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Utilitarism Exchange Accounting Preferences Observations

Conference of the International Society for Utilitarian Studies


August 20  22, 2014, Yokohama National University

Aristotle and the `satisfaction of needs'


 an outline of arguments

G.M. Ambrosi

University of Trier, Germany

ambrosi@uni-trier.de

August 20-22, 2014

G.M. Ambrosi University of Trier, Jean Monnet Chair, FB IV, Emeritus

Aristotle: Satisfaction of needs


Utilitarism Exchange Accounting Preferences Observations

Overview

1 Utilitarianism and Aristotle

2 Aristotle's model of exchange

3 Aristotelian accounting
Equal values
Equated goods
Geometry

4 Preferences and exchange


Equality of preferences
Inequality of incomes
Satisfaction of needs

5 Sundry observations

G.M. Ambrosi University of Trier, Jean Monnet Chair, FB IV, Emeritus

Aristotle: Satisfaction of needs


Utilitarism Exchange Accounting Preferences Observations

Ancient roots

Utilitarianism has many roots in European antiquity.

The word comes from Latin utilitas = `usefulness'

Utilitas was used by some medieval scholars for translating


Aristotle's Greek term
chreia = `use', ` need' , `demand'
But the relation between Aristotle's term chreia in the sense of
`need' and later reections about the satisfaction of need is
problematic.
Other connections of utilitarianism with ancient roots:

G.M. Ambrosi University of Trier, Jean Monnet Chair, FB IV, Emeritus

Aristotle: Satisfaction of needs


Utilitarism Exchange Accounting Preferences Observations

Jeremy Bentham (1789), Chapter on Principles of Utility:

NATURE has placed mankind under the governance of


two sovereign masters, pain and pleasure.
Plato, in his Laws (644), wrote 348 BC, long before Bentham:

each [individual] possesses within himself two antagonistic


and foolish counsellors, whom we call by the names of
pleasure and pain
Wicksteed (1914), President of Royal Economic Society:

Aristotle's system of ethics and our reconstructed system


of economics are twin applications of one identical
principle or law

But this is open to debate.

G.M. Ambrosi University of Trier, Jean Monnet Chair, FB IV, Emeritus

Aristotle: Satisfaction of needs


Utilitarism Exchange Accounting Preferences Observations

Aristotle's fundamental utilitarianism

In Ÿ11 of his Nicomachean Ethics, Book V, ch.5 (NE, V,5) Aristotle


did indeed make the very utilitarian sounding statement:

Everything . . . must be measured by some one thing.


In truth this one thing is [the satisfaction of ] need . . .

But as a kind of substitute for need, convention has


brought money into existence . . .

This statement is the basis of my contribution.

G.M. Ambrosi University of Trier, Jean Monnet Chair, FB IV, Emeritus

Aristotle: Satisfaction of needs


Utilitarism Exchange Accounting Preferences Observations

Aristotle's model of exchange: the text

As Plato's disciple, Aristotle built on Plato's position that the


purpose of the state is to give its citizens the opportunity for
specialised production and economic exchange with each other,
usingmarkets and money. (Plato, Republic 371 B)
Aristotle (NE, V,5) Ÿ8 describes such exchange as follows

1
Ÿ8 Now proportionate requital is eected by diametrical
conjunction. For example, let A be a builder, B a
shoemaker, C a house, and D a shoe. It is required that
the builder [A] shall receive from the shoemaker [B ] a
portion of the product [D ] of his labor, and give him a
portion [of C , namely] of the product of his own [labor].
1
Rackham: diagonal
G.M. Ambrosi University of Trier, Jean Monnet Chair, FB IV, Emeritus

Aristotle: Satisfaction of needs


Utilitarism Exchange Accounting Preferences Observations

Exchange: an illustration

Total production of houses C and


shoes D denes the dimension of the
outer rectangle.
Parts (portions) of these goods are
exchanged between artisans A and B
as the arrows show.
The arrows of retained and obtained
goods dene the households'
possibilities for the satisfaction of
needs.
The traditional interpretation looses
these distinctions.

G.M. Ambrosi University of Trier, Jean Monnet Chair, FB IV, Emeritus

Aristotle: Satisfaction of needs


Utilitarism Exchange Accounting Preferences Observations

Exchange: The medieval view

Langholm (1979, p.15)  Justice of


proportionate reciprocity is eected
by diagonal conjunction.
With this obscure saying Aristotle
introduces a quasi-mathematical
argument in four terms, correspond-
ingaccording to the Latin tradition
to the angles of a square
Figure: Albertus Magnus (1252)

In fact Aristotle's passage is an accounting advice.


