A Critique of the Neoliberal Concept of the Homo
Economicus from the Perspective of Ubuntu Philosophy
MSc Thesis
Written by: Jonasz Dekkers
12023310
Under the supervision of: Dr Annette Freyberg-Inan
Second reader: Dr Michael O. Eze MSc in Political Theory
Graduate School of Social Sciences (GSSS) University of Amsterdam
Preface
I have decided to write my thesis on ubuntu philosophy, since I have read a lot about it during the past year and I got more and more excited about its message, its convictions and its main principles. Especially the principle of ‘not existing without others’ caught my attention and intrigued me to delve into the philosophy academically. The intrinsic outward intentionality of ubuntu towards others, captured in the expression ‘I am, because you are’, fascinates me. This is because it is an attitude diametrically opposed to our Western individualist tendencies. All of my academic ‘career’ I have been interested in non-western social theories and have I been critical of the Eurocentric outlook of the courses at the universities at which I attended my classes. Therefore, I am very happy that the University of Amsterdam is more responsive to a non-western take on political theory. Moreover, it humbles me that Michael Eze works here – an expert on the topic – and that he agreed to be the second reader to my thesis. Furthermore, I want to thank my supervisor, Anette Freyberg-Inan for her invaluable help, without which I could have never written this thesis. Next to her, I want to thank my family and my girlfriend for their support and valuable input. Lastly, I would like to thank a dear friend of mine, with whom I have spent countless hours writing our theses together. You know who you are.
Abstract
This thesis is concerned with criticising the neoliberal view of human nature, as captured in the concept of the Homo Economicus (the ‘HE’), from the perspective of the traditional African philosophy of ubuntu. It does this primarily through a critical analysis of how the HE has come to inform the dominant ‘mode of subjectivity’ in neoliberalism (not as ideology, but as system of beliefs) and its consequences. In this thesis, these consequences are related to the guiding principles that western societies have invoked to address two of humanity’s crises: anthropogenic climate change and ever-growing inequality of wealth. These principles are inadequate and cannot serve the purpose of tackling the crises, because they are
predominantly neoliberal in nature. To achieve the purpose of providing a profound critique, this thesis juxtaposes the neoliberal HE with the view of human nature in the philosophy of Ubuntu: the Human with Ubuntu. This is relevant because in times when the dominant worldview in the West is neoliberalism, an inquiry into the view of human nature central to this system of beliefs is required, to be able to constructively think about the way forward. Moreover, there exists a gap in the literature regarding the African contribution to the global ethical project, compared to the Asian and South-American contribution. This thesis argues that the neoliberal system of thought ‘bumps’ into a ‘glass ceiling’ constructed by its
individualism, self-interestedness, competitiveness and rational maximization of utility. The main consequences of the HE as dominant mode of subjectivity are that non-economic social relations are expressed in economic terms, rationality is conceptually not necessarily attached to morality, the pursuit of wealth (money-making) has become the ultimate value and the human has lost its claim to be the ultimate value: the implicit anthropology of subjects is radically altered into being the HE, making neoliberalism function as a regime of truth. This thesis argues that, to break through this ceiling, invoking principles of ubuntu philosophy is necessary. It arrives at this conclusion by first laying out the history of the Homo
Economicus, how it became the dominant mode of subjectivity and by an explanation of its main dispositions (rationality, self-interestedness and individualism). Similarly, ubuntu philosophy will be explained by providing an overview of its history, an etymology of the term and a thorough elaboration on its main elements and principles. It will become evident that ubuntu is a philosophy to be practiced and is built on values of cooperation, reciprocity, dignity, respect, humanness, and dialogue. Important elements are the community, the other, inter-subjectivity, dialogical morality and cosmic harmony. ‘I am, because you are.’
Table of contents
Chapter 1 Introduction ... 1
Chapter 2 The Homo Economicus ... 7
2.1 The Homo Economicus in the 18th, 19th and 20th Century ... 7
2.1.1 Adam Smith ... 9
2.1.2 John Stuart Mill ... 11
2.1.3 Vilfredo Pareto and John K. Ingram ... 14
2.1.4 Milton Friedman and Paul Krugman ... 17
2.2 Rationality ... 20
2.3 Individualism and self-interest ... 24
2.3.1 Individualism ... 25
2.3.2 Self-interest ... 29
2.3.3 Possessive individualism ... 32
2.4 The Homo Economicus as mode of subjectivity ... 34
2.5 Conclusion ... 40
Chapter 3 Ubuntu philosophy ... 42
3.1 Introduction ... 42
3.2 Etymology and general explanation ... 43
3.2.1 History of ubuntu ... 44
3.2.2 Etymology of the term 'ubuntu' ... 46
3.2.3 Explanation of the philosophy ... 48
3.2.4 Contemporary debate on ubuntu ... 55
3.3 Ubuntu ethics and the (moral) role of the community ... 60
3.4 Conclusion ... 66
Chapter 4 Critique of the Homo Economicus ... 67
4.1 Comparing the Homo Economicus and the Human with Ubuntu ... 68
4.1.1 View of human nature, ontology and epistemology ... 69
4.1.2 Subjectivity and social relations ... 70
4.1.3 Rationality and morality ... 75
4.1.4 Moral obligations ... 78
4.1.5 Perception of the community ... 80
4.2 Implications ... 83
4.2.1 Money as ultimate value and its consequences ... 84
4.2.2 Climate change and environmental destruction ... 86
4.2.3 Inequality and exploitation ... 89
4.2.4 The 'glass ceiling' of neoliberalism ... 90
4.2.5 The socio-political 'modus operandi': from conflict to harmony ... 91
Chapter 5 Conclusion ... 93
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Chapter 1: Introduction
In contemporary times, humanity is facing multiple crises at once. We are at the advent of a climate crisis caused by anthropogenic climate change, and inequality of material wealth has reached historical proportions (Watts, 2018; Elliot: 2019). According to a report of the United Nations Intergovernmental Panel on Climate Change (IPCC), the climate will warm up by 1.5 degrees Celsius within eleven years (Watts, 2018). A mere two degrees Celsius warming of the climate would cause extreme drought, climate related poverty, food scarcity and, moreover, biodiversity would decrease at a tremendous pace, with for instance a 99 percent loss of the world’s corals.
