a Kantian kingdom of ends, men are flesh-and-blood creatures that are bad until laws make them good. Machiavelli views human beings roughly as animals. Writing about Machiavellis animal metaphors in The Prince,
2
In a philosophical paper it is important to define ones concepts. However, with Machiavelli, this is a problematic task since he is not a philosopher in the fullest sense of the word, and he typically does not define his concepts. Any definition we may give to any of his concepts is already an interpretation and has to be supported with textual evidence. This is beyond the scope of this paper, but fortunately Machiavellis conception seems to have no unusual characteristics. While they do not amount to a definition, law for him has some basic features. It may originate from the pen of a single legislator but can be changed later by a legislature. It is an explicit system of rules. The rules are enforced in different ways under the supervision of a political government. The question of the purpose of law on the other hand is the topic of this paper itself. 3 Soderini was gonfaloniere of justice in the Florentine republic when Machiavelli was employed by the government. 4 Interestingly Holler (2008: 64f) indicates that Soderini is an exception to Machiavellis pessimistic doctrine about human nature. After all, Soderini seems to be good. I think however that Soderini has already been rendered good by the laws; Machiavelli does not state that men are bad always and everywhere, just that they are bad when not moderated by laws. I propose the hypothesis that Soderini has been rendered good in the laudative sense by the laws, and good in the pejorative sense by growing up in Florence.
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Airaksinen (2009: 553) notes that Machiavellis princes are animals in their relentless urge to live and survive in changing circumstance in the middle of other animals. I believe the idea can be applied not just to princes but to human beings as a whole. Without proper training, our animal or natural instincts frequently pit us against each other; with training, we can learn not to fight each other. However, the lessons we learn must be repeated continuously, because we have a tendency to forget them if and when we are exposed to bad influences. Machiavelli (1971: D I 42; 126) has an entire short chapter on the topic of How Easily Men Can Be Corrupted in which he writes that no matter how well people are brought up they are easily corrupted: Quintus Fabius, a very good man, blinded by a little ambition and persuaded by the malignity of [the tyrant] Appius, changed his good customs to the worst and became like him. Such an example will make legislators of republics and kingdoms more ready to check human appetites and to take away from them all hope of being able to err with impunity. Thus, even if laws make men good, goodness is not permanent, even if one supports the other: as good customs have need of laws to maintain themselves, so laws have need of good customs so as to be observed (Machiavelli 1971: D I 18; 102). Goodness does seem at least to correlate with a set of habits as products of continuous education. Yet, Strausss definition seems to leave something out. Goodness, as understood by Strauss, seems to be simply a rule of sociality (as opposed to antisociality) and non-interference. If it is possible to define goodness as sociality, the difference between the two kinds seems to disappear. In Strausss case we can see this if we replace goodness with sociality (which we should be able to do if goodness simply is sociality): hunger and poverty make men industrious, and the laws make them social. Unless Machiavelli means that hunger and poverty do not yet make men work together to improve their situation but only work individually, each for himself, it seems as if industry already requires sociality. If men (importantly in plural, as it means no-one is significantly better off than anyone else) really are hungry and poor, there is not much to be gained through antisocial industry such as stealing, because nobody has anything worth stealing. And in extreme cases of poverty in which people finally turn against each other, poverty no longer makes men industrious but simply desperate. If I am right, the special distinction that laws have disappears with Strausss definition of goodness, because they are not the only things that make men social. Even if we believe that goodness can be defined in some way other than that of Strauss, it remains an important question why Machiavelli chooses to use the distinction between the two kinds of necessity we saw earlier. It is perhaps only a question of perspective. Since we tend to read
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Machiavelli as a political technician, we immediately tend to refuse any hint of straightforwardly ethical claims in his books. If an acknowledged moral philosopher said that laws make people good, we would have little doubt of the meaning of goodness. Also, we tend not to read Machiavelli as an author of systematic arguments. But if we for a moment set aside our conviction that Machiavelli only deals with particular case studies, we might learn something new about him. If we for a moment read Machiavelli as a moral philosopher and understand the Discourses as his primary ethical work, where else to start to look for its theoretical basis but in its initial chapters? It does not seem to be a coincidence that the laws make men good statement occurs on the first few pages of the book (excluding the dedicatory letter and the introduction to Book I). Hunger and poverty and many other similar things function mechanically. In the state of nature, people are generally too lazy even to do bad things. But hunger makes them do something: when they are hungry, they try to look for something to eat. As soon as the hunger is satisfied, people become lazy again. The idea is that while hunger and poverty may produce a change in peoples behavior, such a change is limited only to their behavior and is not likely to last. The same applies to fear: it is not a sufficient basis for a political order. It is possible to make people obey through fear, but this only works in the short term, and the change is only superficial. A prince governing through fear is a good example. Discussing the importance of religion, Machiavelli (1971: D I 11; 94) writes that where the fear of God fails, it must be either that the kingdom comes to ruin or that it is sustained by the fear of a prince, which supplies the defects of religion. Because princes are of short life, it must be that the kingdom will fail soon, as his virtue fails. A fearsome prince can be very effective, but in the end he will die. Nobody is afraid of a dead prince, so after his death people are free to be bad again. Fear, like hunger and poverty, is an important tool in the toolkit of the legislator (and the ruler), but it is only a technical instrument that is supplementary to laws. Laws are related to fear as well in the sense that one reason laws work is that people obey because they are afraid of harsh punishments. They see someone who breaks the law get punished, and they are scared the same thing might happen to them too if they broke the law. Compared to a harsh prince, the advantage is that with laws, the fear does not depend on any single person but on the institutions that are immortal, at least in principle. Laws do not die like princes. This solves one of the problems of simple fear, hunger and poverty as tools of governing: they are temporary, while
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laws can be made almost eternal. A second point, however, is even more important. The idea is that after some time, people no longer respect the law just because they are afraid of being caught. Instead there is a change that goes deeper than behavior. They obey the law because they have changed: their bad nature is now constrained by laws. We can see this from Machiavellis (1971: D I 58; 140ff) comparison between princes (or kings) and peoples. He is attacking the opinion of all the writers that nothing is more vain and inconstant than the multitude. He defends the people (or the multitude) by pointing out an error in the reasoning of these writers. He accuses the writers of sampling bias, of comparing kings regulated by (or moderated by, or obligated to) laws to the loose multitude, or in other words, the people unregulated by laws. With such kings one should put in the comparison a multitude regulated by laws as they are; and the same goodness that we see to be in them will be found to be in it. This means even kings can be regulated by laws, because otherwise such a comparison would be impossible. However, as Mansfield (1979: 170) notes, a king would of course be in a position to change any law he wanted to, unless the laws were of superhuman origin. It seems that for Machiavelli, laws do not work just because of fear of punishment, because nobody can punish a king for breaking the law or prevent him from changing it. A king can be regulated by laws even if he has nothing to fear.5 Once people have become good, they have in some way accepted the laws as reasons to act in a certain way. Laws are therefore reasons in practical reasoning, in reasoning on how to act. Further, they are taken to be reasons to act in a certain way even when there is no advantage in doing so and no risk of punishment in not doing so. (Also, laws seem unique among reasons in having this capacity.) They are therefore not prudential reasons. Thus it seems that they are moral reasons. Kocis (1998: 83ff) interprets the matter roughly in the following way. Although there are some moral values that apply in all contexts, full morality is only made possible by a certain institutional framework. For Kocis the basic concept is obligation. He views Machiavelli as opposed to moral rationalism according to which moral obligations ultimately stem from a divine, hierarchical world order; according to moral rationalism we
5
There is a chapter in which Machiavelli (1971: D I 45; 127) writes that the nonobservance of a law, particularly if done by the author of the law, sets a wicked example. Despite the language of setting an example that suggests a consequentialist reading that such nonobservance encourages others not to observe the law it seems that the tone is purely of moral condemnation.
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should be good because God tells us to. In the moral voluntarist view that Kocis ascribes to Machiavelli, moral obligations do not depend on cosmic order but social order. And as such, they are created and not received. The interpretation is tempting because it allows a way to make room for both the good and the evil Machiavelli. Like Strauss (1958: 9f) famously writes, although there is truth in depicting Machiavelli as a teacher of evil, such a view is not exhaustive. There is a good Machiavelli too, the one that seeks a just political order and the common good. Kocis solution permits us to see the evil Machiavelli as only referring to a corrupt, pre-civilized condition. In such a condition, before human laws, we have no obligations (Kocis 1998: 84). But although obligations do not exist, what does exist is the moral value of civilization. This value morally requires that we should first take steps to survive and then set our eyes on bringing lawful rule into being, or developing a civilization with its glory (Kocis 1998: 84). By doing so, by law we are made good or raised from a bestial to a human condition (Kocis 1998: 91). While Kocis captures something of Machiavellis view, there seems to be a conceptual problem with his interpretation. He believes that even outside civilization there are things we should do. At the very least, we should strive to bring about civilization. But Kocis cannot say that we are obligated to do so, because obligations do not exist outside civilization. Thus, morally we should do something we are not morally obligated to do. This is not a happy conclusion, since it makes it necessary to make a distinction between acts that are morally required and acts that are supererogatory, or in other words morally good but not required. Kocis might defend himself by maintaining that outside civilization, nothing is really required of us, but it would be good if we tried to bring about civilization. Yet this does not seem right. Civilization is very important, and Machiavelli knows this. He would not be satisfied with saying that if civilization does not exist, then we are not required to work towards it. Indeed, if he has one major preoccupation, it seems to be bringing about a good social order. It is not supererogatory but a moral obligation. I want to suggest a conceptual modification to Kocis view. It is not that moral obligations do not exist outside civilization, but that moral agents do not exist (or at least they are very rare). Only law makes moral agency possible on a large scale. As a matter of Machiavellis moral psychology, a functional system of laws seems to be a necessary condition of nurturing a community of moral agents.6 Thus I believe that for
6
I suggest a different claim than Benner (2009: 281) who believes Machiavelli is
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Machiavelli the establishment of laws in order to make men good is the most essential task of a government, and all else is secondary.7 My modification allows us to retain Kocis idea that civilization makes a moral difference without running into the problem of how we can be obligated to do something in a pre-civilized condition. Moral obligations do not disappear when civilization disappears. Only our capacity to recognize them as moral obligations disappears. What civilization does to us is that it makes us understand our moral obligations, and it does this by way of law. This assertion must not be taken too strongly. As we have seen, it is not strictly impossible for men to be good even without laws; that they are bad is just a methodological assumption. However, the overwhelming majority is bad. And what laws do is that they turn the majority of men from amoral animals into moral agents. Also, probably even laws are unable to make all men good, although to my knowledge Machiavelli does not discuss this explicitly. 4. Rule of law? Because of the moral connection between law and goodness, it would seem possible to think of Machiavelli as arguing for rule of law. Notably Benner (2009: 280) has used Machiavellis suggestion that laws make men good to make this claim. She writes that in the third chapter of Book I of the Discourses Machiavelli alludes very pointedly to the fundamental importance of the rule of law for his political theory. The central idea in rule of law is roughly that nobody is above the law, whereas in rule by law the government rules by writing and enforcing the laws as it sees fit. This distinction becomes visible when there would be an advantage for the government in changing (or breaking) the law. If the
not talking about moral agency but rule of law and durable political orders. I am in agreement with her to the extent that we both believe that laws are necessary because without them civil order cannot last long. However, she does not say this is so because only laws make moral agency possible on a large scale. I will turn to the question of rule of law in the next section. 7 We can assume that the content of the laws is secondary as well. This is perhaps a surprising conclusion, since we of course recognize the possibility (and actual existence) of bad laws in the world. However, I believe it is only surprising because typically we do not take into account the possibility of having no laws at all. For a political realist like Machiavelli, any attempt to establish a system of laws, no matter what the content of that system, would be an improvement in a situation with no such system in place. Of course this does not imply that Machiavelli does not distinguish between good and bad laws.
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government respects the law even in such cases, rule of law is operating. In rule of law, law has moral authority; in a sense law has then made men good. If moral considerations override all other considerations, in rule of law we could think of legal considerations overriding all other considerations apart from the moral ones.8 First, we must be moral; second, we must obey the law; and within these constraints, we may act as we choose. One significant problem in ascribing rule of law to Machiavelli is that although he recognizes and praises situations in which nobody is above the law, he is inconsistent. This inconsistency is perhaps made necessary by his theory of moral corruption. Although it is a matter of debate how to determine what is the appropriate punishment for a crime, it is clear that rule of law requires a strong connection between the crime and the punishment. For example, it seems contrary to rule of law that a petty criminal is picked out as an example and made to pay for everyones bad behavior: in other words, although there is always some room for discretion, the punishment should be determined mainly by the characteristics of the crime, and everyone committing the same kind of criminal act should be punished in the same way. Machiavelli disagrees with this idea. Men tend towards corruption, and they need to be reminded periodically of the necessity of obeying the law. Like Machiavelli (1971: D III 1; 195ff) makes explicit in detail, this is done by applying harsh punishments, or to use his word, executions (from the ambiguity of the term it is not clear if executions demand a person to be put to death or if executing means more abstractly to carry out a punishment). While the punishments may actually be for breaking the law, it does not seem to be just the law that is applied. According to Mansfield (1979: 302) the idea is that although executions enforce laws, their true purpose is political in maintaining a certain government and its way of life, and the means is sensational display rather than dignified legality. There seem to be problematic elements for the rule of law interpretation. There is considerable room for discretion for determining the appropriate punishment. The punishment does not depend exclusively on the crime but more widely on the social circumstances. This is clear from Machiavellis idea that harsh punishments need to be performed periodically, according to a fixed time limit of five or ten years. If this is
8
Although it might seem that for Machiavelli law takes precedence over ethics because law is necessary for moral agency, this conclusion is avoidable. It is just a fact of moral psychology that moral agency requires a functioning legal system. But in moral philosophy moral principles override all other considerations, including laws.
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not done, corruption will progress and eventually become incurable. Another element of rule of law is that it places on legislation a requirement of transparency. People should not be kept in the dark about the basis for the laws. However, Machiavelli makes it clear that there is a major element of deception behind laws: And truly there was never any order of extraordinary laws for a people who did not have recourse to God, because otherwise they would not have been accepted. For a prudent individual knows many goods that do not have in themselves evident reasons with which one can persuade others. Thus wise men who wish to take away this difficulty have recourse to God (Machiavelli 1971: D I 11; 94). Machiavelli openly advocates the use of God as a tool of persuasion. Although in practice the people may never truly understand why the laws are the way they are, for rule of law it seems necessary at least not to use religion cynically as Machiavelli does, just as a substitute for rational argumentation. The justifications for the laws should be public, and laws should not have secret objectives. Machiavelli could be defended here on the grounds that he is not writing about laws in general, but extraordinary laws. It is possible that he thinks that having recourse to God is allowed only in unusual situations such as beginnings of society and in a state of emergency. In a stable society, legislation should be transparent. However, Machiavelli does not think that religion is needed just when founding a political order, but instead that it can never be given up: Thus, princes of a republic or of a kingdom should maintain the foundations of the religion they hold; and if this is done, it will be an easy thing for them to maintain their republic religious and, in consequence, good and united. All things that arise in favor of the religion they should favor and magnify, even though they judge them false; and they should do it so much the more as they are more prudent and more knowing of natural things (Machiavelli 1971: D 1 12; 95). Although laws are important for Machiavelli, it often seems that religion as a means of control is an even more basic element of the political order for him. We can hardly speak of rule of law if there is a propaganda machine designed to make people accept the way they are governed: in such circumstances, those in control of religion are also in control of the law and thus above the law.
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Holler (2008: 61) writes that for Machiavelli religion served only as a means to enforce the law. But interestingly, as we see, religion too seems capable of at least maintaining (if not making) a republic good and united. Because Machiavelli tends to treat religions and governments in similar ways, it is perhaps justified to conclude that even a religion has the capacity to make good by using laws, or in other words the rules of the religion. Why would not a religion then be an alternative to a political government? From all of what Machiavelli says about religion (and in particular the Catholic Church) the lesson that we may draw is that religions tend to be unreliable. We see from the preceding citation that to maintain their republic religious and, in consequence, good and united, it is sufficient for princes of a republic or of a kingdom to maintain the foundations of the religion they hold. But on the other hand Machiavelli (1971: D I 12; 96) also points out that the Church has rendered Italians without religion and wicked, and that it has kept and keeps this province disunited. Apparently, while religion may maintain and perhaps even make a republic good and united, left to its own devices it can produce exactly the opposite effect: make a republic wicked and disunited. Therefore Hollers suggestion seems to me correct. A religion can make men good even by itself, but it only functions reliably as a means to enforce the law and under the supervision of a political government. Returning to the general question of rule of law, despite the connection between law and ethics that enables law to make men good, law is not as strict for Machiavelli as it is for a theorist of rule of law. Everyone is morally obligated to respect the law, but the leader or the governing elite retains a great deal of freedom to maneuver between laws. Goodness leaves room for Machiavellianism. 5. The Machiavelli of law While continuities exist between the Discourses and The Prince and the debate over the alleged fundamental unity (cf. Berlin 1972: 181) of the two works will surely continue as long as we continue to study Machiavelli, the ideas I have been developing in this paper, if correct, seem to expose a rift between them. In The Prince Machiavelli is very quiet9 about the law.10 I have argued for the idea that law is fundamental
9
His silence is not total; there are several remarks on law in the work. But it is important to note that when he alludes to the importance of laws, he does so only to state that he will not talk about them: because there cannot be good laws where there are not good arms, and where there are good arms there must be good laws, I
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to the Discourses. If we do not want to admit a contradiction between the two works, it would be essential to explain why in two books on the same subject matter in which the author purports to lay out all that he knows there is such a difference. Mossini (1962: 264f) asserts, not without good reasons, that the difference or contradiction on the topic of laws exists not just between The Prince and the Discourses, but even within the Discourses: Effectively in the thought of Machiavelli there are two contrary tendencies, two different attempts of explaining the foundation and the final value of politics, of authority, of power. To illustrate this it is however necessary to refer not to the distinction The Prince Discourses, but instead to that of [. . . ] Princelaws, that only in part coincides with the other one and does not have, at any rate, anything to do with that abstract and arbitrary question of distinction between the two works of Machiavelli. This observation is important because it makes the matter conceptual, not just one of a difference between two books. It is a question between the prince as a concept and the law as a concept. Mossinis interpretation of Machiavelli is based on The Prince, but he justifies this claim with passages from the Discourses as well. The most obvious one is Machiavellis remark that not even well-ordered laws are enough to stop universal corruption: where the matter is not corrupt, tumults and scandals do not hurt; where it is corrupt, well-ordered laws do not help unless11 indeed they have been put in motion by one individual who with an extreme force ensures their observance so that the matter becomes good (Machiavelli 1971: D I 17; 102).
shall leave out the reasoning on laws and shall speak of arms (Machiavelli 1971: P 12; 275). 10 For example, Mossini (1962: 243) notes that the almost total lack of interest Machiavelli seems to demonstrate to everything that is law, rights, justice, cannot fail to surprise anyone picking up the book, and that at first this would seem to confirm Jean Bodins accusation of the falsity and corruption of Machiavellis science. 11 It might be tempting to cling to the exception Machiavelli leaves open and argue that in the end after all laws can make people good even in extreme corruption. Yet given the context it seems obvious that in this case it is the capacities and qualities of the one individual that make the difference, not laws.
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Faced with the question of the contradiction between the Machiavelli of law and the Machiavelli of the prince, Mossini (1962: 285) concludes that the new Machiavellian valorization of laws is, substantively, a consequence of the weakening in Machiavelli of that religious, mystical sense [. . . ] of political values behind his vision of politics. If Mossini is right, Machiavelli turned to laws because in the end not even he himself was convinced by his own thesis of power in no need of regulation and legitimization. I am not sure Mossinis conclusion necessarily follows, but his analysis of the conceptual contradiction is correct and important. It means that taken as a whole, Machiavelli is not completely coherent. If we want to save Machiavelli from this unfortunate fate, this leaves us with two options. We can either try to get rid of the contradiction or pick one of the two Machiavellis the one of law and the other of the prince and uphold the resulting picture as the real Machiavelli. I do not believe the contradiction can be eliminated, and both sides of his thought are strong enough not to be discarded in favor of the other. Yet, if we want to read Machiavelli, to study him and perhaps to learn from him, we can focus on the parts that make sense. I believe that based on the goodness argument the Machiavelli of law is a coherent figure, although given the contradiction observed by Mossini, it is not the full truth of the historical Machiavellis thought. 6. Conclusion The point of the Discourses is not to justify a certain institutional arrangement, not even a republican one. It is not a theory of justice. Rather, if I am correct, the idea is that ethics would be sufficient if we were all (or at least almost all) moral agents to begin with. We would understand and act according to our obligations. But because this is not the case, we are in need of a system that raises us from our state of not understanding our moral obligations to the state of moral agency. Law is that system. But while law makes us good, it does not promise a predictable and transparent society. Of course this is not saying much. Many interpretations of Machiavelli have answers for questions that my paper does not answer. As I write in the introduction, this paper is not an attempt to provide a complete interpretation of Machiavellis thought. My reading can only present a serious challenge to the traditional interpretations of Machiavelli after further research and further elaboration, but the steps I have made in this paper are reasons for cautious optimism. There is one obvious reason for doubt that I have not yet addressed. When Machiavelli (1971: D I 3; 82) says that law makes men good, he
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does not say it in active but in passive form: instead of either writing io dico, I say, like he frequently does, or completely omitting the reference to who is talking, here he writes si dice, it is said (that law makes men good). I have not found in the literature a discussion of what this might mean. Who is it that says it? Everyone? Machiavellis Florentine contemporaries active in politics? Classical authors? The question of how seriously we should take the assertion turns on the answer to the question of whose words they are. Acknowledgement: The author would like to extend his thanks to Fondazione Luigi Firpo in Turin for allowing him to access their private library. References Airaksinen, T. (2009), Fortune is a Woman: Machiavelli on Luck and Virtue, Homo Oeconomicus 26: 551568. Benner, E. (2009), Machiavellis Ethics, Princeton: Princeton University Press. Berlin, I. (1972), The Originality of Machiavelli, in: M. Gilmore (ed.) Studies on Machiavelli, Florence: Sansoni: 147206. Colish, M. L. (1971), The Idea of Liberty in Machiavelli, Journal of the History of Ideas 32: 323350. Holler, M. (2008), The Prince and the Law, in: T. Eger et al. (ed.) (2008), International Law and Its Economic Analysis, Festschrift fr Hans-Bernd Schfer, Wiesbaden: Gabler-Verlag: 5770. Hulliung, M. (1983), Citizen Machiavelli, Princeton: Princeton University Press. Kocis, R. (1998), Machiavelli Redeemed: Retrieving His Humanist Perspectives on Equality, Power, and Glory, Cranbury, NJ: Associated University Presses. Machiavelli, N. (1971), Tutte le opere, ed. by M. Martelli, Florence: Sansoni. Machiavelli, N. (1985), The Prince, trans. by H. Mansfield, Chicago: University of Chicago Press. Machiavelli, N. (1996), Discourses on Livy, trans. by H. Mansfield and N. Tarcov, Chicago: University of Chicago Press. Mansfield, H. (1979), Machiavellis New Modes and Orders: a Study of the Discourses on Livy, Ithaca: Cornell University Press. Mossini, L. (1962), Necessit e legge nellopera del Machiavelli, Milan: Giuffr. Skinner, Q. (1978), The Foundations of Modern Political Thought, Cambridge: Cambridge University Press.
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Skinner, Q. (2000), Machiavelli. A Very Short Introduction, Oxford: Oxford University Press. Strauss, L. (1958), Thoughts on Machiavelli, Glencoe, Ill.: Free Press.
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www.accedoverlag.de Veblen,Commons,andtheModernCorporation: WhyManagementDoesNotFitEconomics