G.M. Ambrosi University of Trier, Jean Monnet Chair, FB IV, Emeritus

Aristotle: Satisfaction of needs


Utilitarism Exchange Accounting Preferences Observations

Exchange: The correct view

Table: Aristotelian exchange: the basics

product quantities
producer total traded retained price

builder A QC∗ QC QCr pC


shoemaker B QD∗ QD QDr pD

How to measure Aristotle's portions and the equating of goods:


QC∗ QC QCr
= +
QC∗ = QC + QCr QC∗ QC∗ QC∗ 1 = qC + qCr (1)

QD∗ = QD + QDr QD∗ QD Qr 1 = qD + r


qD (2)
∗ = ∗ + D∗
QD QD QD

G.M. Ambrosi University of Trier, Jean Monnet Chair, FB IV, Emeritus

Aristotle: Satisfaction of needs


Utilitarism Exchange Accounting Preferences Observations

Equal values

Aristotle's accounting I: equal values

Table: Equivalence and sustainable trade

money values
product name selling buying

houses (C) pC QCs = pC QCd

=
(budgetary requirement)
shoes (D) pD QDs = pD QDd
equivalence pC QC = pD QD

Rothbard's (1995; 16) wrong claim:


His [Aristotle's] reasoning was that for A and B to exchange two
products, the value of both products must be equal. . . The
Aristotelian concept of equal value in exchange is just plain wrong

G.M. Ambrosi University of Trier, Jean Monnet Chair, FB IV, Emeritus

Aristotle: Satisfaction of needs


Utilitarism Exchange Accounting Preferences Observations

Equated goods

Aristotle's accounting II: equated goods

Aristotle, NE V,5 Ÿ10

As therefore a builder [A] is to a shoemaker [B ], so must


such and such a number of shoes [qD ] be to a house [qC ]

equivalenceas before pC × QC = pD × QD (3)


QC QD
expand with Q ∗ -s pC QC∗ × ∗ = pD QD∗ × ∗ (4)
| {z } QC | {z } QD
≡A ≡B
see equs. (1), (2) A × qC = B × qD (5)
A qD
proportionate requital
B =
qC (6)

A ≡ pC QC∗ → worth of builder ; B ≡ pD QD∗ → worth of shoemaker

G.M. Ambrosi University of Trier, Jean Monnet Chair, FB IV, Emeritus

Aristotle: Satisfaction of needs


Utilitarism Exchange Accounting Preferences Observations

Geometry

Aristotle's accounting III: Geometry

Netz (1998; 37): The meto-


nym of modern science is a
formula, a symbolic text.
The metonym of ancient
science is a diagram, a visual
representation.

Indeed, again and again


Aristotle refers to geometry
in the NE.

Figure: drawing qir , qi Figure: drawing qD /qC

G.M. Ambrosi University of Trier, Jean Monnet Chair, FB IV, Emeritus

Aristotle: Satisfaction of needs


Utilitarism Exchange Accounting Preferences Observations

Equality of preferences

Preferences and exchange

Problem:
relate qD /qC to A/B in simple way

Aristotle NE V,5 Ÿ11 :


 . . . if people did not need things, or
if theydo not need them to the
same extent, then either there will
be no exchange, or the exchange
will be a dierent one.
Interpretation:
Figure: Equal preferences Assumption of equal preferences

G.M. Ambrosi University of Trier, Jean Monnet Chair, FB IV, Emeritus

Aristotle: Satisfaction of needs


Utilitarism Exchange Accounting Preferences Observations

Inequality of incomes

Inequality of incomes

Problem:
Aristotle seems to write gibberish.

Rothbard (1995, p.16) Eh? How


can there possibly be a ratio of
`builder' to `shoemaker' ? Much less
an equating of that ratio to
shoes/houses? . . .

But see equs. (3) to (6). Remember:


A ≡ pC QC∗ ; B ≡ pD QD∗
Figure: A<B and qC > qD qC ≡ Q C
Q∗ ; qD ≡ Q
Q∗
D

The poor pays more C D

G.M. Ambrosi University of Trier, Jean Monnet Chair, FB IV, Emeritus

Aristotle: Satisfaction of needs


Utilitarism Exchange Accounting Preferences Observations

Satisfaction of needs

The households' situations

Satisfaction of households' needs


requires availability of goods. This
may be measured by the areas
qCr × qD and qD
r × q or by sides:
C

χA = qCr × qD ; χB = qCr × qD
p p

(7)
Rewriting this with exponents gives

Ui = (qir )0.5 (qj )0.5 (8)

with i =C , D ; j = D, C
Figure: Available goods

G.M. Ambrosi University of Trier, Jean Monnet Chair, FB IV, Emeritus

Aristotle: Satisfaction of needs


Utilitarism Exchange Accounting Preferences Observations

Fairness and Aristotle's proportions

A question of fairness

A qD qCr χA
= = =
B q qr χB
| {z C} | D {z }
(i) indirect proportional (ii) direct proportional

1 The higher the As, the more this party gets as qD .


2 The higher the As, the better the resulting satisfaction of
needs.

Is that fair?

G.M. Ambrosi University of Trier, Jean Monnet Chair, FB IV, Emeritus

Aristotle: Satisfaction of needs


Utilitarism Exchange Accounting Preferences Observations

Pythagoreans' erroneous arguments for justice

Pythagorean arguments for justice:

1 With A : B = χA : χB distributive justice is fullled.

2 We have a literally square deal of corrective justice.

3 Since always χA + χB = 1 , aggregate society is unaected by


questions of distribution. Distribution is no social concern.

