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Oct 09, 2006

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Chad Vandervalk

Though I respect what you are saying, I would have to respectfully disagree regarding my economic education. I would like you to know that I have a BA in Economics, as well as a MSc from the London School of Economics. I am not misinformed regarding the facts and mechanisms of the capitalist system.
I am also aware that the capitalist system developed out of the Christian culture of Europe. However, the underlying assumptions of the economic system as we know it and experience it are not really Christian. The interesting result of Adam Smith was that pursuing my own self-interest, or to put it more plainly, making all my decisions based solely on what would be the best for me, actually reduces the extra profits in the system as a whole and produces the most efficient outcome.
Viewing the system itself as being based on un-Christian motives does NOT imply that everyone who engages in this system engages with un-Christian motives. There are many people who are very successful in the system because they view their opperation as being the most stewardly.
We may disagree, but that is not due to ignorance on my part.

Michael W. Kruse

Chad, thank for the come back. I have to admit I had to go back and reread here. After six months and my memory gets stale. (Shoot, after six hours and my memory gets stale.)

I hope it was clear that my post was not intended to be personal. I’m glad to hear of you economics background (certainly more credentialed than mine.) You appear to have come to your conclusions from an informed perspective. Fair enough. I still disagree with your assessment. Unlike in your case, I deeply suspect that much of the hostility toward economic freedom ubiquitous from the religious higher education has more to do with a general disdain for the vita activa and a large uncritical acceptance of evaluations made about economics from various branches of the humanities than it does with any real engagement with economics.

My position is this proto-capitalism was in place in Northern Italy and emerging elsewhere in Europe 300 years before Smith was on the scene. Going back to Augustine there was theological justification for trade based on mutual assessment of the worth of an object instead of some intrinsic value the object had. Aquinas theologically justified nearly all the major tenets that underpin capitalism like private property, free trade and even the legitimizing the use of interest (while officially not approving of it) in the 13th Century. The Scholastics over the next few centuries expanded on this work going in different directions but particularly among the Spanish Scholastics, the ideas that lead to capitalism were evident. By the 17th century, all that really remained was to emerge was a way to amass capital on a limited liability basis with proportional shareholder interests (corporations) and power plants that would lead to the industrial revolution.

Smith was operating directly out of this milieu. I am persuaded that Smith is being read through the eyes of later philosopher/economists to say things he did not (Possibly John Stuart Mill beyond.) Smith was no orthodox Christian but his economic philosophy was still very much rooted in orthodox Christian thought. I think what he said in Wealth of Nations about self-interest/self-love is greatly distorted and Wealth of Nations is frequently considered apart from its companion work The Theory of Moral Sentiments.

For Smith, attending to one’s interests did not mean to the exclusion of care for others. Furthermore, Smith was addressing what system of relationships best guaranteed a just and productive society. Smith believed benevolence to be among the highest of virtues and believed all were obligated to practice it. However, no individual can fully trust other individuals to act benevolent on a consistent basis. Therefore, it is better to have people acting on my behalf because they see at as in their “self-interest” to do so not out of benevolence.

“But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interests their self-love in his favour, and show them that it is for their advantage to do for him what he requires of them… It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.” (Wealth of Nations, bk 1, Chap 2)

From The Theory of Moral Sentiments:

And hence it is, that to feel much for others and little for ourselves, that to restrain our selfish, and to indulge our benevolent affections, constitutes the perfection of human nature; and can alone produce among mankind that harmony of sentiments and passions in which consists their whole grace and propriety. As to love our neighbour as we love ourselves is the great law of Christianity, so it is the great precept of nature to love ourselves only as we love our neighbour, or what comes to the same thing, as our neighbour is capable of loving us. (Section 1, Chapter 5, Paragraph 5)

Capitalism had been in formation long before the 18th Century and was grounded in orthodox Christian teaching. There is nothing inherent in capitalism that requires a materialistic individualistic mindset for it to work and it was not grounded in it. Capitalism was hijacked by Enlightenment and Modernist impulses, and yoked to their materialistic individualism. It can be unyoked. When you critique capitalism, I think you are objecting to materialism and individualism. I join you. However, I reject that the assertion that capitalism is inherently based on selfishness. It should be redeemed not discarded.

dlw

I think the issue appears to be a matter of semantics...