ThibaultLeTexier
GREDEGCNRS,NiceUniversity,France (eMail: Letexier_t@yahoo.fr)
Abstract: From the late eighteenth century, economics revolved largely around the market. At the end of the nineteenth century, the everyday activities of developing corporations modified the usual field of economic investigations. However, economists were slow off the mark and seemed reluctant to give a proper place to this new player in their theoretical schemes. In particular, they had difficulties to grasp the managerial nature of the firm. Thorstein Veblen and John Commons offered the first comprehensive history of the modern business company. Little interested in the anatomy of the corporate leviathan, they rather analysed its double-sided spirit, both pecuniary and industrial. By doing so, they cast important thoughts on the business firm as an institution to be taken into account by economists. Yet, they failed to shift economic theory from its prevailing market orientation and to acknowledge the growing effects of the managerial rationality within the economic realm. JEL classifications: B25, B31 Keywords: Veblen, Commons, Marx, Smith, Marshall, institutionalism, management, business enterprise, corporation, homo economicus.
1. Introduction: theorizing or not the business firm Management never fit into economics. Until the end of the nineteenth century, economics did not really deal with the business firm. There were attempts to grasp the economic consequences of the rising of the manufacturer and the factory and to theorize the entrepreneur. Cantillon,
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Say, and Marx acknowledged the social influence of industrial leaders ideas and undertakings. Members of the German historical school such as Gustav von Schmoller analysed at length the birth and growth of the business enterprise, but they were more historians than economists. None of these thinkers proposed a theory of the business firm. The institutions economists focused on until the end of the nineteenth century were the market, currency, and the State. When the large business corporation appeared from the 1840s, the economists logically understood it within the analytical schemes they had developed during the preceding century. This framework proved useful to understand capitalist entrepreneurs logic, market structures, and profitoriented behaviours. But it felt short of grasping the dynamics of the managerial rationality embodied in the modern business corporation. The science of management and economics rest upon contradictory premises, focus on distinct institutions, and revolve around different principles. It is precisely because of this epistemological foundation that twentiethcentury management did not fit economics. For Veblen and Commons, the business firm is the vehicle of two main rationalities: on the one hand the pecuniary rationality, which is structured upon the notions of market, exchange, capital and profit; and on the other hand the industrial rationality, which revolves around the principles of production and efficiency. But the business firm has become, for a century, the vehicle of a third one: the managerial rationality. This third logic cannot be subsumed under the industrial and the pecuniary, precisely because it developed in rejection of the excessively mechanical orientation of the industrial logic, and in rejection of the figure of the homo economicus. Both Veblen and Commons saw the rising of this managerial rationality. And both failed to fully take into account the force of its impact on the business firm. Being a science of market, economics was, and largely remains, illequipped to grasp this managerial dimension. Marshall failed to tie the industrial and the pecuniary logic together. Veblen and Commons were the first to fully take into account the business firm in their economic theories. Nevertheless, if they cast important thought on the business firm growing control over society, they did not acknowledge the constitution of managers into a distinct class nor free the managerial rationality from the pecuniary logic. In that sense, even the foremost thinkers of the business firm of the early twentieth century could not make management fit into economics. After having envisioned how economics understood the business firm from a market perspective since the eighteenth century, the paper will consider how management science developed by rejecting both the industrial and the pecuniary logic. It will then assert Veblen and
T. Le Texier: Veblen, Commons, and the Modern Corporation
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Commonss partial breakthrough as well as their short-comings in bringing the managerial firm into economics. Management does not fit into economics because, while on the one hand management science consciously rejects the homo economicus model and the pecuniary rationality, on the other hand the bulk of economists keep on apprehending the managerial firm from the perspective of the market. 2. Understanding the business firm from a market perspective In the eighteenth century, political economy understood production and consumption from the triple standpoint of land, labour, and capital, with the market tying these factors together. Until the end of the nineteenth century, economics dealt, in addition, with salaries, finance, banking, prices, wealth, surplus, profit, taxation, exchanges, currency, and value, but it hardly touched on the business enterprise, with the exception of a few attempts to grasp the economic consequences of the invention of the manufacturer or to apprehend the role of the entrepreneur. Turgot and Cantillon cast important thoughts on these matters. When the enterprise understood as a formal institution rather than a temporary adventure appeared in political economic treaties, it was mainly under the form either of (1) a family affair, (2) a commercial affair, or (3) a state affair; and thus it was analysed under the categories either (1) of brotherhood, honesty, tradition and care, (2) of profit, exchange and capital, or (3) of sovereignty, trade balance and influence. For the early economists, the enterprise carried no rationality of its own but would obey to different kinds of rationalities. The market, much more than the business firm, was the central institution of the rising economic science. In the eighteenth century, the economists defined the commercial world as a system of physical exchanges rated in money and carried on through markets. For Adam Smith, the division of labour, resulting from the proliferation of exchanges, was submitted to market rationality. He distinguished between the capitalist and the labour of inspection and direction (Smith, 1776, vol. I: 50f). But he dealt in a rather cursory way with the inescapable question of tasks coordination. Until the end of the nineteenth century, whether they envisioned the division of tasks or their coordination, economists thought of the market as the main instrument for organizing production and consumption. Most of them considered production as a form of exchange. According to the classical and neoclassical economists, and particularly the laissez-faire school, individuals spontaneously and rationally react to the competitive system by forming transitory patterns of action. Form them the proto-business corporation is just an abstract and small dot in the
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market place, producing commodities to be sold in the market by combining production elements whose prices are fixed in other markets. In their economic foreground stands the individual, be he the owner or worker. The entrepreneur himself remained a secondary character of eighteenth and nineteenth century treatises on political economy. Smith referred to him sporadically, and Ricardo did not even mention him. Jean-Baptiste Say painted him in somewhat vague, terms, as someone who risks a capital in the hope of making a profit. John Stuart Mill, who refused to limit political economy to the study of exchanges, gave him his first great role. According to the liberal economists of the English school and to Marx in their wake, the captain of industry is a pure capitalist. For Schumpeter, still, a society is called capitalist if it entrusts its economic process to the guidance of the private businessman (Schumpeter, 1946: 189). To him, this entrepreneur is less the trained administrator of an existing concern than the born creator of novelties. Say, Fourier, Proudhon, Saint-Simon, Marx and Comte each recognized the social influence of the captains of industry and their enterprises. But Marx was the only one who incorporated thoughts on management into his economic theory. As he noted it, it was not an economist but the Dr. Ure who first recognized that not the industrial capitalists, but the industrial managers are the soul of our industrial system (Ure, 1835, quoted in Marx, 1867a: 454). Following his lead and quoting him abundantly, Marx described the constitution of this new class of workers, born from the separation of the intellectual powers of production from the manual labour (Marx, 1867c: 462). He further noticed that the labor of superintendence, entirely separated from the ownership of capital, walks the streets. It is, therefore, no longer necessary for the capitalist performs the labor of superintendence himself (Marx, 1867c: 455). Nevertheless, Marx continuously submitted the logic of management to the capitalist rationality. To him, management is capitalist per se. Under the capitalism regime there are only two classes [...], the working class disposing of their labour-power, and the capitalist class owning the social means of production and the money (Marx, 1867c: 488). Far from constituting a class in themselves, the managers belong to the first but operate on behalf of the second. This command, noted Marx, is an attribute of capital, although the individual capitalist can in his turn hand over its implementation to specialised workers, who nevertheless represent capital and the capitalist over against the army of workers (Marx, 1975: 262). That is, the labor of superintendence and management arising out of the antagonistic character and rule of capital
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over labor is nothing but the function of capital (Marx, 1867c: 454). In spite of his declarations, Marx remained closer to Smith than to Ure. At the end of the nineteenth century, most economists visualised the concept of the emerging business corporation with such conceptual tools as private property, value, capital, investment, credit, cost, profit, entrepreneurship, the price system and market competition. That is, they thought of it as a capitalist institution. For them, as Mitchell put it, economics was the science of business (Mitchell, 1916: 141) gathering more or less elaborate studies of the logic of pecuniary institutions (Mitchell, 1969: 784). The first economist who tried to synthesise the organizing side of the firm and the price system was Alfred Marshall. And he failed, to put it bluntly. Marshall recognized that organisation played an important role in the coordination of divided tasks. He identified the division of labour between management and manual work as the kernel of the modern economic problem (Marshall, 1890: 39). He also treated problems of imperfect competition and admitted that the domination of a few large businesses may impair the efficiency of the open market (Marshall, 1919: 174). But looking at industry in 1890 he saw no separation between owners and managers, with the exception of some rare public joint-stock companies. To him it is not the managers but the businessmen, otherwise called undertakers or entrepreneurs, who bring together the capital and the labour required for the work, who arrange or engineer its general plan, and superintend its minor details (Ibid: 244). Moreover, the superintendence of labour is but one side, and often not the most important side of business work (Ibid: 248). To him the entrepreneur must therefore be a capitalist more than a manager, and these two functions seem to be independent from one another. He clearly understood the importance of scientific management for American production and was critical of its tendency to make companies more structurally rigid in the face of external changes and prevents the workers to express their personal creativity. But to him industrial activities rested more on personal qualities than on managerial systems (Caldari, 2007: 55). Book IV of Marshall's principles added organisation as a fourth factor of production to the three traditionally considered by economists, but this fourth element seems less integrated with this original scheme of thought and more tacked on, as a way of inducing its constituent parts to become dynamic and changing. Under the heading of organisation, Marshall developed a broad and loose range of ideas, from the plasticity of human resources and working arrangements to the stimulating effect of mechanisation on standardization, and from the centralization of industries in particular locations to large-scale production a conglomerate , which Robbins debunked as spineless platitudes (Robbins, 1932: 65; cf. Ravix,
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2012). In his 1919 work, Industry and Trade, he was interested in the effect that the growth of giant businesses exerts on the relative demands for capital and for labour, and on the character of the work required of labour (Marshall, 1919: 848). But on the whole, as Gardiner Means sums it up, Marshall did not try to introduce the big modern corporation into his analysis (Means, 1962: 28). When he discussed corporations, it was as an exception to his rule on the life cycle of firms. If Veblen made use of some elements of Marshallian analysis (Hodgson, 2012: 55), Marshall never quoted either Veblen or Commons and did not seem to have read them. To him, economic problems relate specially to man's conduct under the influence of motives that are measurable by a money price, money being the centre around which economic science clusters (Marshall, 1890: 75f.) Management having little to do with money, as we shall see below, we understand his relative disinterest for that arena. In their defence, most of eighteenth and nineteenth century economists knew the big firm only under the particular traits of the Colonial company. In the 1880s, business executives, like economists, were absorbed in problems of markets and prices rather than of management. By that time, there were more fishermen in England than engineers and surveyors (English census of 1891, quoted in Hobson, 1894: 71). Even at the time Marshall wrote the Principles, the bulk of the British manufacturing companies were sole ownerships or partnerships. Moreover, it was not in Europe but in the United States that railway companies innovations in corporate finance raised issues of financial manipulation, providing information to shareholders, insider dealing, the formation of trust funds, the role of investment bankers, the basis of corporate capitalization, conflicts of interest between different classes of owners and creditors, which caught Veblens attention. Yet, Marshalls works difficulty for integrating the problematic of organisation within the land-labor-capital framework proves that if the economists of the Victorian age overlooked the growth of the business enterprise, it is also, and perhaps primarily, because they were intellectually ill-equipped to discern these transformations. The intellectual frameworks elaborated by eighteenth and nineteenth centuries economists oriented their attention to other problems and made it harder for their heirs to grasp the managerial firm. 3. Beyond the industrial and the pecuniary: the managerial rationality In the nineteenth century, there were on the whole two major ways of thinking looking at the governing of employees. The first relied on
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mechanical imagination and focused on the arrangement of machines. The second considered the worker as a homo economicus. During the first industrial revolution, foremen managed and superintended machines more than men. There was no real action directly upon the human material. What was rationalized were work situations and factory arrangements, with the idea that as long as machines were well-set, the workers needed little attention. The term management was then first used in factories to refer to the care and arrangement of machines. And the notion of arrangement remained a central notion of management science throughout the twentieth century. The other way of thinking about the control of employees drew on the mechanics of utility and self interest, in Jevonss word, and focused on economical means. In this perspective, sub-contracting, piece-work, premiums, bonuses, and the putting-out system were used to indirectly master the workers. Qualified workers were often paid on a market base and supervised themselves. The foreman usually shared his power with the gang boss. Until the end of the nineteenth century, the literature on works administration praised market bonds over hierarchical surveillance as a way to control workers. Both these views could appear together in the books of engineers and economists, but bore little relation to each other. When scientists such as Charles Babbage and Andrew Ure added to their numerous engineering advices chapters on money, prices and costs compiled from principles of political economy, they seemed to pay a tribute to a respected and influential outlook, but could scarcely draw any definite relation between the mechanical rationality and the capitalist logic. Quite distinct from those two is the managerial rationality, as it was shaped by mechanical engineers and managers at the turn of the twentieth century. Taylor remained at first in the tradition of political economy (Taylor, 1896) and of engineering thought (Taylor, 1906), but he transcended these two views to elaborate what has been known as scientific management. The first papers published by the American Society of Mechanical Engineers on the topic of workers management all drew from the imagination proper to political economy (Towne, 1886; Kent, 1887; Towne, 1889; Halsey, 1891; Taylor, 1895; Gantt, 1902; Richards, 1903). Typically, Henry Townes famous article The Engineer as an Economist (1886) urged engineers to take interest in matters of accountability, costs of production, and wages. With Taylor and his followers, the worker is not a product to rent or buy but a machine to be arranged and controlled; he must not be paid according to matters of supply and demand but according to their productivity. As John Commons clearly analysed it, Taylor created the most usable of all the different meanings of 'efficiency', that is, output per