Next to the climate crisis, income has never been more concentrated and unequally distributed amongst the population worldwide. According to a report of the charity Oxfam, during the last couple of years, the wealthy have grown extensively wealthier and the poor have grown poorer. This has resulted in the staggering fact that 26 people now own as much as the poorest 3.8 billion people on earth (Elliot, 2019). As the director of Oxfam, Matthew Spencer, puts it: ‘the massive fall in the number of people living in extreme poverty is one of the greatest achievements of the past quarter of a century but rising inequality is jeopardising further progress’ (Spencer, 2018, as cited in Elliot, 2019).
The inadequacy of societies to effectively deal with climate change and the increase of inequality is evident. Since the 1992 Rio de Janeiro earth summit, where leaders of the world met to discuss how to deal with anthropogenic climate change, the climate has warmed by 1 degree Celsius compared to pre-industrial levels (The Economist, 2018). Moreover, a quarter of a century later, the United States, one of the biggest polluting countries of the world, pulled out of the so-called ‘Paris Agreement’ (Halper & Zavis, 2017). According to the United Nations Framework Convention on Climate Change in 2016, almost every country in the world agreed in Paris to try and keep the rise of temperature at a maximum of 2 degrees Celsius before the end of this century, while ambitiously pursuing the ideal to keep it below 1.5 degrees (UNFCCC, 2018). As this limit will most probably be reached by 2030 already, current efforts to keep the climate from warming to catastrophic proportions are turning out to be insufficient, to say the least.
Humanity has all but destroyed the basis for its own survival, as it has damaged the earth to the brink of irreversibility and caused inequality of wealth to reach historical proportions. With stagnating further progress and a climate crisis in prospect, humanity is in any case on the verge of radical alterations to the human condition on earth, with far-reaching consequences for
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social, political and ethical domains. The ineffective responses of developed countries to these crises have been predominantly neoliberal in nature, meaning that they hold on to a firm belief in free market forces of supply and demand to ‘naturally’ solve these problems (Andrew, Kaidonis, & Andrew, 2010). Neoliberalism as a practice has been a much-contested concept in the literature, but by common consent neoliberalism is an ideology, most dominantly coloured by the conviction that forces of the market must rule the economy and be largely free from governmental interference. The government must serve solely as a guardian of the functioning of this free market. As Harvey (2005, as cited in Andrew, Kaidonis, & Andrew, 2010: 612) puts it, when discussing the role of the state in neoliberalism: ‘(t)he role of the state is to create and preserve an institutional framework characterized by strong private property rights, free markets, and free trade.’
However, in this thesis, following Michel Foucault in The Birth of Biopolitics (2008), the term neoliberalism stands not necessarily for an ideology, but rather for a system of beliefs. Foucault argues that neoliberalism is expressed through implemented policies and as a ‘a way of doing things’ (Foucault, 2008: 318). As such, neoliberal logic holds at its core a firm belief in the regulatory force of free market relationships of supply and demand. Moreover, this logic has instigated an extension of the economic domain to the social domain, causing originally non-economic relations to be expressed in economic terms.1 As a part of and supporting this process, Western societies have witnessed the construction of a particular view of human nature by creating a certain mode of subjectivity, which over the years since the Second World War has become the predominant mode in the West, according to Foucault. This view of human nature is man as the Homo Economicus (hereafter abbreviated as the ‘HE’).
The HE has a theoretical history that goes back to Adam Smith and his famous Inquiry Into the Nature and Causes of the Wealth of Nations (1776). Throughout his history,2 the HE has been conceptualised as an abstraction of human character, methodologically useful for predicting economic behaviour more accurately. Man as the HE is perceived as an economic agent who acts rationally, according to the doctrine of instrumental rationality and the principle of maximization of utility. Moreover, the HE acts out of self-interest, based on a methodologically and possessively individualist conception of social reality, meaning that he
1 This definition of neoliberalism might strike one as rather bluntly stated, but an elaborate account of it will be
provided in chapter 2.
2 In this thesis, I will treat the HE as a male (a ‘he’), since that reads more easily than ‘he/she’, or ‘one’ and
relates suitably to the abbreviation. Moreover, when the concept was conceptualised in the seventeenth century, the era of Adam Smith, females were not considered an important part of political economy, nor of any other social or economic domain, for that matter. This hints already at a possible inequality inherent to the concept.
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owns himself and is responsible for himself only. The HE is a competitive being, presupposing inequality to be the basis of economic interactions and, with the extension of the economic domain to the non-economic, also the basis of social interactions.
What does the construction of this mode of subjectivity as the HE entail? I argue that the perception of social reality as possessively individualistic has caused a profound forgetfulness of the other. It has altered the way people make themselves and are being made subjects: it has altered the ‘implicit anthropology’ of humans in neoliberalism (Read, 2009: 32). This is such a radical alteration of subjectivity, that, according to Foucault, the neoliberal subject perceives the logic of free market forces (and with it, capitalism), in which he is fully immersed, as synonymous with reality, causing neoliberalism to function as a regime of truth. This effect has constructed a ‘glass ceiling’ of neoliberalism, as its logic and main character (the HE) seem unable to adequately address the identified crises.
In times when the dominant worldview in the West is neoliberalism (Foucault, 2008; Read, 2009), an inquiry into the view of human nature central to this system of beliefs is required, to be able to constructively think about the way forward. In turn, this system of beliefs and its view of human nature must be criticised; its fundamental flaws must come to the front, in order to break through the glass ceiling of neoliberalism. However, in this thesis, I will not go into the causes of these crises and whether or not neoliberalism is ‘to blame’, but, more importantly, I will show that the neoliberal view of human nature as captured in the concept of the Homo Economicus is untenable, by criticising the concept from the perspective of the traditional African philosophy of ubuntu. Therefore, the research question of this thesis is as follows: how can the neoliberal view of human nature (as captured in the concept of the Homo Economicus) and its societal implications, be criticised from the perspective of the traditional African philosophy of ubuntu?