Aristotelian arguments against justice:

1 Above proportionalities are pure accounting, hence not justice.

2 Likewise, the equalisation of goods is just formal (Q


∗ /Q ∗ ≡1
always). The resulting square has nothing to do with justice.

3 The plea for strict reciprocity endangers society. It lacks equity.

G.M. Ambrosi University of Trier, Jean Monnet Chair, FB IV, Emeritus

Aristotle: Satisfaction of needs


Utilitarism Exchange Accounting Preferences Observations

Aristotle's critique of the Pythagoreans

Nicomachean Ethics V,5 Ÿ1


 Some people think that it is in fact the reciprocal that is
unqualiedly just as the Pythagoreans asserted; for they used,
without qualication, to dene the just as what stands in a
reciprocal relation to something else.
However the reciprocal does not t the case either of the just in the
distributive [proportional] sense or of that in the recticatory
[corrective]

G.M. Ambrosi University of Trier, Jean Monnet Chair, FB IV, Emeritus

Aristotle: Satisfaction of needs


Utilitarism Exchange Accounting Preferences Observations

Relation to a Cobb-Douglas function

The Aristotelian measure of relative satisfaction of needs in relative


magnitudes can be seen in terms of Cobb-Douglas functions for
absolute magnitudes

r
D 0.5 QC 0.5
χA qD × qCr (Q ∗) ( Q∗ ) (QD )0.5 (QCr )0.5
p
q QD C
= = r = (9)
χB r C 0.5 QD 0.5 (QC )0.5 (QDr )0.5
p
qC × qD (Q
Q∗ ) ( Q∗ )
q
C D

since (QC∗ )0.5 and (QD∗ )0.5 cancel in the middle term of equ.(9).

G.M. Ambrosi University of Trier, Jean Monnet Chair, FB IV, Emeritus

Aristotle: Satisfaction of needs


Utilitarism Exchange Accounting Preferences Observations

A strange coincidence

Aristotle Metaphysics D.5 : and a man's sailing to Aegina is


necessary in order that he may get his money. (Ross, 1928, 1015a)

Figure: Aristotle, c.330 BC


Figure: Coin, Aegina island, c. 330 BC
Nicomachean Ethics, V,5

G.M. Ambrosi University of Trier, Jean Monnet Chair, FB IV, Emeritus

Aristotle: Satisfaction of needs


Utilitarism Exchange Accounting Preferences Observations

References

-Albertus Magnus ([1252], 1972). Opera omnia  Super ethica: commentum et


quaestiones Ps. 1. Vol. 14. Monasterium Westfalorum Aschendor: Institutum
Alberti Magni Coloniense
Aristotle's Geometrical Accounting.
-Ambrosi, Gerhard Michael (2014). URL:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2419927
-Bentham, Jeremy ([1789] 1907). Introduction to the Principles of Morals and
Legislation. London; New York; Toronto: Clarendon Press
-Bury, Robert Gregg (1926). Plato Laws  with an English Translation. Vol. II.
The Loeb Classical Library. Harvard University Press & William Heinemann
-Langholm, Odd Inge (1979). Price and Value in the Aristotelian Tradition. A
study in scholastic economic sources. Bergen, Oslo, Tromso:
Universitetsforlaget
-Netz, Reviel (1998). Greek Mathematical Diagrams: Their Use and Their
Meaning. In: For the Learning of Mathematics 18.3, pp.3339.

G.M. Ambrosi University of Trier, Jean Monnet Chair, FB IV, Emeritus

Aristotle: Satisfaction of needs


Utilitarism Exchange Accounting Preferences Observations

References

-Rackham, Harris ([1926] 2003). Aristotle  The Nicomachean Ethics with an


English Translation. Vol. 73. Loeb Classical Library. Cambridge, Mass. and
London: Harvard University Press
-Ross, William David (1928): Metaphysica, in: The Works of Aristotle, edited
by William David Ross, volume VIII (Oxford, London etc.: Clarendon Press),
(page numbering is only by Bekker numbers).
-Rothbard, Murray N. (1995). Economic Thought before Adam Smith  An
Austrian Perspective on the History of Economic Thought. Vol. 1.
Cheltenham, UK: Elgar
-Rowe, Christopher J. and Sarah Broadie (2002). Nicomachean ethics -
translation and commentary. Oxford etc.: Oxford Univ. Press
-Wicksteed, Philip H. (1914). The Scope and Method of Political Economy in
the Light of the Marginal Theory of Value and of Distribution. In: The
Economic Journal 24.93, pp. 1-23.

G.M. Ambrosi University of Trier, Jean Monnet Chair, FB IV, Emeritus

Aristotle: Satisfaction of needs


Utilitarism Exchange Accounting Preferences Observations

The End

G.M. Ambrosi University of Trier, Jean Monnet Chair, FB IV, Emeritus

Aristotle: Satisfaction of needs