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man-hour regardless of money value (Commons, 1950: 98f; cf. Commons, 1913: 142; Commons, 1919, Ch. 1 and 2; Commons, 1934: 282ff). As such, the Taylor system made almost no reference to money value, markets, property, interest, supply, demand, and profit, which were, and still are, central notions in economics. One might argue that, in the end, efficiency means reduced costs and commercial profit. But as the efficiency engineer Harrington Emerson pointed out, high cost and inefficiency are not identical. High cost may occur with high efficiency, low cost may occur with low efficiency (Emerson, 1908: 117). And management is concerned with efficiency, not with costs. Speaking in the name of mechanical engineers working as managers, a close collaborator of Taylor admitted a few years later that we operate our businesses to make money largely because the making of money has been considered one of the best gauges by which the output and the efficiency of the management could be measured. Production is really what we are trying to get, and the earning certainly the declaring of dividends may from any economic standpoint mean absolutely nothing as to the efficiency of the management (Cooke, 1913: 485). Taylor himself thought of accounting not as a tool for assessing profits but as an instrument to control production. The author of the first academic study of Taylorism observed that to Mr. Taylor and his associates costs, though of course important, are secondary to productive efficiency (Thompson, 1917: 71). Studying the practices of the early American managers, Thomas Johnson and Robert Kaplan confirm that the management accounting measures were designed to motivate and evaluate the efficiency of internal processes, not to measure the overall 'profit' of the enterprise (Johnson and Kaplan, 1987: 9). Besides this principle of profit, the concepts that constitute mainstream economics are almost completely absent from modern management text-books. Management is not a matter of property, profit, value, capital, interest, supply, or demand. It is a matter of control, organisation, knowledge, and efficiency. Moreover, the managerial rationality makes reference to a wide array of institutions besides the business firm. From its inception, scientific management was thought to refer to non-capitalist institutions. For Taylor, the fundamental principles of scientific management are applicable to all kinds of human activities [...]: to the management of our homes; the management of our farms; the management of the business of our tradesmen, large and small; of our churches, our philanthropic institutions, our universities, and our governmental departments (Taylor, 1911: 7f). And he liked to quote the functioning of a first-class American baseball team as one of the best illustrations of the application of the principles of scientific management (Taylor, 1912: 416).
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Throughout the twentieth century, the economical element kept this secondary role in management thought, while the engineering element became secondary as the number of blue-collar workers collapsed. After Taylor, the foremost thinkers of management tended to define their object without referring to either of these elements. A managerial organisation could thus be defined as an impersonal system of coordinated human efforts (Barnard, 1938: 94), as a technical instrument for mobilizing human energies and directing them toward set aims (Selznick, 1957: 5), as an assemblage of interacting human beings (March and Simon, 1958: 4), or a collective action in the pursuit of a common mission (Mintzberg, 1989: 2). Neither of these definitions refers to the market or to the industrial realm. 4. Veblens and Commonss partial breakthrough Thorstein Veblen and John Commons were the first economists to fully comprehend together the industrial and pecuniary rationalities of the firm, and more specifically of the financially networked corporation. If they recognized the growing importance of management, as Marx and Marshall had before them, they failed to theorize it as a true rationality deeply affecting the behavior of the firm. Veblen and Commons were neither classical nor socialist economists, but in a three-fold minority: firstly, they did not follow the mainstream of classical and neoclassical economists; secondly, they were American, at a time when economics was mainly European; thirdly, they drew extensively from social sciences instead of looking toward mathematics. Precisely, can we assume, it is because they used psychology, sociology, anthropology, and law, because they witnessed the profound transformation of American institutions at the end of the nineteenth century, and because they did not seek to ground their theories in objective, measurable and mathematically expressable facts, that Veblen and Commons could explore the black box of the business and investigate the complexities of institutions. Thorstein Veblen was the first economist to notice that the business had become, at the beginning of the twentieth century, the master institution of civilised life (Veblen, 1923: 86), and to propose a theory for it. As his foremost interpreter noted, such a theory was to be Veblens main concern after his re-entrance into academic halls in 1891 (Dorfman, 1939: xv), much more than theorizing market exchanges (Waller, 2007). Indeed, he wrote the history of enterprises from the hunter-gatherer to the banker capitalist, unveiling its logic and showing its effects, its nature, its technical character, its relationship to markets, and its influences over habits of mind, cultures, and institutions. Using the tools of sociology,
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ethnology, and history, he conceived the modern enterprise as a system of beliefs and the locus of a sharp divide between the logic of business and industrial rationality. John Commons, who we might call his main successor for this corporate insight, used law to build up his own theory of the business corporation as a system of rules. Going back to the manorial system and focusing on transactions, he disentangled the legal intricacies and the mental evolutions which have made its existence possible. Both underlined the importance of good-will. For our authors, far from being an homogeneous globule of desire and happiness freely bargaining on markets the sale and purchase of physical commodities, as Veblen vividly depicted the classical homo economicus (Veblen, 1898: 73), the human being is, in Commonss terms, an active person associated with others and participating in and controlled by the practices common to all (Commons, 1925: 376). Both sustained that, whether in a framework of formal institutions or not, human behavior mostly involves habits and repetitive practices constrained by beliefs, conventions, social norms, and also increasingly by laws and contracts. As a result, economics could not be confined to catallactics and had to shift from laissez-faire economics to control economics (Commons, 1950: 293). Here is Veblens and Commonss major breakthrough: they were the first economists to analyse the growing control of the business corporation over industrial societies. Every business is a purposeful control over human nature, as Commons stated, but also over the non-human environment (Commons, 1924: 367). With the spread of the business corporation, there is no longer such a thing as natures harmony, natural law, natural order, or natural rights. Nature including human nature has become a set of controllable, manipulable, and modifiable resources. A main form of control exercised by the business corporation was (and is) control over labour through division and standardisation of tasks, rewards, punishment, and wages. On the shop-floor, explained Veblen, the large, modern industrial organisation required that the labour force and the labour units be mobile, interchangeable and distributable, in the same impersonal fashion as the mechanical contrivances engaged are movable and distributable (Veblen, 1904: 326). Due to the increasingly fierce competition and the subsequent necessity of cutting costs, the businesses sought to make labour more efficient. Scientific management was the most widely accepted answer in America and in Europe. Minute division of labour, specialisation, mechanisation, time and movement study, piecerates: in order to multiply efficiency, Commons noted, even the psychology of the workman is analyzed and experimented upon as accurately as the chemistry of the different kinds of coal (Commons,
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1913: 73). Both Veblen and Commons looked upon the Taylor movement with interest, and sometimes with enthusiasm (Commons, 1921). The business corporation also gained control over its economic environment. The logical outcome of free enterprise was not competition but administered prices, oligopoly, or monopoly. According to Veblen, the endeavour of all such enterprises that look to a permanent continuance of their business, is to establish as much of a monopoly as may be (Veblen, 1904: 54). Berle, Means, and Galbraith made this idea one of their stock in trade. According to the former, the result of great corporations fighting each other is either consolidation, or elimination of one of the units, or acceptance of a situation in which the place of each is approximately respected (Berle, 1954: 45f). The American State actively contributed to this centralization of corporate powers. Markets remained of course a necessary means of coordinating businesses, but thanks to the achievements of marketing they could be discovered, created, and stimulated. The basic principle of a willing buyer and seller, Commons stated, was being violated by the emergence of large-scale corporations (Commons, 1936: 243). The means for controlling markets are, for instance, a corporations immaterial capital, those intangible assets which Veblen and Commons called good-will and which comprise such things as established customary business relations, a reputation for upright dealing, franchises and privileges, trademarks, brands, patent rights, copyrights, exclusive use of special processes guarded by law or by secrecy, exclusive control of particular sources of materials (Veblen, 1904: 139). According to Veblens and Commonss heir John K. Galbraith too, the corporation must exercise control over what is supplied. It must replace the market with planning (Galbraith, 1967: 27). That is, the peaceful coordination of billions of products, activities and human beings seems to require social attitudes to be accommodated to the corporations needs. If any responsible corporation strives to hold sway over resources, production, conception, invention, and distribution, it also tries to anticipate demands and forecast consumption behaviours. Public behaviour must therefore be made predictable, but also modifiable. Industry has to produce goods, but also desires. Control over consumption patterns involves conditioning through advertising. By the 1920s, publicity engineers had so developed their practice that the fabrication of customers can now be carried on as a routine operation, quite in the spirit of the mechanical industries and with much the same degree of assurance as regards the quality, rate and volume of the output (Veblen, 1923: 306). Like marketing, advertising can be seen as a development of managerial rationality.
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The corporation also gained influence over the modern cultural situation by spreading a corporate ethos which mixed commercial standards and a matter-of-fact outlook (Veblen, 1919: 178). As Mitchell noted, such a transition of a nation to the factory system implies a lot of voluntary changes: New methods of building and sanitation have to be learned. New means of communication to be established. Land has to be taken for new uses and familiar privileges altered. New bases of power grow up and must be recognized. Population has to be educated in order to learn how to live under new conditions (Mitchell, 1967: 103). The modern corporation also sought to influence society through the lobbying of the main political parties. As Commons remarked as early as 1896, the lobby is coincident with the very recent growth of large private corporations. It is organized by them (Commons, 1896: 45). He later demonstrated how American legislatures soon wither in the face of private corporations with public functions and unexampled resources. Galbraith (1967) showed that, during the twentieth century, industrial interests also usurped landed interests within the Parliaments of industrial democracies. The technocratic movement, whose leaders Henry Gantt, Howard Scott and Stuart Chase had listened to or read Veblen and had managed to catch his careful attention, further advocated the scientific organisation of society according to the industrial logic (Dorfman, 1935: 454ff). Far from opposing this idea of a scientifically designed social control, American institutionalism relied on it until the end of World War II (Rutherford, 2011), even though Commons was distinctive by emphasising issue of industrial democracy. Veblen and Commons thus recognized that the advent of the large business firm had transformed the natural laws of the market. With the help of a rational knowledge, a company was now able to organise and control its resources in order to make them more efficient. But for our authors these were scattered phenomena. They failed to see that such an action was becoming the specific task of a new body of trained professionals who were less and less engineers or entrepreneurs, and more and more managers. 5. Veblens and Commons missed opportunity Veblen and Commons both recognized the capitalist nature of the modern corporation. Industry, as Veblen continuously asserted, is managed by businessmen for business ends (Veblen, 1914: 351). As such, rather than the creature of the engineer, the business company is the direct descendant of the merchants and the entrepreneurs concerns and the child of the pecuniary culture which arose out of the money economy. In such an economy, as described by Mitchell, economic activity takes the form of
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making and spending monetary incomes (Mitchell, 1913: 21). The daily use of money has disciplined most of the population into accounting for prices, figures, paces, sizes, numbers, and costs, turning each wage-earner and consumer into a profit-sensitive accountant. Veblen and Commons both admitted that, mainly as a result of the necessities of credit to finance the integration of large-scale corporations, modern American capitalism is Banker Capitalism, instead of the former Merchant Capitalism or Employer Capitalism (Commons, 1934: 890). Absentee ownership had left many industries under the control of Wall Street. The larger use of credit system had not only changed the nature of capitalism, it had also spread its message. The modern corporation, asserted Commons, has diffused capitalism throughout large masses of people by building up a system of stocks and bonds, of savings banks and insurance companies, and millions of people who, under the old Marxian theory, would have been expropriated, have become themselves members of the propertied and capitalist class (Commons, 1919: 193). During the eighteenth and nineteenth centuries, this pecuniary logic disseminated throughout American society. Besides this business metaphysics, as Veblen called it, our two authors recognized that a second rationality was also driving the modern corporation, and took account of this conflicting bipolar nature of the modern business concern: striving for profit and for efficiency, it is both market oriented and internally directed. On the whole, the relationships between the industrial and the pecuniary logic were never fully thought through by these authors who portrayed them alternatively as conflicting or as cross-fertilizing each other, according to the needs of the demonstration. Veblen recognized that the industrial rationality of the firm was serving its pecuniary ends, but also underlined that owners, bankers, and salesmen had become kinds of engineers themselves. Commons also identified a contradiction between those two functions he borrowed from Veblen. To him, the going plant is a producing organization furnishing a service to the public, but the going business is a bargaining organization obtaining prices from the public. One is the exact reverse of the other (Commons, 1924: 182). Commons articulates the industrial and pecuniary logic in his concept of going concern that he uses to understand organised collective action, and especially the modern corporation. To him, the link between these two dimensions of the activities in the firm is not operated by managers, but by what he calls the government of the firm. The book he edited on Industrial Government fails to propose any general and coherent understanding of this notion (Commons and others, 1921). Mitchell, the foremost intellectual heir of Veblen (Dorfman, 1949: 455), also inherited from him this bipolar scheme, and thus differentiated