In short, the core of ubuntu philosophy is best captured in the maxim ‘I am because we are, and since we are, therefore I am’ (John Mbiti, 1970, as cited in Menkiti, 1984: 171). Ubuntu is a South-African concept and stems from the saying umuntu ngumuntu ngabantu, which could roughly be translated as ‘a person is a person through other persons’ (i.e. Lotha & Young, 2000; Van Norren, 2014). Subjectivity in ubuntu philosophy is inherently ‘otherness-dependent’ (Eze, 2012: 251). Ubuntu ethics is oriented towards the other, with the notion of embeddedness in the community central to its morality, which is dialogically deliberated upon. Ubuntu ethics champions respectful and dignified interrelationships with others and non-human nature, with an ontological need to maintain ‘cosmic harmony’ (Ramose, 1999/2017).
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In this thesis, I will show that neoliberalism’s concept of human nature is unable to address humanity’s crises, and I will provide an alternative mode of subjectivity to the HE: the Human with Ubuntu. Being a fully rational agent and acting according to the principle of maximizing utility, the HE seems to champion rationality over morality to reach the desired end.3 I argue that, for the HE, the ultimate value to which morality must yield is the pursuit of monetary wealth. Therefore, my aim extends to replacing money as the ultimate value with the human as the ultimate value, by invoking the reasoning of ubuntu philosophy. This will be done with the goal in mind of dislodging the idea that neoliberalism and, with it, capitalism, are synonymous with reality and reason. I argue that a recognition of elements of the innovative, non-western approach of ubuntu philosophy can alter this perception. This would demand a reconstruction of the dominant mode of subjectivity from the Homo Economicus to the Human with Ubuntu. With this, I aim to make constructive suggestions to unravel the social and the economic, make ethics primary over the economic, and turn subjective intentionality away from a pure focus on the self and more towards others.
The societal relevance of this thesis is that it gets at the root of issues such as the current climate and material inequality crises, which neoliberalism seems unable to successfully accomplish. To sum up this thesis’ societal relevance succinctly, I want to cite Ya-Mona (2003: 387):
‘[W]hen trying to look at the relation between the ethical and the economic order, our main preoccupation is to try and show that, given the ambiguity of the exercise of economic activity, which can enslave people as well as liberate them, it is important for the ‘economic circuit’ to be ordered and directed from the start by ethics in a direction corresponding to human dignity.’
Furthermore, critically evaluating the dominant subject in neoliberalism will get to the root of these issues, because he represents the ways in which pervasive neoliberal logic seeps through the cracks of daily human conduct and interactions, making its way to form such a radical mode of subjectivity that neoliberal logic becomes synonymous with ‘truth’ and the only possible logic. The fundamental functioning of the economic rationale in the social
3 Citation from chapter 2.2: ‘This thesis appears to threaten the “rational authority” of morality. It seems possible
that acting morally on some occasion might not be a suitable means to an agent’s ends. If so, then according to this thesis, it would not be irrational for her to refuse to act morally on such an occasion’ (Kolodny & Brunero, 2018).
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domain has becomes virtually invisible, causing neoliberal individualism and self-interest to strike one as being a natural characteristic of human conduct. By looking at neoliberalism’s main character, I aim to get at the root of the system of beliefs, of its ‘way of doing things.’ Moreover, a genuine appreciation of elements of ubuntu philosophy, ethics and consequently, its subjectivity, will add to the ambitious enterprise of moving forward, through the glass ceiling and towards a more sustainable, inclusive and dignified human condition on earth.
The academic relevance of this thesis lies in further in helping to fill the gap in the literature regarding the African contribution to (global) ethics, compared to the Latin-American (Buen Vivir) and Asian (Mindfulness and Happiness) contributions, which have been more often addressed (Van Norren, 2014: 246). This is because the stated crises
transcend borders and must thus be addressed on an international scale. As Ban Ki-Moon, ex-attorney general of the UN, has stated in Time Magazine: ‘climate change respects no
borders; our actions must transcend all frontiers’ (2018). To deliver on this global task, a better inclusion of African ethics must be achieved. This is all the more urgent since, being tightly linked to global capitalism, neoliberalism is taking over more and more societies, including non-western countries.
‘Ubuntu can inform the development debate in terms of what measures are important and above all what processes are required. Moreover, it can emphasize the
interrelationship of the current goals. This is not merely window-dressing, but a fundamental reshaping of our thinking, where market competition is complemented by cooperation; and where acting out of ‘self-interest’ is balanced by the notion of ‘not existing without the other’ (Van Norren, 2014: 246).
Furthermore, critically juxtaposing the concept of the HE with the subject in ubuntu philosophy has not yet been done, explicitly. Comparisons between the African worldview and the Western worldview have been made,4 but it is important to grasp in what ways these worldviews come to inform their subjects, and how this in turn influences social interactions. By looking at the dominant views of human nature and their social, economic and ecological consequences in both neoliberalism and ubuntu, I can thoroughly and critically examine their modes of subjectivity and the social domains they shape.
4 For a comprehensive summary of the main differences, consult B. J. van der Walt (2006: 126, as cited in
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To achieve the purposes of this thesis, its structure will be as follows. First, I will lay out the history of the HE (2.1). After this, I will state what it means that the HE is a rational being (2.2), by expanding on the notions of practical/instrumental rationality, rational decision theory and maximization of utility. Thereafter, in section 2.3, I will elaborate on the HE’s individualism and self-interestedness. Within this subchapter, I will delve into the notion of (methodological) individualism using the works of Friedrich Hayek. Furthermore, I will explain how self-interest became the spirit of our capitalist time and a core trait of human nature, using the writings of Albert Hirschman. To finish this subchapter, I will expand on C. B. Macpherson’s notion of possessive individualism. In subchapter 2.4, I will go into
neoliberalism and how it made the HE the dominant mode of subjectivity, relying on Michel Foucault. In this section, I will lay out the consequences of HE’s dominance, among which the extension of the economic domain to the social and the HE conception as a ‘company of one.’
