The economist and the preacher

There exists in every human breast an inevitable state of tension between the aggressive and acquisitive instincts and the instincts of benevolence and self-sacrifice. It is for the preacher, lay or clerical, to inculcate the duty of subordinating the former to the latter. It is the humbler, and often invidious, role of the economist to help, so far as he can, in reducing the preacher’s task to manageable dimensions. It is his function to emit a warning bark if he sees courses of action being advocated or pursued which will increase unnecessarily the inevitable tension between self-interest and public duty; and to wag his tail in approval of courses of action which will tend to keep the tension low and tolerable.

That’s Dennis Robertson, in a much-cited passage that I (like I assume many people) first read in ‘The Calculus of Consent’.  I think this is a fantastic passage, which really sums up a lot of what’s good and important about economics as a social science.  ‘Homo economicus’ – that rationally self-interested meagre shadow of a vision of the human animal – provides a salutary check against institutional structures that rely too heavily on non-self-interested behaviour from their inhabitants.

But what about the “preacher” side of this quote?  Do we have nothing to say about the behaviours of the human animal that break with ‘homo economicus’?  Isn’t there a danger that, in neglecting other elements of human behaviour, economists’ proposals and analyses will miss essential components of even those “incentive-compatible” institutions which rely for their primary motive force on rational self-interest?

I think the three-tiered analysis of the motive structures of human behaviour that I’ve recently been outlining goes some way towards addressing this category of worry.  On that approach, the ‘homo economicus’ framework resides on the ‘middle’ of the three analytic tiers: straightforward individual-level preference functions.  But ‘above’ and ‘below’ this level of analysis are two additional analytic tiers, which can greatly complicate our understanding of the motive structure of the human animal.  At the ‘social’ level, there is the desire to enjoy the approbation and escape the disapprobation of one’s peers.  And at the ‘sub-individual’ level there are the potentially conflictual subcomponents of the psyche, as (for example) analysed by Freud.

Because this three-tiered analysis can, if we wish, be articulated in rational choice terms, this approach does not necessarily take us outside the space of the economist’s analytic toolkit.  Specifically, it keeps us within the domain of one of the discipline’s central analytic principles: people respond to incentives.  When we move between analytic tiers, we are shifting our focus from one category of incentive to another – but we are still working within a framework that can be understood in incentive-compatibility terms.

This in turn allows us to think about what “the task of the preacher” amounts to, at least from this perspective.  In terms of the social level of analysis, the task of the ‘preacher’ is to institute a culture of moral approbation and disapprobation that itself incentives the “right” behaviour.  And I think this is a pretty useful (albeit, yes, perhaps slightly crass or reductionist) way to think about ethical communities.  It’s not the case (contra some cynics) that people only behave well because they fear the negative judgements of their peers, but the negative (and positive) judgements of peers clearly do function as a substantial set of incentives in shaping behaviour – a community that rewards good behaviour with approbation and bad behaviour with disapprobation will tend to encourage more good and less bad behaviour than a community of which the reverse is true.  (Of course, what counts as ‘good’ and ‘bad’ behaviour is a vastly contentious matter, but that’s not the point here.)

What about the ‘sub-individual’ level – the level of the internal subcomponents and dynamics of the individual psyche?  Here, too, we can think in terms of incentives: the interaction of the different subcomponents of the psyche involves internal praise and blame, internal gratifications and distress.  Here, too, then, we can think (perhaps with a little straining of terminology) in terms of the construction of an ‘incentive structure’ – the internal incentive structure of the psyche’s gratifications.  And the formation of this internal ‘incentive structure’ is another way of thinking about the formation of character.  (More on this, hopefully, soon.)

So if we want to we can extend the concept of ‘incentive compatibility’ to character-formation and the ethical dynamics of a community.  Of course, we need to keep straight which sense of ‘incentive compatibility’ we’re talking about – and we need to remember that this is just one way of thinking about these phenomena, and not invariably the most productive one.  Still, I find it helpful.  Thinking about things in this way also allows us to retain (what I regard as) the core insight of the Robertson quote, without committing ourselves to all the baggage that comes with a generative distinction between aggressive/acquisitive versus benevolent/self-sacrificing instincts within the human psyche.  Rather, that distinction can be folded into and generated out of a larger story about the moral economy of our motives and behaviour.

In this next post in this series, I want to return to the issue of character-formation, and talk a little about the distinction between habits and decisions.