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sharply between making goods and making money (cf. Mitchell, 1923). But like Veblen, he soothed the tension by asserting that these two highly rationalized phases of economic activity have definitely systematized relations to each other. For the carefully ordered complex of activities connected with making goods is itself subordinated to the carefully ordered plans for securing profit-balances upon the ledgers (Mitchell, 1910: 199). For Veblen, the second form of rationality which drives the business firm is less managerial than mechanical, technological and industrial. It aims essentially at producing goods efficiently. On the contrary, rather than being exclusively focused on material efficiency, management is a matter of rationally controlling and organising human as well as non human resources. It is not simply a method of production; it is a mode of exercising power. Veblen ignored this third logic of the modern business firm and the growing force of the class of professionals who embodied it. For Commons, engineers and managers were a part of the collective labour power but managers had the specific function of organizing and controlling the other labour forces in order to fulfil the objectives of the corporation. This is what he called the managerial transactions, which designated hierarchical relations between the manager and the managed. Writing in the 1930s, Commons was aware of the importance of management, but he limited it to the sphere of production. To him, management was only a matter of making goods, as was the industrial logic for Veblen: a matter of command and obedience between a superior and an inferior according to a principle of efficiency (Commons, 1931: 652; 1934: 255). Veblen and Commons failed to take account of the deep transformations involved in the broader role played by managers at the turn of the century. Between 1880 and 1920, the engineering profession has grown in the United States from 7,000 to 136,000 (US Bureau of the Census, 1943: table 8 p.111, quoted in Layton, 1962: 70). The hundreds of managers clubs, associations, reviews, conferences, university courses and corporate schools which sprouted up during these years attest to the fast and astonishing structuring of this social group. A clerical, white collar class had arisen (Zunz, 1990). Observing the practice of absentee ownership and the fast-growing complexity of manufacturing, Veblen accurately concluded that, between workmen and businessmen, a professional class of efficiency engineers is coming into action who will take over the functions assigned in economic theory to the entrepreneur (Veblen, 1914: 222f). Nevertheless, he did not acknowledge the wide latitude of power they were gaining over the owners of the stock and never developed the idea that managers could operate the corporation with goals other than profit
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maximisation (Rutherford, 1994: 109). On the contrary, he maintained, even after the efficiency craze and the tremendous success of scientific management, that managers have not drawn together into anything like a self-directing working force (Veblen, 1921: 70). For sure, there was no such thing in America as a soviet of technicians. But Veblen obviously underrated managers class-consciousness perhaps because of this dichotomizing moralism, as David Riesman (1953: 80), called it, which made him recast the Marxian opposition between unified capital and unified labour, and left no room for a third party. Neither did Commons recognize managers as a possible third body between employers and employees. This third actor could be the judge or the State or any kind of public authority, but ideally there was none. Commons considered that managers were between capital and labour and that the problem of banker capitalism was that management was only responsible toward capital while it also had to be responsible toward labour. As it was the case for Marx, Commons mainly viewed management as a malleable tool in the hand of the capitalist entrepreneurs. 6. Conclusion Veblen and Commons were interested in the power of economic actors and the role that it plays in the determination of outcomes. However, both failed to see that managers were becoming a major force in the economy. Veblens and Commonss breakthrough has not been a revolution. Even after the rise of the business corporation, economics as a whole and even microeconomics continues to develop as a science of markets. The mental foundations laid down by the classical economists have become a kind of intellectual path dependency which economists have largely followed hitherto. In the twentieth century, the cognitive schemes centred around the market continued to structure the bulk of the theories of the business corporation, in spite of its drastic change. As Schumpeter put it, the owner-managed firm survived much better in economic theory than it did in actual life (Schumpeter, 1954: 859). The tenants of the theory of the firm have elaborated important tools to grasp the managerial side of the corporation (Foss, 2000). Major strands of thought, such as game theory, social choice theory, and the theory of public goods, no longer rely on seeing everything through the catallactic perspective. Nevertheless, it seems like most of the economists still apply market schemes to understand business firms. The market remains the cardinal institution of economics. The new institutional economics, which has emerged from more neoclassical, Austrian, and game theoretical sources, has adopted a
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generally favourable attitude towards markets (Rutherford, 1994: 129). Authors labelled institutionalists such as Ronald Coase, Armen Alchian, Harold Demsetz, Michael Jensen or Oliver Williamson walk along this path. According to their theories, the business enterprise is understandable from a market point of view, as a nexus of contracts connecting individuals, as a substitute for using the market, or as an economic agent striving for profits and little else. For these authors, if there are businesses rather than nothing, and if they adopt such a shape and size, it is essentially down to costs. To them, the pecuniary logic remained the very key to understanding the soul of the business enterprise. Business historian Alfred Chandler similarly innovated a theory of managerial capitalism rather than one of management. To him, the apparition and development of big businesses had mainly economic reasons. On the one hand, nationally integrated markets generated a higher demand for goods. On the other hand, the business enterprise and the market can be seen as alternative means of accomplishing economic ends (Chandler, 1977: 1). In other words, and as most of contemporary economists would admit, in the eyes of Chandler the business firm is almost completely understandable in economic terms and with economic theorems. By taking into consideration the managerial logic, economists could deepen their understanding of the business firm. Firstly, it could make apparent that many business decisions are taken in terms of efficiency, control, and organisation, and not strictly with narrow pecuniary objectives. Secondly, economists would take into account the political side of the firm, the power relations that inhabit it, and the conflicts resulting from it which strongly affect its behaviour.
References Barnard, C. (1950 [1938]). The Functions of the Executive, Cambridge, Mass.: Harvard University Press Caldari, K. (2007), Alfred Marshalls Critical Analysis of Scientific Management, European Journal of the History of Economic Thought 14: 55-78 Chandler, A. Jr. (1977. The Visible Hand: The Managerial Revolution in American Business, Cambridge: Cambridge University Press Commons, J. (1896), Proportional Representation, New York, Boston: T. Y. Crowell & co. Commons, J. (1913), Labor and Administration, New York, The Macmillan company Commons, J. (1919), Industrial Goodwill, New York: McGraw-Hill
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Commons, J. (1921), Faith in People, in Commons, J. and Others. Industrial Government. New York: The Macmillan Company: 13-25 Commons, J. (1957 [1924]), The Legal Foundations of Capitalism, The University of Wisconsin Press Commons, J. (1925), Law and Economics, Yale Law Journal 34: 371382 Commons, J. (1934), Institutional Economics: Its Place in Political Economy, New York: Macmillan Co. Commons, J. (1936), Institutional Economics, American Economic Review 26: 237-249 Commons, J. (1970 [1950]), The Economics of Collective Action, with a biographical sketch by S. Perlman; manuscript ed., introduction and supplemental contributed by K. H. Parsons, New York: Macmillan Commons, J. and Others (1921), Industrial Government, New York: The Macmillan Company. Cooke, M. (1913), The Spirit and Social Significance of Scientific Management, Journal of Political Economy 21: 481-493. Dorfman, J. (1939), Introduction, in Veblen, T. Imperial Germany and the Industrial Revolution, New York: The Vikings Press. Dorfman, J. (1961 [1935]), Thorstein Veblen and his America, with new appendices, New York: A.M. Kelley. Dorfman, J. (1949), The Economic Mind In American Civilization, Vol. III, 1865-1918, New York: The Viking Press. Emerson, H. (1919 [1908]), Efficiency as a Basis for Operation and Wages, New York: The Engineering Magazine. Foss, N. (Ed) (2000), The Theory of the Firm: Critical Perspectives on Business and Management, 4 vol., London: Routledge. Galbraith, J. (2007 [1967]), The New Industrial State, Princeton: Princeton University Press. Gantt, H. (1902), A Bonus System for Rewarding Labor, Transactions of the American Society of Mechanical Engineers 23: 341-372. Halsey, F. (1891), The Premium Plan for Paying for Labor, Transactions of the American Society of Mechanical Engineers 12: 758-765. Hobson, J. (1901 [1894]), The Evolution of Modern Capitalism: A Study of Machine Production, London: W. Scott; New York: C. Scribners Sons. Johnson, H. T. and Kaplan, R. (1987), Relevance Lost: The Rise and Fall of Management Accounting, Boston: Harvard Business School Press Kent, W. (1887), A Problem in Profit Sharing, Transactions of the American Society of Mechanical Engineers 8: 630-633. Layton, E. (1962), Veblen and the Engineers, American Quarterly 14: 64-72.
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March, J. and Simon, H. (1958), Organizations, New York, John Wiley and Sons. Marshall, A. (1920 [1890]), Principles of Economics, 8th edition, London: Macmillan. Marshall, A. (1923 [1919]), Industry and Trade: A Study of Industrial Technique and Business Organization; and of Their Influences on the Conditions of Various Classes and Nations, London: Macmillan. Marx, K. (1975), Economic Manuscripts of 1861-63, A Contribution to the Critique of Political Economy, published in Marx and Engels Collected Works: Volume 30. Translated by R. Dixon et al., London: Lawrence & Wishart. Marx, K. (1909 [1867a]), Capital: A Critique of Political Economy, Vol. III. The Process of Capitalist Production as a Whole, ed. by F. Engels; translated from the first German edition by E. Untermann. Chicago: Charles H. Kerr and Co. Marx, K. (1913 [1867b]), Capital: A Critique of Political Economy, Vol. II. The Process of Circulation of Capital, ed. by F. Engels; translated from the first German edition by E. Untermann. Chicago: Charles H. Kerr and Co. Marx, K. (1906 [1867c]), Capital: A Critique of Political Economy, Vol. I, Part I: The Process of Capitalist Production, ed. by F. Engels; translated from the first German edition by E. Untermann. Chicago: Charles H. Kerr and Co. Means, G. (1962), The Corporate Revolution in America: Economic Reality vs. Economic Theory, New York: Crowell-Collier. Mintzberg, H. (1989), Mintzberg on Management: Inside Our Strange World of Organizations, New York: Free Press; London: Collier Macmillan. Mitchell, W. (1910), The Rationality of Economic Activity II, Journal of Political Economy 18(3): 197-216. Mitchell, W. (1970 [1913]), Business Cycles, New York: B. Franklin Mitchell, W. (1916), The Role of Money in Economic Theory, American Economic Review 6: 140-161. Mitchell, W. (1923), Making Goods and Making Money, reprinted in Mitchell, W. 1950. The Backward Art of Spending Money, New York: Augustus M. Kelley: 137-148. Mitchell, W. (1967), Types of Economic Theory. From Mercantilism to Institutionalism, vol. 1. Ed. with an introduction by J. Dorfman, New York: A. M. Kelley. Mitchell, W. (1969), Types of Economic Theory. From Mercantilism to Institutionalism, vol. 2. Ed. with an introduction by J. Dorfman. New York: A. M. Kelley. Ravix, J.-L. (2012), Alfred Marshall and the Marshallian Theory of the
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Firm, in Dietrich, M. and Krafft, J. (eds.), Handbook on the Economics and Theory of the Firm, Cheltenham: Edward Elgar: 49-54 Robbins, L. (1945 [1932]), An Essay on the Nature and Signicance of Economic Science, London: MacMillan. Richards, F. (1903), Gift Propositions for Paying Workmen, Transactions of the American Society of Mechanical Engineers 24: 250-277. Riesman, D. (1953), Thorstein Veblen: A Critical Interpretation, New York: Scribner. Rutherford, M. (1994), Institutions in Economics: The Old and the New Institutionalism, Cambridge: Cambridge University Press. Rutherford, M. (2011), The Institutionalist Movement in American Economics, 1918-1947: Science and Social Control, Cambridge: Cambridge University Press. Schumpeter, J. (1946), Capitalism. Reprinted from Encyclopaedia Britannica IV: 801-807, in Schumpeter, J. 1989. Essays on Entrepreneurs, Innovations, Business Cycles and the Evolution of Capitalism, ed. by R. V. Clemence; with a new introduction by R. Swedberg. New Brunswick, N.J.: Transaction: 189-210. Schumpeter, J. (1994 [1954]), History of Economic Analysis, ed. from manuscript by E. B. Schumpeter; with a new introduction by M. Perlman, New York: Oxford University Press. Selznick, P. (1957), Leadership in Administration: A Sociological Interpretation, Evanston, Ill.: Row, Peterson. Smith, A. (1869 [1776]), An Inquiry Into the Nature and Causes of the Wealth of Nations. Vol. 1, Oxford: Clarendon Press. Taylor, F. (1895), A Piece-Rate System, Being a Step toward Partial Solution of the Labor Problem, Transactions of the American Society of Mechanical Engineers 16: 856-903. Taylor, F. (1919 [1911]), The Principles of Scientific Management, New York: Harper Bros. Taylor, F. (1912), Taylors Testimony before the Special House Committee to Investigate the Taylor and Other Systems of Shop Management, reprinted in Taylor, F. (2003) Scientific Management, ed. by K. Thompson, New York: Routledge. Thompson, C. B. (1917), The Theory and Practice of Scientific Management, Boston, New York [etc.]: Houghton Mifflin Company Towne, H. (1886), The Engineer as an Economist, Transactions of the American Society of Mechanical Engineers 7: 428-432. Towne, H. (1889), Gain Sharing, Transactions of the American Society of Mechanical Engineers 10: 601-618. Ure, A. (1835), The Philosophy of Manufactures, or an Exposition of the Scientific, Moral and Commercial Economy of the Factory System of
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Great Britain, vol. I, London: Charles Knight US Bureau of the Census (1943), Sixteenth Census, Population. Comparative Occupational Statistics for the United States, 1870-1940, Washington, D.C.: Government Printing Office Veblen, T. (1898), Why is Economics not an Evolutionary Science, Quarterly Journal of Economics 12, in T. Veblen (1919), The Place of Science in Modern Civilization and Other Essays. New York: Huebsch: 56-81 Veblen, T. (1927 [1904]), The Theory of Business Enterprise, New York: Scribner. Veblen, T. (1918 [1914]), The Instinct of Workmanship and the State of the Industrial Arts, New York: B. W. Huebsch. Veblen, T. (1919), The Vested Interests and the Common Man: The Modern Point of View and the New Order, New York: B. W. Huebsch. Veblen, T. (1921), The Engineers and the Price System, New York: B. W. Huebsch. Veblen, T. (1923), Absentee Ownership and Business Enterprise in Recent Times: the Case of America, New York: B.W. Huebsch. Waller, W. (2007), Veblens Missing Theory of Markets and Exchange, or Can You Have an Economic Theory Without a Theory of Market Exchange? in Knoedler, J., Prasch, R. and Champlin, D. (eds), (2007), Thorstein Veblen and the Revival of Free Market Capitalism, Cheltenham; Northampton (Mass.), Edward Elgar: 87-126. Zunz, O. (1990), Making America Corporate, 1870-1920, Chicago; London: University of Chicago Press.
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www.accedoverlag.de TheEssentialRelativityofHappinessand Wellbeing.CommentsonBjornGrindes HappinessandMentalHealthasUnderstood inaBiologicalPerspective,HomoOeconomicus 29(4):535556. HetaAleksandraGylling