In chapter 3, I will treat the (rather short) written history and etymology of ubuntu (3.1), after which I will thoroughly explain the philosophy (3.2). Within this section, I will delve into the concepts of be-ing, the community, the other, personhood, relational ontology and the notion of otherness-dependent subjectivity. In section 3.3, I will write about ubuntu ethics, the (moral) role of the community and moral obligations. It will become evident that ubuntu is a philosophy to be practiced and shows a ‘capacity to express compassion,
reciprocity, dignity, humanity and mutuality in the interests of building and maintaining communities with justice and mutual caring’ (Khomba, 2011: 127-128).
Finally, in chapter 4, the main differences between the two worldviews and views of human nature in neoliberalism (HE) and ubuntu philosophy (Human with Ubuntu, HwU) will be set out. This will be done by elaborating on, in order of presentation: their view of human nature; ontology and epistemology; subjectivity; rationality and morality; and their
conceptualization of the community. There, I will draw my descriptive conclusions regarding the differences between the HE and the HwU. After this, in section 4.2, I sketch the negative implications of the HE as dominant mode of subjectivity: money as the ultimate value,
climate change, inequality and exploitation. By invoking the metaphorical notion of the ‘glass ceiling’ of neoliberalism as a heuristic device, I will criticise these implications from an ubuntu perspective. There, I will draw my normative conclusions.
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Chapter 2: The Homo Economicus
In this chapter, the concept of the Homo Economicus (the HE) will be explained. The chapter will commence with a subchapter on the history of the HE since the eighteenth century. This subchapter will open with an introductory paragraph, followed by a disquisition on the conceptualisations of the HE by Adam Smith, John S. Mill, Vilfredo Pareto, John K. Ingram, Milton Friedman, and Paul Krugman, respectively. After this, subchapter two will be on rationality, focusing on the question of what it means to be rational. This question will be answered by expanding on the predominant conceptualisations of rationality and by subchapter three, which will set out two essential concepts of the HE: individualism and self-interest. The former will be explained by looking at the works of Friedrich Hayek and C. B. Macpherson. The latter will be dealt with by explaining what ‘interest’ means in light of this thesis and how self-interest became the ‘spirit’ of our time and a predominant characteristic of man in western social and economic theory, along the lines of the writings of Albert Hirschman. Finally, in subchapter four, the ways in which the HE became the predominant mode of subjectivity in western societies will be examined. This will be done by a consultation of Michel Foucault’s The Birth of Biopolitics, followed by a concluding paragraph.
2.1 The Homo Economicus in the 18th, 19th and 20th century
Rationality is the foundation of modern economics (Hanappi-Egger, 2014: 398). Rooted in the scientific revolution and the succeeding Enlightenment, rationality as an attitude became a rebellious way to respond to oppressive monarchs and their ‘God-given’ right to rule. Represented and brought into being by famous philosophers such as David Hume (1711-1776), who argued that humans are rational social agents, able to acquire knowledge through empirical research, the idea of man as a rational being gained momentum in eighteenth century Europe. With Adam Smith (1723-1790) and his well-known proposition that humans naturally seem to be exchanging goods, rationality seeped into the ‘science’ of (political) economics (Hanappi-Egger, 2014). One of the ‘founding fathers’ of this economic science is William Stanley Jevons (1835-1882) (Frederik, 2014). He stated that economic science is based on the idea that humans strive to maximize pleasure and minimize pain, by finding ‘pleasure’ through purchasing it and aiming to balance this purchase with as little ‘pain’ as possible. This idea of rationality is at the heart of modern economics. Since this is the case, rationality is also fundamental to the concept of the HE.
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In economic science, the HE is a way of conceptualising human nature into an abstraction useful and relevant for analysing, modelling and predicting economic behaviour. According to this conceptualisation, rational economic man is characterised by an obstinate form of self-interested utility maximization. The first use of the term ‘homo economicus’ is attributed to a number of different theorists: O’Boyle (2009) attributes it to Maffeo Pantaleoni in his Prinicipii di Economia Pura (1889); Cremaschi (2010) identified Vilfredo Pareto as being the first, in his Considerazioni sui Principi Fondamentali Dell'Economia Politica Pura (1892); and Persky (1995) identified both Pareto (in his Manual from 1906) and John Kells Ingram in A History of Political Economy (1888) as the earliest to mention the term, although Ingram uses ‘economic man’ instead of the Latin term (in contrast to Pantaleoni and Pareto). According to O’Boyle (2007: 323), the concept emerged from seventeenth- and eighteenth-century individualism, whereas others deem it a relatively modern, nineteenth-century concept. Consensus of opinion tells us that one can be (more than averagely) certain that the first Latin use of the term can be attributed to critics of John Stuart Mill’s characterisation of man in political economics (O’Boyle, 2007; Persky, 1995; Tittenbrun, 2013).
Due to differences in belief about the origins and meaning of the concept of HE, it is important to first illuminate and examine the literature on its history. I will delve into it in a chronological manner. After thoroughly reviewing the literature on the HE, I decided to take the most occurring and influential writers on the HE to incorporate in this historical analysis: I will start with outlining Adam Smith’s (1776) thoughts, followed by J. S. Mill (1836), J. K. Ingram (1888), and Vilfredo Pareto (1892, 1906), to conclude with Milton Friedman’s influential Methodology of Positive Economics (1953) and a reaction on Friedman by contemporary economist Paul Krugman (2007).
To be clear, the theorists named in the following are not necessarily proponents or opponents of HE. They are chosen because in the literature on the HE they are (historically) frequently seen as the main writers on the topic. Therefore, normative claims will not be made here; I will merely describe what and why the most well-known authors on the topic have written about HE, or more generally, about the characterisation of man in economics. My normative evaluation of this characterisation will be presented in chapter four, where I will juxtapose ubuntu philosophy with the concept of the HE.
