School of Economic Science Annual Economics Lecture 28th February, 2014
Dr Peter Bowman, was Head of Economics, School of Philosophy and Economic Science
The annual economics lecture is an opportunity to review what has taken place in the economics faculty of the School over the last year and to reflect on what has been learnt. One of the highlights of the last year was the receipt by the School of an Award from the Globalisation for the Common Good Initiative led by Professor Kamran Mofid. (see here) This award was for services to society in the interest of the Common Good. The Award was presented at a Conference in Paris last September for which the theme had been the Common Good. Those who attended the Annual Lecture last year may remember that it this idea was referred to but not fully expounded on.
It had occurred to me during the Paris Conference that this was rather an important concept and one that was worthy of fuller consideration. It is not that there is any intention that the overall direction of our path here in the Economics Faculty of the School should change from that of pursuing Economics with justice but rather that a fuller understanding of the Common Good will assist with the appreciation of the need for Economics with Justice.
During the Paris Conference there were a number of presentations, mostly of a practical nature, on the theme of social entrepreneurship. This is where the primary motivation of a business is to meet a real need in society and the motive of private gain is secondary. This gave the impression that there is a significant practical appreciation of the sense what the Common Good on the Gallic side of the English Channel but there is also a growing interest in social entrepreneurship on this side as well.
I dare say few would deny there is such a thing as the Common Good but for many of us we may not thought about what it really means and what its significance is. So the idea this evening is not to present something new but rather to remind you of something you already know but that may have got covered over, been forgotten.
INTRODUCTION TO COMMON GOOD
So what is meant by the Common Good and what would it mean to have an economics for the Common Good? It is not the intention to define the idea and then expound upon but rather to explore the concept and in particular its relevance to economics in a more tentative way.
The idea of the Common Good is quite central to what could be called the Natural Law tradition that can be traced back to Aristotle and includes thinkers such as St Augustine and St Thomas Aquinas. In the School we have a practice when looking back at the origin of this sort of idea not to stop at Aristotle but to go back to Plato.
Here is what he has to say about this subject. This passage that follows comes from the Laws . The mysterious Athenian is offering consolation to a youth who accepts that there is such a thing as an all-powerful deity but accuses him of neglect when it comes to the detail of how the creation is run.
The ruler of the universe has ordered all things with a view to the excellence and preservation of the whole and each part, as afar as maybe, has an action and passion appropriate to it. Over these, even to the least fraction of them, ministers have been appointed to preside, who have wrought out their perfections with infinitesimal exactness. [Now to the youth] And one of the portions of the universe is thine own, unhappy man, which however little, contributes to the whole, and you do not seem to be aware that this and every other creature is for the sake of the whole, and in order that the life of the whole may be blessed; and that you are created for the sake of the whole, not the whole for the sake of you. For every physician and every skilled artist does all things for the sake of the whole, directing his efforts towards the common good, executing the part for the sake of the whole and not the whole for the sake of the part. [Plato The Laws Book IX line 903 Jowett Translation]
So here Plato gives a strong and clear sense of the whole and of the relation between the individual and the whole. It gives a very different basis for considering economics, in fact a diametrically opposite view to the self-interested utility-maximising individual, the homo economicus that has become established at the heart of conventional economic thinking. It is not the intention this evening to spend time in a critique of conventional economics. I assume that the critique has been undertaken and the conclusion is that there is a need for a fundamental re-direction of economics. The time this evening is better spent attempting to formulate that new direction.
The idea of the Common Good brings out the sense of wholeness and the sense that a natural purpose of human life is to contribute to the greater good. It also implies a simple natural law that is not evident in the concept of homo economics which is that people are inherently social, we are naturally gregarious; it is natural for us to gather together in communities of varying sizes. We do not need a narrative to explain how inherently separate-feeling individuals came together to form societies, it is redundant. In Progress and Poverty Henry George quotes the stoic Roman Emperor Marcus Aurelius on this: “ We are made for co-operation. Like feet, like hands, like eyelids, like the rows of the upper and lower teeth.”