DepartmentofPoliticsandEconomics/SocialandMoralPhilosophy, UniversityofHelsinki (eMail: heta.gylling@helsinki.fi
When I spot an article on feelings, emotions, and their biological background, I can hardly resist the temptation to see what kind of connections and assumptions the author has made this time the topic being as trendy as it gets. As every philosopher knows, happiness and wellbeing are fuzzy concepts which evade most attempts to be defined. We do, of course, have a pretty good common sense idea about what they mean but still they cannot be universalized or accurately defined without reference to actual lives in a context. Jeremy Bentham based his ideas on ethics and social wellbeing on observable human behaviour: people tend to avoid pain and suffering and try to further their own happiness and wellbeing as much as they can. It may happen directly by egoistic, selfcentred pursuit of ones own happiness or, indirectly, in rejoicing in the happiness of your loved ones. Whether this is actually a form of selfish happiness is another issue. John Stuart Mill who followed Benthams footsteps in utilitarian thinking, realized that pleasures do have not only quantitative differences but qualitative as well. According to Grinde, in evolutionary biology the term Darwinian happiness has been used in an attempt to understand why evolution endowed the human species with the capacity to have either pleasant of unpleasant experiences (Grinde, 2013: 535). However, this approach is widely off mark if we want to understand human happiness. It may be pleasurable to be a pig and roll in the mud but as an educated
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human being to enjoy reading a book may represent a higher form of pleasure. From this some people might be tempted to draw the conclusion that, firstly, all human beings who are able to read, do so and, more importantly, should enjoy reading. And secondly, that the reason for this lies in the fact that we are biologically similar to each other, i.e., our brain is equipped with the capability of reading and writing and understanding at least some level of abstraction. Unfortunately the fact that our brains are relatively similar in anatomic or biological terms does not mean that different kind of pleasures, enjoyments and happiness would somehow neutrally reside in our brain. Surely, we do have sensations which are physically born in our brain but to try to locate a very general sentiment of feeling like happiness in a particular physical reaction is to undermine human mind, imagination, creativity or lack of it. How many times do we wonder how some people seem to enjoy and to be happy about something that causes in us amazement about the poverty of their desires. A crisps eating couch potato who knows nothing better than to watch his favourite soap may be perfectly happy in a life-style that would drive a high brow intellectual to morbid desperation. One mans pleasurable experience is another mans horror. As Oscar Wilde put it, there is no sin except stupidity. Grinde, as well as I suppose many other natural scientists, is keen on making unnecessary generalizations and observing what he wants to see, find, and prove. We have a lot of evidence showing how, for instance, many big ape and chimpanzee researchers have, instead of intentionally distorting their findings, sincerely believed to have observed behaviour they have hoped to see. An instinct for survival and procreation may be important from a purely biological point of view but does not have the same meaning for people in different cultural and historical contexts. In harsh, brutal conditions parents do not want to have children because they enjoy seeing them develop, learn, and take pleasure in their life. Children were instrumentally valuable, necessary for your survival. They were born and they died, they were made to work or the whole family would have suffered. Children were not playing the way we see them do today in most cultures. The only thing they played was the role of an adult industrious worker trying to scrape together part of the familys livelihood. Couples did not have the luxury of discussing at length how many children they want. They had neither time nor means to plan for their childrens career. Should we buy a violin or a tennis racket at the age of four would have been a ridiculous question, as it still is for many people. On the other hand, today, it would be an obsolete idea for parents to ask whether their daughter should enter service at the age of nine or ten. Ruthless times do not allow indulgence in more than instantaneous pleasures.
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For the gentlemen of Athens to talk about meaningful life and eudaimonia made sense. But how much did it make sense to the rest of the population? Workers, slaves, and women in general? Or in the Middle Ages when food was so often scarce and people were plagued by nasty illnesses which today might by easily cured. Or what about life in early industrial societies? Does it really make sense to talk about happiness and a meaningful life for people who malnourished suffered long hours in noisy, dangerous factories or mines? Emile Zola's book series of twenty volumes with the collective title Les Rougons-Macquart depicts the life of a fictional family under the French Second Empire and the enormity of suffering in those days.1 Or should we ignore all those people and say that since they were debased to a beastly livelihood, we should only concentrate on those (rather few) people who during hundreds and hundreds of years were lucky enough to be born in wealthy, privileged families? The quest for optimal long-term happiness (Grinde, 2013: 545) was rarely an option when a painless death when young was seen as a release from earthly suffering. Still today, millions of people live a life of severe deprivation either in war and crime ridden countries or miserable slums while some of their compatriots and rulers dwell in stolen riches. People do adapt even in difficult conditions and try to make the best out of their lives. I am sure that were you to visit some of the poorest slums in todays world (like Kibera in Nairobi, Kenya2), people do not see their life as meaningless. But to talk about their lives and about meaningful life in the Aristotelian sense of eudaimonia, would be, in my opinion, derogatory. Some people simple cannot afford to opt for a meaningful life. As the articles fourth chapter on mental health shows, Grinde is interested in the consequences of psychological disorders and efforts to ameliorate our seemingly worsening life-styles, which are partly responsible for an increasing number of mental conditions. But here again, he fails to pay attention to different living conditions and changing times. Is it really too much to assume, as I do, that one major reason for the prevalence of depression is simply that people can afford to be depressed? If your wake-up hours are filled with concern where to find food, how to feed your family, how to alleviate the suffering of your loved ones, how can you afford self-reflection on whether you seem to show signs of
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The most famous novel being Le Grminal from 1885. In Nairobi, Kenya, there are roughly 2.5 million slum dwellers in about 200 settlements and they represent 60% of the citys population, on only 6% of the land. The most famous one, Kibera, houses almost 1 million people. It is the biggest slum in Africa and one of the biggest in the world.
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depression or not? If you know that staying in bed the whole day means being sacked from the factory (if you have the luxury of your own place to sleep and do not have to do turns with others), you will probably not stay put because you feel depressed. Serious mental illness would be called for. It is most likely true that the high prevalence of depression may reflect that modern societies are troubled by a suboptimal social environment, as well as by too much pressure on achievements that are difficult to attain (Grinde, 2013: 549). According to Grinde we should try to alter the situation by reducing excessive exercise of the low mood module. Easy to say but impossible to make it happen, for at least two reasons. Firstly, in modern democratic societies people do have different ambitions, values, and preferences. Some people might happily opt for a peaceful simple life in the countryside, surrounded by the voices of nature in a pleasant environment, living a natural life, whatever that might mean. Indeed, there are today these truly green people who do not care for city life and its pleasures and who are happy to go without the benefits of modern technology. But there are others, like myself, who cannot imagine anything worse. Simple life in the middle of a forest or fields, even in a small village would seriously harm my mental wellbeing and would make me do anything to avoid such horrors. Then, of course, there are those people who say they would love to live a simple life but who fall in the Enlightenment trap. Especially the French Enlightenment philosophers who should be praised for their advanced ideas concerning social wellbeing, imagined country life to be perfect, natural, and idyllic. Beautiful trees and flowers among which cute non-smelling non-lice ridden sheep napped in the afternoon together with their shepherd. No hardship, no deprivation, no toiling beyond your strength.3 Secondly, only tyrannical, dictatorial authorities can radically change the course of our way of life and abandon modern technologies. Most importantly, only they can make people give up their liberties. To be banned to live in deprivation and serious restrictions on the freedom of expression would make Western societies markedly different from what they are today. We do see fundamentalist, religious tendencies of this sort emerge predominantly outside the Western sphere and we should hope that we will be ideologically strong enough to protect our more liberal democracies. We should avoid detrimental behaviour and therefore it is particularly important to focus on how children are brought up (Grinde, 2013: 551). Obviously true, but biology and brain research cannot help us here. People strongly disagree in what is good for the children and what is not. Some
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Especially Denis Diderot seemed to have no idea of the miseries of rural life.
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believe in open access to information and the importance of education in general and some in closed quarters (especially for girls) and dogmatic teachings. Already in the late 18th century, ideas about appropriate upbringing differed greatly. The liberal and enlightened ideas expressed by the encyclopaedists Denis Diderot and Antoine-Nicolas de Condorcet have almost nothing in common with Jean-Jacques Rousseaus segregationist and narrow-minded views presented in his mile. It surely would be handy if our bodies and minds would follow the genetic messages they are supposed to follow, but, alas, there is plenty of adversative evidence. The American obesity rate could not be as high as it is if the hedonistic pleasure associated with food would be controlled. And the increasing popularity of extreme sports could not be possible if fear and pain were not, for some, a contributing factor for their over-all happiness. Brain research must be a fascinating research area but it should be realized that to look for the meaning and varieties of human happiness in the brain may be as productive as what the cynic Diogenes of Sinope did when he was searching for an honest man: he used to stroll about in full daylight with a lamp.
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www.accedoverlag.de MeaningsofHappiness.CommentsonBjorn GrindesHappinessandMentalHealthas UnderstoodinaBiologicalPerspective,Homo Oeconomicus29(4):535556. TimoAiraksinen