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Before the Latin term homo economicus came into being, its forerunner was prevalent in some of the most influential texts on political economy. To start with, generally accepted as being the first to write about a specific kind of man in political economy is Adam Smith in his An Inquiry Into the Nature and Causes of the Wealth of Nations (1776). I decided to take The Wealth of Nations as a starting point to analyse Smith’s view on man in political economy, since this is his (or perhaps even ‘the’) most famous book on the subject. His other works, such as The Theory of Moral Sentiments (1759), are less absolute when it comes to describing human nature. In the former, Smith seems to champion individuality as the main area of focus in politico-economic science, whereas in the latter he proposes human solidarity as being in the centre of attention (O’Boyle, 2009: 1). Compared to The Wealth of Nations, in The Theory of Moral Sentiments, Smith seems concerned with a broader conception of human nature both in and outside the realm of political economy. However, this is not necessarily problematic because Smith’s underlying conception of human nature in political economy, the area this thesis is concerned with, seems to remain constant.
As stated above, Smith seems to regard the exchange of goods as a natural human tendency. Take the following passage from The Wealth of Nations, on individual economic activity:
‘He will be more likely to prevail if he can interest their self-love in his favour, and shew them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of’ (Smith, 1776: book I, chapter II: 26-27).
From this quote, it could be derived that Smith championed self-interest within the phenomenon of exchange as an innate tendency of humans as well. Such a proposition could lead to an essentialist account of human nature as being inclined to self-interestedness:
‘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
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humanity but to their self-love, and never talk to them of our own necessities but of their advantages’ (Smith, 1776: book I, chapter II: 26-27).
Self-interest is not a bad thing or some sort of vice for Smith. Self-interest itself is neither good nor bad; those are rather the consequences of acts carried out in light of this self-interest. It is a good thing if it leads to the creation of more wealth. For instance, this happens when a tailor’s personal desire to make more money leads him to open a new factory. This factory employs dozens of workers who will consequentially earn more money than they did without their town’s new factory. With more money, the workers will buy more products in the local economy, eventually leading to an overall increase of wealth in the (local) population (Harari, 2018). This inherent self-interest in optimising one’s economic actions into being of the greatest value for only one’s own gain, is, as Smith has (in)famously proclaimed, as if one is ‘led by an invisible hand to promote an end which was no part of his intention’ (Smith, 1776: book IV, chapter II: 456). Thus, the famous idea of the invisible hand is meant to serve analogously for man’s inherent self-interest steering the course of the economy:
‘Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, indeed, and not that of the society, which he has in view. But the study of his own advantage naturally, or rather necessarily leads him to prefer that employment which is most advantageous to the society’ (Smith, 1776: book IV, chapter II: 454).
As Michel Foucault has put it, the invisible hand is the ‘correlate’ of the HE: it is the mechanism through which HE functions (Foucault, 2008: 278). That the HE pursues only his own gain without having the ‘greater benefit’ of industry in mind is a good thing, necessary even. Moreover, according to Smith, HE’s self-interest is not only a good and necessary driving force for the greater benefit, the other way around would be detrimental to the economy: ‘I have never known much good done by those who affected to trade for the publick good. It is an affectation, indeed, not very common among merchants’ (Smith, 1776: book IV, chapter II: 456). It does not even enter the minds of merchants to think about the greater good of society, which is thus not a bad thing for Smith.
All of this must be seen in light of Smith’s grander idea about how a division of labour contributes to the growing wealth of a nation (Harari, 2018). These ideas (of accumulative growth and division of labour) have become very influential and lie at the core of the ideology
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of modern capitalist economy. However, Smith also described the possible negative consequences of growing specialisation of labour: work could become too simplistic, causing workers to perform easy tasks all their lives. This would lead to stupidity, a lack of ingenuity and weak problem-solving capabilities: ‘[he] generally becomes as stupid and ignorant as it is possible for a human creature to become’ (Smith, 1776: book 5, chapter 1).
As stated, Adam Smith’s role in the story of the HE is a fundamental one, in the literal sense of the word ‘fundamental’. The idea of the HE is built upon Smith’s description of man in The Wealth of Nations, but not more than that. According to Frederik (2014), Smith would oppose the notion of a one-dimensional economic being who is merely acting out of self-interest and the need for accumulating wealth. In the opening statement of his 1759 ‘Theory of Moral Sentiments’, Smith pleads in defence of empathy:
‘How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it’ (Smith, 1759: 1).
So, although widely recognized as the founding father of modern economics, he would not have approved of the pejorative connotations that the concept of HE generally carries (in the following on J. S. Mill, there will be more on this). The honour of being the founding father of a specific characterization of man in economics is more generally attributed to another famous economic thinker: John Stuart Mill (Persky, 1995).
2.1.2 John Stuart Mill (1806-1873)
Chronologically after Adam Smith, the most influential writer about human character in political economy is John Stuart Mill. Predominantly in his essay On the Definition of Political Economy; and on the Method of Investigation Proper to It (1836):
‘[Political economy] does not treat the whole of man’s nature as modified by the social state, nor of the whole conduct of man in society. It is concerned with him solely as a being who desires to possess wealth, and who is capable of judging the comparative efficacy of means for obtaining that end’ (Mill, 1836, as cited in Persky, 1995: 223).
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This is the passage to which critics of Mill, most prominently Vilfredo Pareto, refer when they use the Latin term homo economicus. Because the Latin concept is first used by critics of Mill to attack his view of economic man, it intrinsically carries pejorative connotations.