The word common in its finer sense expresses this sense of natural co-operation within a society. It is a word that comes to us from the Latin although there is parallel concept in the Old English word gemaene. The Latin etymology is helpful. The word consists of two parts. There is the prefix com– which carries the sense of together, in association. It is quite common!! Occurs frequently – in words such as combine, complete, compete, compare.
The second part munus, munia is the same root that gives us the word muni- meaning ‘ready to serve’ as in ‘municipal’. Hence the word could be taken as meaning in essence “helping each other” (Skeats). It occurs as the adjective in the names of two of the finest aspects of our culture – the Common Law and the Book of Common Prayer and also in the idea of common land.
The word develops as the noun ‘community’ – a body of people having common rights or interests and the related word ‘commune’. This is both a noun and a verb. As a verb ‘to commune’ means to converse together familiarly, to hold converse with one’s heart. From this verb comes the noun communication. This is what holds any community together and it is clear it is not something an individual can do on his or her own. The word only makes sense in terms of the whole, supporting Plato’s description. Finally, to end this etymological exploration there is the word ‘communion’ which is the name of the most essential activity that a community takes part in. [Although they have not come out of the etymology it is interesting that the sounds of the words unity and union appear in these words].
So this is the sense that we take common in and not the disparaging sense it has acquired to mean ‘ordinary’ or ‘prevalent’ and see how this gives meaning to Machiavelli’s famous dictum that it is not the individual good but the common good that makes cities great.
Having spent time looking in detail at the full meaning of the adjective ‘common’ then we should also explore the meaning of the word “good”. How can we have an economics for the common good if we are not sure what the good is? Let us again go back to Plato. In the Republic he gives the impression that even Socrates is pressed to explain what this word is about but when he is pushed it opens up a vista which few other philosophers have the power to direct us towards. Socrates begins his explanation with an analogy, that of sight. He says the sense of sight is associated with the eye as the organ of sense and the quality of visibility in the objects of sight but without a third factor, namely light, and in particular sunlight, this sense cannot work. He notes that there are other sources of light such as the moon but these are much inferior to the sun and sight works much less well with only these to support it. He then goes on from the analogy to the reality he is trying to explain.
To quote: Now the soul is like the eye; when resting upon that on which truth and being shine the soul perceives and understands and is radiant with intelligence; but when turned towards the twilight of becoming and perishing then she has opinion only and goes blinking about and is first of one opinion and then of another and seems to have no intelligence.”
He then explains: Now that which imparts truth to the known and the power of knowledge to the knower is what I would have you term the idea of the good… As in the previous instance light and sight may be truly said to be like the sun and yet not to be the sun, so in this other sphere (science) knowledge and truth may be deemed to be like the good but not the good, the good has a place of honour higher yet.
[Plato Republic Book VI line 511 Jowett translation]
To this Glaucon, the follower of Socrates who is trying to follow all this can only say with what is described as ludicrous earnestness: By the light of heaven how amazing!
What follows in the Republic is the famous allegory of the cave where Plato has another attempt to explain by analogy the nature of the good, the highest good.
The main point here for economics is this: if we equate Plato’s soul with the essence of the individual, then what he says is that just as the sense of sight can only operate if there is light so also the individual is dependent on something beyond him which Plato calls the good. The supposedly self interested homo economicus of conventional economics has his wants and desires, but they are not of his making they are shaped, for better or worse by the society in which he lives.
So having briefly turned our eyes towards the light less us descend back into the cave where, according to Plato, ordinary people are sitting chained in the darkness engrossed in shadows projected on the walls of the cave in front of them.
THE COMMON GOOD IN SOCIETY
What is the common good as it exists in society? Here I follow the philosopher John Young in his book The Natural Economy. He suggests it relates to society in three ways,
– it is desired in common,
– it is achieved in common and
– it is held in common.