DepartmentofPoliticsandEconomics/SocialandMoralPhilosophy, UniversityofHelsinki (eMail: timo.airaksinen@helsinki.fi)
1. The Stage Bjorn Grinde (2013: 535f) sets the stage for his study of happiness as follows: Happiness is presumably the key ingredient in quality of life. It has been a focal topic for philosophers, with important treatises dating back to the time of Aristotle and Plato. More recently, several lines of scientific inquiry have approached the question of happiness: in the social sciences the subject is typically referred to as positive psychology, and measured by questionnaires probing the level of subjective well-being []. In evolutionary biology the term Darwinian happiness has been used in an attempt to understand why evolution endowed the human species with the capacity to have either pleasant or unpleasant experiences. For a philosopher it is satisfying to read about Aristotle and Plato in a biological context. It is even more encouraging to read about virtue, meaningful life, and social obedience presented in an anthropomorphic and teleological language: evolution is a rational agent when it does some good things (Grinde 2013: 545): One of the foremost items related to eudaimonia is having a 'meaningful life'. It seems rational for evolution to attach positive
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feelings to utility, which implies that we are rewarded for doing something considered constructive. Similar reasoning may apply to other values typically incorporated in eudaimonia, such as being virtuous and obeying social rules. In this short paper, I will focus on the meaning of some key terms and the concept of happiness. How should we understand the sense and meaning of terms like happiness, virtue, good life, and meaningfulness of life? The questions are difficult to answer, as even a cursory study of philosophy shows. There is no agreement on these matters, only much debate and disagreement. However, when we move over to common parlance, we find no problem. We listen how people talk; they use these words without hesitation and feel convinced that they communicate as they want. We look at dictionaries. They explain the multiple meanings of any word, often circularly, but the explanation is available anyway. Should biologists be happy about this? Perhaps philosophers' scruples with the meanings of words are waste of time and the biologists make a good choice to stay away from semantic minefields? This is possible, not only because they can use dictionary meanings and at the last resort understand these words as they are understood in common parlance. I want to argue that this is not the case. On the contrary, the biological approach to happiness studies suffers because either we do not know what the biologists mean or we suspect that they mean a wrong thing. 2. Linguistic Considerations Semantic issues are certainly not pseudo-concerns (Grinde 2013: 550f). Bertrand Russell says, in his typical ironic way, that the word 'horse' did not get its meaning at the bonfire when the chief of a primitive tribe pointed to a horse and said that this is horse. One should not point at a brain structure and say, this is happiness. This is not how the word 'happiness' gets its meaning. However, if one is confident, one may use words as one wants. Merriam-Webster dictionary explains in 'Pickwickian sense' as follows: "Intended or taken in a sense other than the obvious or literal one," and provides the following background information, "Origin of Pickwickian: Samuel Pickwick, character in the novel Pickwick Papers (183637) by Charles Dickens. First Known Use: 1836." It may be easy to use concepts in their Pickwickian sense, when their meanings are hazy, vague, and ambiguous. You mean by 'happiness' whatever you want, because you need to use it that way, because you can, or because you think this use communicates, for instance, "[H]appiness is what is 'good' for the humankind" (Grinde 2013: 536). Suppose I tease you and you beat me up and then ask, "Are you happy now?" I say I am. Does this mean I
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am happy, or does it mean something else? I am happy in a Pickwickian sense and that is it. Somewhat more exaggerated a case exists when you call a horse a cow, and answer to criticism by saying, 'A horse is called 'cow' because this is how I use these words, and I recommend it to you too.' A well-known example is 'proletarian dictatorship', in which 'proletarian' seems to keep its standard meaning, unlike 'dictatorship.' It has here a Pickwickian meaning. Another example: Genes are rational actors; they are not, but one can say so, if one wants. Lewis Carroll's Alice in Wonderland (Chapter 6) tells a story: "'Must a name mean something?' Alice asked doubtfully. 'Of course it must', Humpty Dumpty said with a sort laugh: 'My name means the shape I am and a good handsome shape it is, too. With a name like yours, you might be any shape, almost'." The point is, actually, that proper names refer but they do not have a meaning. They tell nothing of their referents. Alice may be of any shape. Now, you may consider 'happiness' in the same way: 'happiness' names something or refers to something without telling anything about it. Then you can describe happiness as you want. This is what Humpty Dumpty would say. All this forms an easy and enjoyable method of dealing with happiness. You can make it to mean whatever you like, and still you are convinced that 'happiness' refers to happiness, which is a real thing in the world. This embodied happiness. If you are a brain scientist, you may feel like adopting a meaning of 'happiness' that refers to some conscious hedonic states, and then you attach them to some bodily functions and/or brain structures. This is what happiness means to you, a brain scientist, and you recommend your usage to all. If you are an empirical sociologist, you go around asking people if they are happy or not and how happy they are. In Finland, around 82 to 85 percent of people answer that they are happy or very happy. I have always found this result impressive and I wonder why worry about people's lives. We are all happy, or when someone asks, we say we are happy. For us this correct answer needs no lengthy explanations. We Finns simply do not want to say we are unhappy. If you ask Greeks, they are more willing to be angry and unhappy. On the other hand, medical experts say that depression and anxiety are the most serious health concerns in Finland so that people should take more Prozac. More people need anti-depressant drugs than you would guess, say the doctors. Our brains do not work well in the post-industrial society even though we report happiness. Perhaps we are so happy that we smoke and drink too much, have problems at work, and behave violently at home. No one is interested in the fact that these happy people need Prozac, take headache pills, sleeping pills, sedatives, and heartburn medicines. We visit soothsayers because we desperately want to know the future. We get divorces and cannot manage at work. But we are happy,
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from the sociological point of view. An empirical sociologist means by 'happiness' a disposition to use certain typical speech acts. A brain scientist would disagree, because clearly people's brain modules misfire so badly. It is a good question to ask, as Grinde does, "why humans need a module for low mood" (Grinde 2013: 547). We use this module extensively. My answer is, we are not robots, we are humans, and low mood is one of our motivational tricks. Grinde (2013: 543) writes: In an environment that differs from what evolution has prepared us for, such as an industrialized society, the system easily causes behavior totally at odds with the interest of the genes but not necessarily at odds with maximizing happiness. Happiness is many things. Such words as 'happiness' have so many meanings that we may accept the fact that it does not refer to anything particular. You may use the word as you like and if your listeners understand what you want to say, you communicate with them. Happiness is a word whose meaning is its usage, or it is a cluster term like 'game'. Its correct use has only sufficient conditions but no necessary conditions. 'Happiness' is a term whose singular referent is fictional. It looms large, e.g., in sociological narratives in these days. As I will show below, I am happy when I say so in a context in which you understand what I am saying, and those contexts vary considerably. 3. Eudaimonia and the Meaning of Life The word 'eudaimonia' means happiness in Greek. Of course, the semantic equivalence of these two words is an open question. Philosophers often use 'eudaimonia' as a technical term in an Aristotelian context. Happiness then means one's success in realizing one's important plans and projects and achieving one's goals. Hence, self-expression and realization are sources of happiness, or happiness-makers in one's life. If I am in prison, I cannot say I am happy in the eudaimonistic sense, even if I experienced massive pleasure and all may brain activity would be on the positive side. Eudaimonistic happiness may not be translatable into the biological language. It is disembodied happiness. If happiness means self-realization, I am necessarily unhappy in prison whatever I happen to feel or think about my life. If happiness means pleasure, I can maximize my pleasure in prison and hence be happy. This kind of happiness leaves its traces in the brain, I suppose. A classic example of meaningless life and unhappiness is Sisyphus. He pushes a big stone up a hill, groaning from pain. When they reach the top,
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the stone rolls down and Sisyphus starts pushing it back, repeatedly and forever. I find it interesting that so many people say Sisyphus is happy. I have made limited interviews in my philosophy classes and after my popular talks about happiness, and to my amazement many people say that Sisyphus is happy. Also Marcel Camus says Sisyphus is happy; how can this be? Some people say that Sisyphus is not happy but at least he is brave, but this is strange, too. How could he be brave if he does what he must, coerced, without having an alternative? How could he be happy if his life is totally meaningless and full of pain, devoid of any change, hope, or self-determination? I you are an existentialist for whom life is absurd anyway, Sisyphus might look like an exemplary and paradigmatic figure. I understand that much, but where is his happiness supposed to come from? He knows his life is absurd and that makes him happy. Perhaps this is a possible interpretation. Anyway, a popular way of making Sisyphus happy is by saying that rock rolling is the purpose and meaning of his life. He is a rock-roller whose satisfaction comes from his work. This is to say that the gods failed. Sisyphus' work is his punishment whose point is that a meaningless life is also an unhappy life but many people seem to say that meaning is always possible. Here they say that what Sisyphus does is what he wants to do because he does it. If Sisyphus says he is happy, we might accuse him of self-deception. However, when spectators say it, it does not sound like an automatic falsehood. He may be happy. Is Sisyphus happy or not? The only certainties are that he has no choice and he suffers physically. Some people enjoy that, too; think of marathon runners. 4. Happiness and virtue Grinde (2013: 545) is confident about virtue's role in happy lives, so I will provide some comments on virtue, too. Virtue has many forms. Again, such concepts fail to refer to anything concrete. It is disembodied. I once counted nine (9) different meanings of 'virtue' but many more must exist. Socrates says virtue is knowledge and Aristotle denies this. For ancient Romans and Machiavelli virtue is manly capability and capacity. For Kant, virtue means freely to choose the moral thing, regardless of the consequences like happiness. A virtuous person may be unhappy. For Franklin, virtue is prudence in a typically bourgeois frame. The female virtue used to mean chastity and sexual abstinence. Christian virtues are faith, love, and hope, or symbolically anchor, heart, and flame. There is no such thing as one virtue. Yet, Socrates says a virtuous person is always happy. This leads to the Socratic paradox: you are unjustly sentenced to die and your family is enslaved, and you know that all; yet, you are happy if you are virtuous.