According to Mill, the HE should function foremost as a caricature of man, intended to serve as a basis on which to construct mathematical models and economic analyses more easily. Although Mill was a proponent of simplistic models based on economic abstractions, there is more to Mill’s conceptualisation of human nature than a mere self-interested desire for wealth. Mill is talking about other affects that influence man as an economic being as well. The examples he names are ‘the aversion to labour’ and ‘desire of the present enjoyments of costly indulgences’ (Mill, 1836, as cited in Persky, 1995: 223). These influences are continuously accompanying the HE’s desire for wealth in a conflicting manner. They work together, resulting in four distinct interests, characteristic of the HE as the basis for an economic model: accumulation, leisure, luxury and procreation (Persky, 1995: 223). Mill did acknowledge the need to take into account the outlying cases; ‘disturbing causes’ whose theoretical predictions do not match the practical outcomes. He stated that man’s psychological complexity should be recognised and included in any abstract model of human behaviour. However, he also stated the allowance for psychological deviations could have a negative influence on the determinacy of a model. Next to this, he was convinced that there exists a conceptual basis for predicting behaviour across states and cultures.
For Mill, the conceptualisation of the HE and his necessary variations in behaviour across cultures was first and foremost a consequence of differences in institutions. Moreover, his idea of the HE was meant as a defence of institutions: ‘Mill's central theoretical and empirical project was to use economic man, with his rudimentary but manageable psychology, to prove that institutions did matter’ (Persky, 1995: 224). In all of his writings, attempting to explain HE’s interactions with institutions is Mill’s underlying, common thread, according to Persky (1995). All differences between economic men across time and space are the result of institutional differences. So, economic man in the 21st century is distinct from economic man in the 19th century, caused by differences in institutional practices between the two eras.5 Mill called the ‘science’ of dealing with these differences across time and space ‘political economy’. He was of the conviction that the best way of designing institutions is in such a manner that the relationship between the institutions and their subjects, the HE, is characterised by a laissez-faire attitude. For, this manner of governing would cause the least stark differences between
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economic men across time and space and would facilitate Mill’s attempt to create a political economy capable of universal prediction of the HE’s behaviour. His analysis of the variable, basic psychological construction of the HE, as a result of being continuously exposed to certain sets or types of institutions, is what he called ‘economic ethology’. He argued that the economic ethology of the HE is the fundamental purpose of political economy. To a certain extent this is still the point of departure in contemporary political economy:
‘Mill’s abstraction steered clear of complex human motivation on grounds that it made economic analysis indeterminate and did not encompass human rationality, which today is centrally important to economic decision-making (Persky 1995: 222-23).
[…]
The usefulness of a whole range of public and private bureaucratic reforms […] all rest on the extent to which changing economic incentives can have rapid and predictable effects on the behavior of the relevant population. Economists who have ventured into these areas of research are carrying out, perhaps unknowingly, Mill's ethological program. For the most part, their results support the broad usefulness of Mill's original conception of economic man’ (Persky, 1995: 228).
The idea central to Mill’s HE is not that economics is in need of a specific characterisation of human nature but that for a scientific model to work optimally and universally, it should be parsimonious. Mill’s account of the HE is thus a plea for limiting the scope of (social scientific and) economic analysis, and for the usefulness of theoretically employing a parsimonious psychological construct to lay at the basis of economic man. In other words, Mill was in favour of methodological individualism, where the individual is the basic unit of analysis,6 but he also allowed for a certain amount of abstraction of human nature, for this would benefit economic predictions and analyses.
‘In models where everything affects everything else, social scientists have little ability to draw inferences. Perhaps the "economic" in "economic man" relates as much to his parsimonious psychology as to his fascination with wealth’ (Persky on Mill, 1995: 230).
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Mill’s relevance is not per se the emphasis on selfishness in humans or his methodological individualism. It is the abstraction of these characteristics that he captured in the concept of the HE. However, as stated above, Mill did not use the exact term homo economicus, his critics did. This is why there is a pejorative connotation to the term from the beginning onward. Two of the most prominent critics of Mill, and by some seen as the first to employ the Latin concept of HE, were Vilfredo Pareto and John Kells Ingram.
2.1.3 Vilfredo Pareto (1848-1923) and John K. Ingram (1823-1907)
Included in this brief summary of the history of the HE is Vilfredo Pareto, but not because he was a proponent of the concept of economic man. On the contrary, he is credited by many authors as being the first to use the Latin term in a critique of J. S. Mill’s account of man in political economy (e.g. Persky, 1995). According to Pareto, the HE is an abstraction of a rational being that evaluates and decides upon its actions from an egoistic perspective (Busino, 2000: 220). He opposed the idea of a purely rational and self-interested agent being fundamental to the methodological field of economics. He came to believe that the HE as the basis of conceptual economic models is inherently flawed, during his time spent as an economics professor at Lausanne University in Switzerland (1893-1911) (Busino, 2000: 218). He stressed the irrationalities that make up a great part of human behaviour as being the main reason that economic models often seem to fail at correctly predicting human economic behaviour. He pleaded for the inclusion of ‘nonlogical’ (irrational) actions of economic agents (Chipman, 2002: 425). By means of critiquing Mill, Pareto advocated that the HE has wrongfully become the dominant economic model in the early twentieth century. It ‘has become a matter of course for economic theory’, instead of a specific type of man (Cremaschi, 2010: 24). In Pareto’s critique on Mill, his definition of the HE is that, as an agent in political economy, the HE is an ‘egoist’: an agent who controls and orders his own preferences. Controlling his own preferences is made possible by the capacity to obtain complete insight in and information about his own preferences. According to Pareto, the HE does not interact with preferences or influences of other agents, hence his egoism (Cremaschi, 2010).
Pareto came up with the idea that it is not utility that can accurately describe the ‘quantity of satisfaction’ that one derives from a choice, but the concept of ‘ophelimity’: pure economic satisfaction (Chipman, 2002: 426). This is because utility is more linked to pleasure as such, in the sense that utility is what drug addicts experience when they use drugs, for instance. Pareto questioned the idea that one can measure a certain ‘amount’ of ophelimity or
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utility. This (neo)classical economic idea of the possibility to measure utility or ophelimity is called ‘cardinalist utilitarianism.’ Opposing this idea is considered Pareto’s main contribution to economic theory and the history of the HE (Bruni & Guala, 2001: 22).