Smith, along with the Scottish Common Sense Realism Enlightenment, held with more continuity with the past of Christendom and Scholastic insights that no doubt helped provide the framework for the emergence of Capitalism in Great Britain and the US and elsewhere...

But more needs to be said. Smith was writing in the early days of the Industrial Revolution and was naive wrt later developments. We know now that the pursuit of pecuniary gain does not by any means benefit "the public good" and that there are ongoing concerns with the frameworks that markets operate within.

The real failing seems to be the extent that we obfuscate how the debate is most often about the framework, not the use of markets to decentralize economic decision-making...

Adam Smith needed an editor! Or so said my professor Warren Samuels, the top Adam Smith scholar in the world! He also is by no means the end-all-be-all fount of knowledge for our economic-social-legal relations, as his writing really was more geared for 18th ctry underdeveloped Scotland, learning from Mercantilistic writings in England, Physiocrats in France and a Deism that no doubt bore some continuity with Constantinized Christianity, though perhaps less with biblical Christianity in its emph on the rat'l individuals' pursuit of self-interest, rather than the cultivation of institutions that help us to be more disciplined in our lives and less bounded in our altruisms.

dlw

Michael W. Kruse

Last month I went to a book signing and presentation by P. J. O'Rourke's new book "On the Wealth of Nations." He was pointing out that in the eighteenth century the physical mass of the book said something about the price you should pay. Weighty book had more than one meaning. :)

When it comes dense stuff seriously in need of editing, some of the worst I have read was sociologist Talcott Parsons. I had a prof who said 90% was verbiage, 9% well known sociological knowledge, 1% may actually have said something ... and then the prof made us read Parsons anyway! :)

Your take on Smith is pretty much what I have read as well. Smith seemed to have been clueless about the industrial revolution happening right under his nose. I think Smith was a transitional figure with a strong residual of orthodox Christian thinking married to emerging Enlightenment thinking. It wasn't that he got everything just right but he did manage to frame a great many of the basic concepts that would influence economics. (Also, I think it was in David Warsh's "Knowledge and the Wealth of Nations" where it was suggested that Smith had virtually described increasing returns but may not have fully comprehended what he was on to.)

What I reject is the caricature of Smith as the founder of capitalism, divorced from Christian ethics, teaching a "greed is good" type of selfishness. That is the charge I frequently hear leveled at capitalism. While the philosophy was not precisely biblical it shared more in common with it than it did with “survival of the fittest” mentality that would prevail at other times. I think Smith's contribution was in articulating the relationship between many key variables that had been emerging in Europe over the previous centuries and creating a rudimentary model that helped frame analysis. In that sense, his work was deeply rooted in Christian thought because the variables themselves emerged from the Christian milieu. Greed is not elemental necessity to capitalism. It is a ubiquitous human malady which capitalism, combined with other structures, can channel toward productive ends.

dlw

Smith needed an editor...

Parsons was way over-rated. Geoffrey Hodgson in his "How Economics forgot History" pretty much accuses Parsons of plagiarism and playing into how Sociology and Economics were carved up into separate spheres in the beginning of the 20th ctry.

I think Smith pulled together stuff from different streams in a framework that was generally optimistic that, despite the relative constancy or non-perfectibility of selfish human nature, changes in the legal framework could foster both growth and development and a general transfer of decision-making from the lords who inherited and squandered their well-being to the merchants who earned and stewarded their well-being.

I think that Smith's notion of the propensity to truck, barter and exchange as the basis for the division of labor is an important one. They generally tend to follow with our ability to use our knowledge of nature to reduce the transaction costs of doing business, our ability to form/manipulate values with each other, and our ability to will changes in existing arrangements. All of these presuppose institutions that make our relationships more peaceful...

I think that Smith was appropriated in the 19th ctry "Classical economics" in ways that Smith would not have approved of. Roger Backhouse in his "The ordinary business of life" suggests that Smith's system would have been seen by his fellow Scottish Common Sense Realists as presupposing a just distribution of resources, such as was attenuated seriously during the 19th ctry in England.

""Smith's contribution was in articulating the relationship between many key variables that had been emerging in Europe over the previous centuries and creating a rudimentary model that helped frame analysis."
-sounds like what I said above, of course, the caveats mentioned above also still matter greatly... ;) The "Christian" milieu that Smith wrote from was one that was damaged by the horrors of the 30 years war and its after-effects when Christianity did practically-speaking get subverted into an opiate for the masses in much of Europe.

dlw

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