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Does this make sense? I do not think it does, which is to say that happiness and virtue are not necessarily connected. Of course, I may offer a narrative explanation. If I am virtuous, I have no regrets and no person can justly accuse me of anything. This guarantees my peace of mind, which is one kind of happiness. Peace of mind, or ataraxia, seems to imply a passive mind and its brain. For Buddhists the greatest happiness requires inactivity, the cessation of all desire and motivation, the lack of all will and endeavor, and in the end nirvana or death without return. Arthur Schopenhauer would agree. Thomas Hobbes says that human life is characterized by its restless desires that end only in death. George Berkeley speaks of unnatural desires. According to these views, activity is painful, regardless of temporary pleasures and the illusions of meaningfulness of one's endeavors. Grinde (2013: 545) says, "Hedonism, or sensual pleasure, tends to be frowned upon in Western society." We desire pleasure, we cannot help it, but our evaluation of it tends to be low. When I scratch myself, I feel pleasure, which makes me happy, but I know this is not important. I get much pleasure from my first glass of wine, but I need to work hard to convince myself of its value. Grinde (2013: 546) also writes, "Hedonic stimuli are generally fleeting, and sometimes at odds with long-term happiness, while a positive default state implies a continuous and wholesome source of bliss." Pleasures connect to a narrow timeframe, this is obvious, but perhaps also continuous bliss is out of reach at least without strong medication. Aristotle says that man's (not woman's) natural essence is to be a political actor and his happiness arises from that. He says that a man must be free, not a slave, independently wealthy, not working, from a noble family, not too old, beautiful, and virtuous. Here virtue is just a necessary condition of happiness, never sufficient. This is a realistic view and it implies that Socrates is wrong. A virtuous slave is an unhappy slave. No virtue may shield her against unhappiness. If Socrates is right, 'happiness' is a disembodied state, or it has not physical correlates in human brain or anywhere else in the world. It would be a purely linguistic state of affairs, or as philosophers used to say, an idealistic entity. Why is this so? Happiness is knowledge, so that a person who knows what is right and good also necessarily realizes them in his actions; if he does wrong, he does not know what is right. Therefore, a virtuous man knows, and 'knowledge' is here an evaluative and normative notion whose instances do not reduce to facts about the brain. Knowledge, understood in this sense, does not show in brain scans. Happiness that follows from such knowing is disembodied as well. If I know what is good, I act accordingly and therefore I am happy regardless of anything else. To tell if I am happy or not you need to know if my knowledge is
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faultless and valid, or you need to figure out if my action is consistent with my knowledge. For this, I need two sets of evaluative criteria, one for assessing knowledge claims and one for assessing actions. Finally, if all goes well, I should be happy in a sense that I find almost impossible to explicate. As I said, it may mean that a virtuous person does not take any blame or criticism seriously, or he does not need to pay attention to it. Perhaps he does so and feels unhappy, but this is unnecessary; that is why he is truly happy. He feels unhappy but he is happy. True happiness is not embodied in the physical world. The final joke about disembodied happiness is the ancient saying, "No one is to be called happy before her death." However happy I may feel just now (embodied happiness), a catastrophe may come tomorrow; and then, I will be unhappy (embodied unhappiness). Only after my death can you evaluate the totality of my life and determine its overall happiness (disembodied happiness, as I am no longer there). The same applies to courage. The imperial Japanese army decorated a soldier for courage in battle only after his death. He might run away from the next battle. Courage in this sense is not an event in the brain but disembodied, justified social evaluation. My conclusion is, if anything, that brain scientists may use concepts like 'happiness' in any sense they might find interesting, useful, or desirable. However, they might consider the possibility that they are talking about something that they themselves create in order to satisfy their own and their audiences' rather specialized needs. I am sure this gives pleasure and makes them happy (embodied happiness).
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PoemwithEndnotesandReferences* by WernerGueth
When heading for the hall of fame I have been rather lame. Where I tried some impression1 I was told: out of fashion! Probably it will be done Only after I am gone.
Satisficing in forward looking deliberation Is my latest dedication2 Which is why I raised my voice Against repairing rational choice.3 Institutions as fair procedures4 Did not inspire many readers. In industrial organization Unnoticed many a publication!5 Also indirect evolution6 Failed to cause a revolution.
After presenting the recent review paper with Martin Kocher on ultimatum bargaining research at the ESA Conference in Cologne in September 2012, Axel Ockenfels thanked me not only for my presentation but also for the ultimatum game. Later on I have realized: Maybe it is me who should be thankful for the ultimatum game.
*
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Fortunately the ultimatum game7 Has prevented total shame: Since no responders tolerate Proposers are so moderate.
However, in my private life Proposes Ursula, my wife. Better to admit the shame At home we play dictator game8 Since all money spent on flower Didnt buy me veto power.
Wouldnt ultimatum bargaining Be a lot more entertaining? Wouldnt Ursula learn swiftly, Fair requires fifty-fifty?
Arguing no choice Doesnt exclude voice! Wont render the years we spent A life Ultimatum experiment. Complaining would be a disaster: Ursula can talk much faster!
The theory of equilibrium selection in the tradition of Harsanyi and Selten (1988) may serve as an example. (See Selten and Gth (1978) and Gth and Selten (1991), Gth (1985, 1992), and, more comprehensively,
W. Gueth: Poem with Endnotes and References
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see Gth and Kalkofen (1989).) Granting priority to payoff dominance which is inconsistent with best reply invariance has been questionable. However, it seemed unavoidable to render the theory more applicable. (General market entry games as analyzed by Selten and Gth (1982) could be analyzed only after modifying the theory, see the earlier unpublished paper of Selten and Gth (1977).) 2 After an initial attempt (Gth, 2000) the approach has been specified in more detail in Gth (2010, 2013). 3 I have argued against neoclassical repairs and game fitting in Gth (1995a, 2008). 4 See Gth (1976, 1979, 1986, 2011, excluding experimental studies), Gth and Van Damme (1986), Gth and Kliemt (2013a, 2013b). 5 Just a few topics: price leadership (Gth, Ockenfels and Stephan, 1989), justification of quantity competition (Gth, 1995b) la Kreps and Scheinkman (1983); labor economics (Brandts, Gth and Stiehler, 2006; Berninghaus, Bleich and Gth, 2013; Berninghaus, Gonzles and Gth, 2004; Berninghaus, Hoppe, Gth, Paul, 2012; Alewell, Friedrich, Gth, Kuklys, 2007; Fischer and Gth, 2012; Gth and Paul, 2011), intra- and interfirm competition (Gth, Pull and Stadler, 2011); evolutionary justification of monopolistic competition (Gth and Huck, 1997, 2005). 6 See the review of Berninghaus, Gth and Kliemt (2012) and the even more informative appendix (2011). 7 See the recent survey of Gth and Kocher (2013). 8 Dictatorial reward allocation has a long tradition. (See, for example, Mikula (1973), Shapiro (1975), and Gth (1984), for dictatorial labor allocation.)
References D. Alewell, C. Friedrich, W. Gth and W. Kuklys (2007). Fair Wages and Multiple Fairness Standards A Lab Study of Co-Employment of Hired and Rented Hands, Schmalenbach Business Review 59, 2-28. S. Berninghaus, S. Bleich and W. Gth (2013). The Consequences of (De)Regulation on Employment Duration and Efficiency An Experimental Study, Economic Inquiry 51(1), 1050-1065. S. Berninghaus, L. Gonzles and W. Gth (2004). Firm Specific Investments Based on Trust and Hiring Competition: A Theoretical and Experimental Study of Firm Loyalty, in: Franz, W., Ramser, H.J., Stadler, M. (eds.), Schriftenreihe des Wirtschaftswissenschaftlichen Seminars Ottobeuren, Volume 33 (Bildung), 89-114, Tbingen: Mohr Siebeck.
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S. Berninghaus, C. Hoppe, W. Gth and C. Paul (2012). Duopolistic Hiring and Sales Competition A Theoretical and Experimental Analysis, Metroeconomica 63:4, 693-726. S. Berninghaus, W. Gth and H. Kliemt (2011). Appendix on Indirect Evolution. http://www.econ.mpg.de/files/2011/Appendix_Exercises_on_indirect_ evolution.pdf S. Berninghaus, W. Gth and H. Kliemt (2012). Pull, push or both? Indirect Evolution in Economics and Beyond, in: Evolution and Rationality: Decisions, Co-operation, and Strategic Behaviour Ken Binmore and Samir Okasha (eds.), Cambridge University Press, 110132. J. Brandts, W. Gth and A. Stiehler (2006). I Want YOU! An experiment studying motivational effects when assigning distributive power, Labour Economics 13(1), 1-17. S. Fischer and W. Gth (2012). Effects of exclusion on acceptance in ultimatum games, Journal of Economic Psychology 33(6), 1100-1114. W. Gth (1976). Towards a More General Study of v. StackelbergSituations, Zeitschrift fr die gesamte Staatswissenschaft (4), 592-608. W. Gth (1979). Kriterien fr die Konstruktion fairer Aufteilungsspiele, in: Entscheidungen in kleinen Gruppen. W. Albers, G. Bamberg und R. Selten (eds.), Mathematical Systems in Economics. 45 (1979), 57-89. W. Gth (1984). Egoismus und Altruismus - Eine spieltheoretische und experimentelle Analyse, in: Normengeleitetes Verhalten in den Sozialwissenschaften, H. Todt (ed.), Schriften des Vereins fr Socialpolitik, N.F., Bd. 141 (1984), 35-58. W. Gth (1985). A remark on the Harsanyi-Selten theory of equilibrium selection, International Journal of Game Theory 14, 31-39. W. Gth (1986). Auctions, public tenders, and fair division games: An axiomatic approach, Mathematical Social Sciences 11 , 283-294. W. Gth (1992). Equilibrium selection by unilateral deviation stability, Rational Interaction, Essays in Honor of John C. Harsanyi (ed. R. Selten), Springer, Heidelberg, 161-189. W. Gth (1995a). On ultimatum bargaining - A personal review, Journal of Economic Behavior and Organization 27, 329-344. W. Gth (1995b). A simple justification of quantity competition and the Cournot-oligopoly solution, ifo-Studien 41/2, 245-257. W. Gth (2000). Boundedly rational decision emergence - a general perspective and some selective illustrations, Journal of Economic Psychology 21, 433-458. W. Gth (2008). (Non)Behavioral Economics A Programmatic Assessment, Journal of Psychology 216(4), 245-254.
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W. Gth (2010). Satisficing and (un)bounded rationality - A formal definition and its experimental validity, Journal of Economic Behavior and Organization 73, 308-316. W. Gth (2011). Rules (of Bidding) to Generate Equal Stated Profits: An Axiomatic Approach, Journal of Institutional and Theoretical Economics 167(4), 608-612. W. Gth (2013). Satisficing Players, Research in World Economy 4(1), 113. W. Gth and S. Huck (1997). A new justification of monopolistic competition, Economics Letters 57, 177-182. W. Gth and S. Huck (2005). On the Evolutionary Stability of Profit Maximization, Homo Oeconomicus 22(2), 211-229. W. Gth and B. Kalkofen (1989). Unique Solutions for Strategic Games Equilibrium Selection Based On Resistance Avoidance, Lecture Notes in Economics and Mathematical Systems Nr. 328. W. Gth and H. Kliemt (2013a). Fairness That Money Can Buy: Procedural Egalitarianism in Practice. Rationality, Markets and Morals 4, 20-30. W. Gth and H. Kliemt (2013b). Consumer Sovereignty Goes Collective. Ethical basis, axiomatic characterization and experimental evidence, in: Martin Held, Gisela Kubon-Gilke, Richard Sturn (eds.): Normative und institutionelle Grundfragen der konomik. Grenzen der Konsumentensouvernitt. Jahrbuch 12, 83-98 Marburg: Metropolis. W. Gth and M. G. Kocher (2013). Thirty years of ultimatum bargaining experiments: Motives, variations, and a survey of the recent literature. Jena Economic Research Papers #2013-003. W. Gth, P. Ockenfels and J. Stephan (1989). Price leadership on homogeneous and heterogeneous markets, in: Methods of Operations Research 59 (1989), Proceedings des 12. Symposiums ber Operations Research in Passau, 1987, 225-248. W. Gth and C. Paul (2011). Downsizing the Labor Force by Low and High Profit Firms: An Experimental Analysis, Journal of Management and Sustainability 1(1), 2011, 2-17. W. Gth, K. Pull and M. Stadler (2011). Intrafirm Conflicts and Interfirm Competition, Homo Oeconomicus 28(3), 367-378. W. Gth and R. Selten (1991). Majority voting in the Condorcet Paradox as a problem of equilibrium selection, Game Equilibrium Models (ed. R. Selten), Vol. IV: Social and Political Interaction, Springer, 7-40. W. Gth and E. van Damme (1986). A comparison of pricing rules for auctions and fair division games, Social Choice and Welfare 3, 177198
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J. C. Harsanyi and R. Selten (1988). A General Theory of Equilibrium Selection in Games. Cambridge, MA: The MIT Press, 378pp. D. M. Kreps and J. A. Scheinkman (1983). Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes. The Bell Journal of Economics 14(2), 326-337. G. Mikula (1973). Gewinnaufteilungsverhalten in Dyaden bei variiertem Leistungsverhltnis. Zeitschrift fr Sozialpsychologie 3, 126-133. R. Selten and W. Gth (1977). Risikodominanz in einem Markteintrittsspiel, Working Paper, Institut fr Mathematische Wirtschaftsforschung, Nr. 63, Universitt Bielefeld. R. Selten and W. Gth (1978). Macht Einigkeit stark? - Spieltheoretische Analyse einer Verhandlungssituation, Neuere Entwicklungen in den Wirtschaftswissenschaften, Schriften des Vereins fr Socialpolitik, N.F. Bd. 98, 197-217 R. Selten and W. Gth (1982). Equilibrium point selection in a class of market entry games, in: Games, economic dynamics, and time series analysis - A symposium in memoriam Oskar Morgenstern, M. Deistler, E. Frst und G. Schwdiauer (eds.), Wien, 101-116. E.G. Shapiro (1975). Effects of future interaction in reward allocation in dyads: equity or equality, Journal of Personality and Social Psychology 31, 873-880.
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Homo Oeconomicus Volume 30, Number 1 (2013)