However, as Bruni & Gala (2001) point out, several economists, such as R. G. D. Allen and John Hicks (1934), have stressed that Pareto did advocate for the possibility of so-called ‘ordinal’ (ranked) preferences, which is contradictory, because then he still relies fundamentally on cardinalist utilitarianism. Utilitarianism is a predominant ethical approach to moral problems, centred around the idea that the moral action is the action that quantitatively produces the ‘most’ good (Driver, 2014). Cardinal in this sense means that the ‘most good’, or, in economic terms, the amount of maximum utility/ophelimity, can be measured and rationally decided upon by the HE. It is also for this reason that Pareto is treated in this short overview of the history of HE: if an economic theorist is regarded as being the first to criticise the measurability of utility (which is central to the concept of HE), while his theories fundamentally still rely on the cardinalist approach, that could point out just how deeply embedded certain aspects of man as the HE are in (modern) economic theory. For, the notion of cardinalism is central to the concept of the HE.
To expand on this criticism, Bruni & Gala (2001) state that Pareto’s account can be classified as a practical form of cardinalism (45). He probably did acknowledge that criteria for measurement could not be known, while stating that this does not mean that we should not talk about cardinal utility. He stressed that ophelimity can only be considered a hypothesis, not an actual, measurable quantity.
However, although Pareto opposed to the idea of invoking the abstraction of human conduct as the HE, his main works show a more ambiguous attitude towards man in economics. Was he an innovator, because he left the more traditional idea of cardinality behind (Hicks & Allen, 1934), or did he still rely on the ideas of classical economists such as Mill and Smith (Bruni & Guala, 2001)? Following the idea of Pareto’s practical cardinalism, I tend to align him with the latter. The following passage of Pareto on the lack of morality in the vision of an enterprise is telling: ‘one makes [a] mistake when one accuses political economy of not taking morality into account; this is like accusing a chess theory of not taking culinary arts into account’ (Pareto, 1906, as cited in Cohen, 2014: chapter 2, 21). Thus, it seems that Pareto perceives economics as being situated ‘outside’ the realm of morality. This notion of a-morality could explain his famous principle; the ‘Pareto optimum’. This optimum entails that for an individual to become economically better off, this always means that somebody else becomes worse off (Sen, 1977: 319). This phenomenon stresses the individualism and egoism of the HE:
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unperturbedly pursuing an ever-growing material wealth, while knowing that this makes another worse off. As Pareto stated, morality is of no concern to economics.
In contrast to Vilfredo Pareto, the case of J. K. Ingram’s (1823-1907) critique of J. S. Mill is more obvious, in the sense that criticising Mill is Ingram’s main contribution to the history of the HE:
‘Mill’s adversaries objected both [the] moral lowliness of his nature and the reductionist character of Mill’s approach and the amoral character of the assumed model of human nature. […] J.K. Ingram caricaturized Homo economicus by demoting him from the genus Homo and declared it a “money-making animal” (Ingram, 1888)’ (Rodriguez-Sickert, 2009: 2).
According to Ingram, economics should be seen as a branch of sociology (Barrett, 1999: 14). Man is first and foremost a human being and a member of society, not a mere labouring creature. Economists exaggerate and are too ‘absolute in their abstractions of man in economics. Mill’s account of HE ‘dealt not with real but with imaginary men – “economic men”’ (Ingram 1888, as cited in Persky, 1995: 222). Tying economics together with sociology is necessary, according to Ingram, for otherwise the science of economics would cease to exist.
To conclude, Pareto could be seen as an ambiguous critic of Mill’s characterisation of the HE, stating that although we cannot measure utility, we can and should talk about it as if it were, whereas Ingram can be considered a rigorous critic of Mill’s HE, stating that without an account of ‘real men’ and thus incorporating economics in the science of sociology, economics as a science would not be. With regards to the HE, Pareto is considered the first to use the Latin term in a pejorative sense. However, he seems to be a proponent of the usefulness of the methodological individualism of the HE. He stressed that ophelimity cannot be measured, but we should act as if it could. As for Ingram, he is considered to be the first to really criticise the idea of economic man in economics. Moreover, he advocated that economics does not stand on its own, for it is a branch of sociology where human nature is perceived as being (far) more complex than the concept of HE allows. Pareto and Ingram are both late nineteenth and early twentieth century thinkers, so chronologically in the following, relatively more contemporary economists will be treated: Milton Friedman and Paul Krugman.
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2.1.4 Milton Friedman (1912-2006) and Paul Krugman (1953)
Friedman, winner of the 1976 Nobel Prize in Economics, was foremost a critic of John Maynard Keynes’ (1883-1946) idea of (macro)economy, which criticised classical (Smithian) economics’ holy grail: the free market economy (Krugman, 2007). Friedman was a professor at the University of Chicago from 1946 on (Kagan, 2019). In this way, the Chicago School of economics is widely regarded as being heavily influenced by the works of Friedman.
According to Kenton (2018), the Chicago School emerged as a reaction on the predominance of the Keynesian school of economics at that time. Keynesian economics had emerged in the 1930s as a response to the Great Depression, stating that the ‘classic economic idea’ of the free market could not suffice in providing full employment and would lead to all kinds of economic failures. Keynes thus pleaded for more government interventions, where Friedman, on the other hand, was one of the most prominent economists trying to revitalise the classical free market between 1950 and 2000 (Krugman, 2007: 1). Friedman was convinced that Keynesian macroeconomic measures, such as expandatory fiscal measures, would only lead to inflation and discoordination, so he pleaded for a return of ‘free market wisdom of classic economists, such as Adam Smith’ (Kagan, 2019: para. 3). He developed numerous economic theories where he stated that the sole concern of a company is the principle of efficiency: ‘the social responsibility of the enterprise is to make a profit […] The business of business is business’ (Friedman, as cited in Cohen, 2014: 41).
To a certain degree, with Keynes in the first half of the twentieth century, methodological individualism as an explanatory system for behaviour in economics was left behind. However, in the second half of the century, it was reinstalled with Friedman and again paired with the idea of rationality. The concept of rational expectations and the idea of laissez-faire governing are two pillars of economic thought related to the Chicago School (Kenton, 2018).