So it is the end for which society exists as a whole, the method of achieving that end and the common desire. If asked what this end is, we could call it human flourishing.
In Greek the word is eudamonia which is defined as follows: “to live within an optimal range of human functioning, one that connotes goodness, generativity, growth, and resilience.” This seems quite close to the description of justice we use in our economics courses as one of “a fair portion of knowledge, health, happiness freedom and prosperity for all.
So we could see the common good as a common desire for human flourishing, as the sum total of the conditions that assist people to achieve flourishing and as the common achievement and shared participation in this flourishing.
A particular aspect of the common good is a common good. A common good is very different from a private good. A private good, think of a new car or a new outfit, has a single owner and tends to decay with use (remember Plato’s twilight world of becoming and perishing). A common good can be possessed by any number of people without diminution. Take trust or peace as examples, , they are not used up when more people share them, in fact they are enhanced. Similarly with knowledge or even better wisdom, sharing knowledge or wisdom does not use it up but enhances it.
ECONOMIC COMMON GOOD
Now let us move on to consider how the economic common good, how the idea of the common good applies to the world of the production and distribution of material wealth and the provision of services. The aim of an economics for the common good is the achievement of flourishing for society as a whole. It is not an end in itself, but a means to an end and the purpose of the economy for the common good is simply the provision of goods and services.
It was noted earlier that it is in fact natural for people to live and work together in communities and co-operate. Out of this co-operative action come three aspects of the economic common good, goods which, you remember, are commonly desired, commonly achieved and commonly possessed and are not used up by that possession.
The first of these, I will term efficiency. What this word means in a general sense is a greater output for a given input. The productive power of many people working together is many, many times greater than their efforts when working independently, for example, if engaged in individual self-sufficiency. There are a number of mechanisms that facilitate this. The first is the possibility of exchange. This enables the possibility of specialization. Each can focus on their own particular talent, on how they are best able to contribute and in return receive what they need by the process of exchange. In a just exchange both parties benefit and there is greater efficiency and well-being because of it.
If there is trust in the community then the possibilities are further enhanced because this allows for that exchange to be delayed. This is the essence of credit. It enables investment, which is essentially the accumulation of capital to enhance productive capacity. It enables projects of a vast scale such as airports, undersea tunnels, power-plants to be constructed. This efficiency is an economic common good, something that is commonly desired, commonly achieved and commonly shared and it is not diminished the more that share in it, rather it is enhanced. We can see here the possibility of a market system a financial system and the accumulation of capital that could serve the common good.
An outcome of this efficiency of production is a second economic common good which is abundance – an abundance of goods and services on offer. There is a strange contrast between the politician’s call for austerity and what we see in our supermarkets and shops, particularly those of Oxford Street and Bond Street. What we have is an abundance. The shops are full to overflowing with an incredible variety of goods and services. The more we participate the more it grows, the more that is demanded the more is supply stimulated. Each desires a moderate abundance for themselves and desires that society as a whole is well-supplied so it is commonly desired. It is achieved through the specialization and trade that co-operation enables and the harnessing of particular locations that are well-provided for a particular type of production. The abundance is commonly possessed, there is an ease with which we can achieve our wants and needs.
The third aspect of the common economic good arising from the enhanced efficiency of people working together and the abundance it produces is that it offers the possibility of freedom from economic activity. For want of a better term let us call this liberation.
Economics for the Common Good is not an end in itself it serves simply to provision society. We may contrast this with the economics built around the self-interested individual was diverted to a different end, namely that of individual gain. An outcome of this way of thinking is that the economy becomes an end in itself and attempts to become the master of society rather than the servant.
