E.K. Hunt on Rationalistic Subjectivism, part 1
eqwq.lrogers at state.ut.us
Mon Feb 12 09:34:08 MST 1996
E.K.Hunt 1992 _History of Economic Thought: a critical perspective_
Ch.6 Rationalistic Subjectivism: The Economics of Bentham, Say, and
Summary by Lisa Rogers
[begin part 1 / 3]
Capitalist commodity production necessarily involved certain
socioeconomic institutions, modes of human behavior, and human
self-perceptions as well as perceptions of others. Specialization
increase social interdependence, but this was experienced as
individual dependence on the market. Market forces were seen as
natural, immutable laws, by both capitalists and workers.
Social Origins of the Premises of Utility Theory
The human consequences of competitive markets under capitalism were
generally thought to be the general human condition in all human
societies forever. In this book, Hunt stresses the distinction
between the LTV (the production perspective ) and the Utility TV (the
market perspective) in the analysis of capitalism. The foundation of
the utility theory are 1. awareness of the human condition (under
capitalism) and 2. the universal projection of these conditions as
Five features of capitalism as seen by the utility theorists:
1. The specialization of labor causes people to see themselves as
isolated, independent, atomistic. Each is seen as egoistic and in
conflict with all others, and each is up against the market. This
idea can be seen in Thomas Hobbes' _Leviathan_ 1651; he believed that
all human motives were so many disguises for egoistic self-interest.
He argued that only submission to a powerful State structure and
absolute monarch could create order and social harmony. Later,
classical economists replaced the monarch with the 'invisible hand'
of the [laissez faire] market.
2. Since human nature was thought to be competitive and egoistic,
the essential source of motivation was seen as achieving pleasure and
avoiding pain. This is the belief called utilitarianism, which is
the philosophical basis of the utility theory of value and modern
3. Economic specialization created social and individual dependence
on a smoothly functioning market, i.e. since no one produced the full
range of subsistence goods, exchange was necessary. Assuming the
existence of capitalism itself, it is obvious that the market creates
"social harmony", by increasing the utility for each participant as
the result of each act of exchange. This emphasis by Bentham, Say
and Senior downplayed the class conflict evident from using the LTV,
as both Smith and Ricardo had done.
4. A prerequisite for productive specialization was the accumulation
of fixed capital, but increased production of capital must reduce the
production of consumption goods. Who will give up that consumption?
It is trivially obvious that the direct cost of industrialization was
financed by profits. However, the historical evidence available
makes it clear that through the period of English industrialization
real wages declined in relation to profits. Therefore, the real
social costs of industrialization were paid by the working class. It
can only appear that the capitalists paid that cost of foregone
consumption if the capitalist system and the market determination of
wages and profits is taken for granted, as natural and just.
Theorists in the social harmony, or utility, tradition have always
take the class distribution of income for granted, and therefore
morally justify profits on the basis of the sacrifices made by
5. As the market system developed, the intensity of competition
among capitalists increased. Efforts at calculated, rational,
predictable control over the process increased. Accounting,
property, contract and commercial laws developed. This was necessary
within capitalism, but such strategizing came to be seen as the core
of all human decision-making, but in calculating not just profit, but
Jermy Bentham on Utility
His career and influence as a social theorist spanned 1770 to 1832.
Most important was _And Introduction to the Principles of Morals and
Legislation_ 1780. Written before he turned to economic specifics,
it contains an elaborate statement of the utilitarian social
philosophy which became the basis of neoclassical economics.
He asserted that all human behavior is based on a single principle:
the desire to maximize one's utility.
"By utility is meant that property in any object, whereby it tends
to produce benefit, advantage, pleasure, good or happiness (all this
in the present case comes tho the same thing), or (what comes again
to the same thing) to prevent the happening of mischief, pain, evil
or unhappiness to the party whose interest is considered."
"In the general tenor of life, in every human breast, self-regarding
interest is predominant over all other interests put
together...Self-preference has place everywhere."
"Aversion is the emotion - the only emotion - with *labour* taken by
itself, is qualified to produce... In so far as *labour* is taken in
its proper sense, *love of labour* is a contradiction in terms."
Therefore, labor would only be done if some other promised pleasure
or threatened pain was attached to it.
Bentham insisted that utility was responsible for exchange value, and
came very close to explicitly developing the principle of *marginal*
utility, which later became the cornerstone of neoclassical
economics. He also foreshadowed a major split within orthodox
utility theory, laissez-faire vs. government intervention
Bentham as a Social Reformer Early Bentham advocated complete
laissez-faire, saying that there was nothing government could do to
increase aggregate production. He agreed with the predominant view
that aggregate supply would always equal aggregate demand in a free
market. All Saving was automatically converted into more capital to
employ more labor, so there would never be a depression or any
involuntary unemployment. By 1801, he changed his mind.
He came to see, like Malthus, that saving might not be matched by new
investment, so that production would decrease, unemployment increase,
and the free market would not be serving the public very well. Also,
he wanted to reduce the enormous income inequality between rich and
poor. He believed in a diminishing marginal utility of money,
therefore, a given amount taken from the rich would cause only a
little pain, and the same amount given to the poor would cause a
great deal of pleasure, thus increasing aggregate social utility.
He failed to note that this would require an impartial government.
By his own theory, legislators were all self-interested, and since
they were also wealthy, they were not likely to promote the interests
of the poor at their own expense.
[end part 1 / 3]
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