Accedo Verlagsgesellschaft, Mnchen

Homo Oeconomicus Volume 30, Number 1 (2013)

113 119 125

www.accedoverlag.de HappyBargain:AspiringGoodorAcceptingFair Deals? FriedelBolleandPhilippE.Otto*

Financial support by the German Science Foundation (DFG#BO747-11) is gratefully acknowledged.

2013AccedoVerlagsgesellschaft,Mnchen. ISBN9783892651062 ISSN09430180

Homo Oeconomicus 30(1)

F. Bolle and P. E. Otto: Happy Bargain

Table 1: The productivities of matches

Homo Oeconomicus 30(1)

Treatment Productivities Treatment Productivities 160 460 280 400

T1 400 640 T4 460 640 160 460 280 520

T2 280 640 T5 460 640 280 520 280 460

T3 460 640 T6 400 640

F. Bolle and P. E. Otto: Happy Bargain

Homo Oeconomicus 30(1)

F. Bolle and P. E. Otto: Happy Bargain

We used the program package QLIM from SAS.

Homo Oeconomicus 30(1)

F. Bolle and P. E. Otto: Happy Bargain

-1.370*** 0.192* 0.008*** 0.114

0.461*** 0.287** 0.465***

0 0.905*** 1.753*** 2.670*** 0.099 0.365***

0.056 0.079 0.105

0 0.803*** 1.634*** 2.453***

Such a dependency of happiness on aspiration levels is found by Stutzer (2004).

Homo Oeconomicus 30(1)

F. Bolle and P. E. Otto: Happy Bargain

Homo Oeconomicus 30(1)

F. Bolle and P. E. Otto: Happy Bargain

Homo Oeconomicus 30(1)

F. Bolle and P. E. Otto: Happy Bargain

Homo Oeconomicus 30(1)

W2 F1 Limit 1 Limit 2 Limit 3 Limit 4 Rho Pseudo R 2

www.accedoverlag.de ThePrecautionaryPrincipleandtheJustifiability ofThreeImperatives MarkoAhteensuu

Homo Oeconomicus 30(1)

M. Ahteensuu: The Precautionary Principle

Homo Oeconomicus 30(1)

M. Ahteensuu: The Precautionary Principle

Homo Oeconomicus 30(1)

M. Ahteensuu: The Precautionary Principle

Homo Oeconomicus 30(1)

M. Ahteensuu: The Precautionary Principle

Homo Oeconomicus 30(1)

M. Ahteensuu: The Precautionary Principle

Homo Oeconomicus 30(1)

M. Ahteensuu: The Precautionary Principle

Homo Oeconomicus 30(1)

M. Ahteensuu: The Precautionary Principle

Homo Oeconomicus 30(1)

M. Ahteensuu: The Precautionary Principle

Homo Oeconomicus 30(1)

M. Ahteensuu: The Precautionary Principle

Homo Oeconomicus 30(1)

Wingspread Statement on the Wisconsin, 26th January 1998).

2013AccedoVerlagsgesellschaft,Mnchen. ISBN9783892651062 ISSN09430180

Homo Oeconomicus 30(1)

R.W. Anderson: Portuguese Inquisitorial Sentencing Trends

Homo Oeconomicus 30(1)

R.W. Anderson: Portuguese Inquisitorial Sentencing Trends

Homo Oeconomicus 30(1)

R.W. Anderson: Portuguese Inquisitorial Sentencing Trends

0.461* 0.287 0.465***

0 0.905* 1.753* 2.670* 0.099 0.365*

0 0.803* 1.634* 2.453***