An effect of the economic co-operation of members of a society is that our basic needs can be met by the expenditure of only a small portion of our collective time, leaving much to spare for other things. This is what the idea liberation is intended to convey. It is not freedom from having to work; it would include recreation but more importantly it offers the opportunity to satisfy our higher needs. As a society expands a growing proportion of the population is able to be supported in non-productive activities, such as music, theatre, art, sport or the pursuit of philosophy. The direction taken depends on the culture. For example in Medieval times this surplus time was used in the building of cathedrals and undertaking of pilgrimages. In late twentieth century America it was devoted to space exploration and putting a man on the moon. This liberation is commonly desired since there are needs to be satisfied that are shared by us all. It is commonly achieved through our greater co-operative efficiency and it is shared by the society as a whole.
What has been presented is a very positive and hopeful view of how an economy can work for the common good. As I am sure many of you are aware what we find in present circumstances is that although there is an abundance potentially available for all, in practice many are excluded from access to it and although there is plenty of opportunity available to spend time transcending economic activity again in reality many are excluded and forced to spend most of their waking hours working to meet basis requirements. At the same time many others appear to take much more than fair share and what they extract from the economy greatly exceeds their contribution. In a word, overlaid on the natural system there is injustice. The point I have been trying to make is that this is not a natural condition it is not inevitable or inherent in a free trading market economy. When we see that enormous possibilities that economics for the common good offers it may serve to illuminate the extent of the injustice
ACCESS TO LAND
Some of the causes of these injustices are deep-seated and we have grown so used to them that they appear to have become part of the natural order of things. They have come about by a combination of historical, social and economic circumstances.
To see how this impacts on access to the common good we need to recognize another very simple natural law: in order to live and work people need a location, they need access to place. If that access is denied then their access to the benefits of the common good are also denied. If in practice that fundamentally necessary access only comes at a price paid to someone else then the advantages of the common good are not shared justly but are diverted to benefit those who have acquired the privilege of granting access.
Rather than dwelling on this issue as a matter of economic theory I will prefer to look at this historically. In the Summer at our annual Conference we spent some time looking at the Great Land Enclosure. (see here)
It has a particular relevance to the subject of this lecture if one takes as an aspect of the common good the provision of nature, but in practice this is only a part of the common good if there is free access to it. This used to happen when there was common land.
THE GREAT ENCLOSURES
The events we studied were what are now known as the great land enclosures. The enclosures took place in Britain between 1760 and 1832. This was essentially the privatization of the land of large parts rural England during that period. The consequence of this move was that access to land was denied to a considerable part of the rural population with a devastating disruption of not just individual lives but whole communities. It is a not well-documented chapter of our history and the voice of those most directly affected as gone almost unheard, on exception being the poetry of John Clare.
The middle of the eighteenth century was a time of great technological change and those changes were impinging on agriculture as well as industrial production. At that time a significant proportion of agricultural land was common land, the commons, in fact in Scotland the term common good land was used. In a rural community the villagers would have access to it, usually governed by traditional regulations. This meant they could pasture their cattle, sheep and geese and had access to woodland for fuel for fires for heating and cooking. In addition they would have gleaning rights, giving them access to the fields after harvest to pick up any left over corn. If we include the cottage industries of spinning and weaving we see that everyone had a considerable degree of independence and self-reliance. Although most villagers would spend some time working for the larger farmers no-one was totally dependent on wages. Even the least well off would have a plot where they could grow their own vegetables. In addition there was a stratification of the society from the newly arrived squatters at the bottom to the lord of the manor at the top. This provided plenty of opportunity for anyone who wanted to work hard to better themselves. There was a ladder of opportunity with a set of accessible rungs.
The enclosures removed all this. The common land was taken into private ownership and fenced off. Deprived of access the villagers were reduced to dependence either on agricultural wages or the social provision of the parish for their income whilst at the same time becoming dependent on the merchants for all their food and basic necessities.
Instead access to the extensive bounty of nature in its simple but provident forms of pasture and woodland was denied to the great majority of the population and concentrated in the hands of a powerful and privileged few.
The great irony of this large-scale appropriation of land was that it was brought about not through violence or lawless coercion but by the capture of the legislative process. All these enclosures came about through Acts of Parliament. Over the period from 1766 to 1844 some 3883 separate Acts of Parliament led to the enclosure of over 5.7 million acres of common fields and waste land.
