Adam Smith, Collusion and “Right” at the Supreme Court

Adam Smith’s views on collusion were injected into the Supreme Court’s ruling in Bell Atlantic v. Twombly as Justice Stevens puzzled over why a collusive action might be viewed as “right.” Motivation by a desire for approbation provides Smith’s explanation for the existence of well- functioning groups. “Right” action is approved by the group. The question is what happens when the groups are in conflict. For Smith, collusion is one instance of the larger problem of faction in which a small group organizes to exploit the larger society

Not an Average Human Being : How Economics Succumbed to Racial Accounts of Economic Man

In this chapter, we shall show how the attacks on the doctrine of human homogeneity succeeded—how, late in the century, economists came to embrace accounts of racial heterogeneity entailing different capacities of optimization.1 We attribute the demise of the classical tradition largely to the ill-understood influence of anthropologists and eugenicists2 and to a popular culture that served to disseminate racial theories visually and in print. Specifically, W. R. Greg, James Hunt, and Francis Galton all attacked the analytical postulate of homogeneity that characterized classical economics from Adam Smith3 through John Stuart Mill. Greg cofounded the eugenics movement with Galton, and he persistently attacked classical political economy for its assumption that the Irishman is an “average human being,” rather than an “idiomatic” and an “idiosyncratic” man, prone to “idleness,” “ignorance,” “jollity,” and “drink” (quoted in full later in this chapter)

Sympathy and Approbation in Hume and Smith: A Solution to the Other Rational Species Problem

This paper examines a key implication of the different conceptions of sympathy and the approbation associated with sympathy in the writings of David Hume and Adam Smith. For Hume, sympathy is an empathy we feel for those like us and hence we are motivated to obtain the praise or approbation of those with whom we sympathize. In Hume’s construction there is a direct link from sympathy to motivation because sympathy is reflected self-love. By contrast, in Smith’s construction sympathy is an act of imagination which only habit makes motivational. The abstraction by our imagination means we earn the approbation (or disapprobation) from those unlike as well as those like us. In Smith’s account we can obtain approbation as we step outside ourselves and regard our own actions dispassionately

Escape from Democracy: the Role of Experts and the Public in Economic Policy

The orthodox view of economic policy holds that public deliberation sets the goals or ends, and then experts select the means to implement these goals. This assumes that experts are no more than trustworthy servants of the public interest. David M. Levy and Sandra J. Peart examine the historical record to consider cases in which experts were trusted with disastrous results, such as eugenics, the regulatory use of security ratings, and central economic planning. This history suggests that experts have not only the public interest but also their own interests to consider. The authors then recover and extend an alternative view of economic policy that subjects experts\u27 proposals to further discussion, resulting in transparency and ensuring that the public obtains the best insights of experts in economics while avoiding pitfalls such as expert bias.https://scholarship.richmond.edu/bookshelf/1244/thumbnail.jp

Adam Smith and the Place of Faction

Our approach to faction focuses on Smith’s account of the interrelation between social distance and small group cohesion. We make the case that social distance is not necessarily constant in Smith’s system. As social distance shrinks, sympathy becomes more habitual and the affection we have for others increases (Peart and Levy, 2005b). Factions reduce social distance, and this gives them power and makes them dangerous. By modifying social distance, they created a disconnect between behavior of which we approve (cooperation) and consequences of which we disapprove. It is in this context that we find virtuous behavior with deleterious consequences. The identification of ‘corruption’ with faction is emphasized in Young (1997, pp.157-158). We take the additional step of connecting the identification to the conclusion that the institution that allows corrupt actions to flourish is in need of reform

Learning from Failure: A Review of Peter Schuck’s Why Government Fails So Often: And How It Can Do Better (Book Review)

Peter Schuck catalogs an overwhelming list of US government failures. He points to both structural problems (culture and institutions) and incentives. Despairing of cultural change, Schuck focuses on incentives. He relies on Charles Wolf ’s theory of nonmarket failures in which “internalities” replace the heavily-studied market failure from externalities (Wolf 1979). Internalities are evidence of a discord between the public goals by which a program is defended and the private goals of its administrators. What might economists contribute? We suggest that economists have neglected internalities because they take group goals as exogenously determined and we defend an alternative tradition in which group goals are endogenously determined. ( JEL A11, D72, D82

The Ethics Problem: Toward a Second-Best Solution to the Problem of Economic Expertise

The collective action problem of economic experts was diagnosed acutely by Knight and Pigou in the 1930s. The interest of economists as a group is in pursuing the public good of truth; the interest of an individual economist is in pursuing the private good of happiness. Pigou’s example is the pursuit of political influence. Deviation from truth-seeking devastates the theory of governance as objective inquiry laid out by Knight and John Rawls, as we saw in the eugenic era. We reformulate the Knight–Rawls position as truth-seeking contingent on a presupposed system. The best case for the Knight–Rawls position is transparency, where presuppositions are common knowledge. If transparency is infeasible making the nontransparency of inquiry itself transparent will serve as a second-best solution to warn third parties to make adjustments. A code of ethics can itself serve as a warning about the temptation. Pigou’s concern about nonpecuniary temptation should be added to the American Economic Association code of ethics

Denying Human Homogeneity: Eugenics & Making of Post-Classical Economics

The question we propose to address is how did economics move from the classical period characterized by the hardest possible doctrine of initial human homogeneity—all the observed differences among people arise from incentives, luck, and history1—to become comfortable with accounts of human behavior which alleged foundational differences among and within races of people? (Darity 1995) In this paper, we shall argue that early British eugenics thinkers racialized economics in the post-classical period.

Theorizing About Human Capacity: A View from the Nineteenth Century

Discussions of eugenic policy of the nineteenth century are too often isolated from the larger debates in political economy over human capacity. These debates centered on two questions. First, do all people have roughly the same capabilities, or do some groups have a lower capacity than others? Second, capacity for what? In the nineteenth century political economists in the tradition of Adam Smith through John Stuart Mill argued that, as Gordon Tullock would later put it, “people are people” and there are no racial or other distinctions to be made about our capabilities for labor market, family formation, or other decisions. Late in the century, however, a coalition formed between progressives led by Thomas Carlyle and John Ruskin, and anthropologists and other so-called “scientists” who “demonstrated” the “inferior” capabilities of groups such as the Irish in Great Britain and former West African slaves, in Jamaica. This was the first, necessary “scientific” step towards the rise of eugenic policy-making