Behind the enclosures there was a spectrum of motives. In some cases there was a genuine interest to improve the efficiency of agriculture by introducing the new scientific methods such as crop rotation and increased mechanisation. At the other extreme there is quite convincing evidence from contemporary records that in at least one instance the primary motive was to raise funds to pay off gambling debts. It was certainly the case that behind this range of motives was an almost irresistible urge on the behalf of landowners to increase the monetary rent they could receive from agricultural land at the expense of their tenants.
The effect of these enclosures on village life was highly destructive. Deprived of access to the commons labourers became totally dependent on agricultural wages for income and on retailing merchants for their provisions. The government of the day resisted calls for a minimum wage. The economic law that when all land is enclosed wages are driven down to the least people are willing to accept was played out with a vengeance. In the absence of government intervention an ad hoc welfare system implemented at the parish level (Speenhamland) came in to play. A formula for the value of a minimum income was worked out on the basis of family size and the price of bread. Farmers, knowing that the parish would make up the difference only forced down wages still further.
The effects were cruel. Many died of starvation. Of those who survived many were forced off the land to the rapidly growing industrial towns or took their chances with emigration.
The voice of john Clare is one of the few that communicated the plight of these people. The process largely took place in silence.
Inclosure came and trampled on the grave
Of labour’s rights and left the poor a slave
And memory’s pride ere want to wealth did bow
Is both the shadow and the substance now
om ‘The More’ 1825 in John Clare:Voice of Freedom R.S. Attack
OUTCOME OF ENCLOSURES
It is not possible to turn the clock back. There was a certain inevitability about the way farming methods had to change at the time of the industrial revolution but it was clear from our study that it did not need to have happened in a way which impoverished so many and enriched so few. What is clear from this cruel episode is deep divisions in society an almost complete absence of a sense of the common good.
This episode laid the foundations on which were built what is often referred to as the free market capitalist system. Britain’s immense colonial expansion around this time meant that the system of privately owned land spread widely across the globe often displacing long established systems of the indigenous population based on traditional wisdom.
The development of the industrial cities on the basis of privately owned land promulgated injustices as great as those meted out on rural lands. The consequence is that access to the economic common good – the benefits of the great efficiency of production, the abundance of goods and services and the possibilities for leisure are not freely available to all are not justly shared but tend to be concentrated in the hands of a few.
We should not deny that the present situation today has become highly complex. Two further storeys have been added to the foundation of enclosed, privatized land.
The first is the layer of state-centred provision. The response to the worst effects of exploitive industrialisation which the land enclosures had promoted was the rise of socialism. Although this was successful in ameliorating the worst effects of the injustice it avoided addressing the underlying causes. Charity is a poor substitute for justice. The way it was implemented has led to large highly centralized state bureaucracy which expropriates almost half the wealth a country produces and attempts to redistribute it in a cumbersome way, which is ripe for exploitation by the rich and leaves a heavy burden of tax on the productive part of the economy. Freedom is replaced by dependency.
Secondly came the unleashing of an unregulated financial system removed from any state control. This has further facilitated a diversion of the wealth, the effect of the co-operative efforts into the hands of a few.
ECONOMIC JUSTICE – CONCLUSION
The path to economic justice is not a simple one. Such is the complexity of our economic and social arrangements, there is no quick fix. I have concentrated this evening not on policy suggestions but in the underlying issues and in particular focused on the underlying ideas, in the hope that a change of heart will produce a change of direction.
Keynes wrote: the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.
The notion of the common good gives an alternative focus to economic consideration to that of the self-interested individual. Justice is in accord with what is in the interest of the common good. The idea gives a reference to judge the validity of a particular policy: is this actually in the interest of the common good?
That is why I encourage you to reflect on the notion of the common good, to make it real for you, to rejuvenate it so that it can provide a basis for economic thinking and replace the idea of the self-interested individual which is now passed its sell-by date.