Friedman was convinced that economic models should be judged on the ability to predict behaviour, rather than on their psychological realism (Krugman, 2007). During their lifetime, people seem to spend and save their money irregularly, something which rational choice theory cannot explain. Keynes tried to solve this by borrowing insights from psychology, where Friedman did the opposite (Krugman, 2007: 3). Instead of exploring new conceptual territories such as ‘loose psychological theories’, Friedman revived and expanded on insights found in classical economics, where rationality plays a central role in the prediction of (consumption) behaviour.
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‘Classical economics, wrote Keynes in 1936, "conquered England as completely as the Holy Inquisition conquered Spain." And classical economics said that the answer to almost all problems was to let the forces of supply and demand do their job’ (Krugman, 2007: 1).
In Friedmanite economics, free-market forces are better equipped to solve problems such as unemployment, low interest rates and inflation than government interventions. All his life, Friedman dedicated himself to the promotion of implementing free-market forces (with the HE as its central agent) in all kinds of socio-political areas (Krugman, 2007: 9). However, Paul Krugman has trouble finding similarities between Friedmanite predictions of the beneficial effects of a radical extension of the free-market economy, and data on these predictions from the post-war period (Krugman, 2007: 10). His main critique on Friedman is that Friedman was too absolute in his ideas on free-markets versus deregulation:
‘Friedman's laissez-faire absolutism contributed to an intellectual climate in which faith in markets and disdain for government often trumps the evidence. Developing countries rushed to open up their capital markets, despite warnings that this might expose them to financial crises; then, when the crises duly arrived, many observers blamed the countries' governments, not the instability of international capital flows’ (Krugman, 2007: 11).
Finishing this short history of HE with the ideas of Paul Krugman is a deliberate choice, for he is a contemporary economic thinker who is still dedicated to criticise the concept of the HE in economic theory but is also convinced that methodologically, the HE should be utilised in modern economic theory, albeit in a ‘textbook-economic manner’. Counterintuitively perhaps, Paul Krugman is generally grouped with the Keynesian school of economics. Like Friedman, he is a Nobel laureate for Economics (2008). According to him, the HE has coloured economic thought in the last two centuries. His definition of the HE is as follows:
‘The hypothetical Economic Man knows what he wants; his preferences can be expressed mathematically in terms of a "utility function." And his choices are driven by rational calculations about how to maximize that function […] based on comparisons of
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the "marginal utility," or the added benefit the buyer would get from acquiring a small amount of the alternatives available’ (Krugman, 2007: 2).
An important concept invoked here is ‘marginal utility’. Marginal utility is a micro-economic concept in the sense that the rationale behind it is individualistic, because of the idea that ‘the added benefit’ is individually defined. However, it could also be employed in macro-economics, because in macro-economics, governments and big corporations are perceived as actors/individual buyers, as well. Thus, marginal utility is central to Friedmanite free-market economics, but also to Keynesian interventionist economics. Krugman believes that, in this manner, the HE is still a predominant concept in modern economics, and that it should be, although he is aware of its limitations.
For the sake of clarity, now that we know where the term comes from historically speaking, in the following I will provide a preliminary definition of what I believe defines the HE. He is first and foremost an abstraction of human character in (modern) economics. The concept originates in eighteenth century thought, with Adam Smith and J. S. Mill. In the late nineteenth and early twentieth century it receives numerous criticisms but, despite this, it becomes a common theoretical fundament on which to construct mathematical models and analyses of economics. Central to the definition of the HE is that humans are perceived as continuously making rational, self-interested and individualist choices in life according to the maximization of utility principle.
Various questions arise considering HE’s character: what does it mean to be rational, to make rational choices, to be individualistic, to be self-interested and to maximise utility? In other words, what sort of person is the HE? To delve into this, important concepts surrounding the character of the HE must be explained further: rationality, individualism and self-interest. I am well aware of the fact that these concepts are subjects of far larger texts than this thesis and that they are very rich and profound. Therefore, due to the scope of this thesis, I will not delve into them exhaustively, but rather briefly, enough to grasp what kind of person the HE is. After this enterprise, I will delve into the HE as mode of subjectivity, following Michel Foucault.
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2.2 Rationality
The concept of rationality can be divided into practical and theoretical rationality, also referred to as practical and theoretical reason (Wallace, 2018).7 Theoretical reason is used when one is deliberating about theoretical questions, rather than about practical issues. According to (Wallace, 2018), theoretical questions could also be practical, but are mainly concerned with explanations and predictions. In other words, they are questions of why something has happened in the past and what will happen in the future. Theoretical reason is concerned with facts and theoretical constructions based on these matters of fact. Therefore, it is the more impartial, descriptive and objective form of reasoning in comparison to practical reason. Theoretical reason is therefore linked to the natural sciences.
More important for this thesis is the notion of practical reason. Practical reason departs from a normative standpoint (Wallace, 2018). It is the form of reasoning where one asks what one ought to do, given a certain situation. It is about deliberating values and is therefore not necessarily linked to matters of (objective) fact. When considering different courses of action, a practically reasoning agent compares them normatively from a first-personal point of view. In other words, the HE acts according to its practical reason, deciding what is the best action to pursue according to its subjective interests and beliefs.
Central to practical reason is the notion of intentional action (Wallace, 2018). One decides intentionally upon an action, following one’s practical reason. Within the debate on intentional action there is yet another dichotomy: the internalist account versus the externalist account. The first holds that an agent’s action is decided upon a subjective set of motivations, which are already present in an agent before the deliberation of an action. In other words, internalists assume that an already formed system or set of motivations of an agent gives rise to an intentional decision. This implies that newly formed intentions are always influenced by prior existing subjective motivations.
The other influential view on intentional action is externalism. Externalists assume that prior motivations do not necessarily influence decision-making (Wallace, 2018). One can motivate an action based on other reasons than one’s prior, subjective set of motivations. One
7 I am aware that there exists a theoretical difference within the tradition of rationality and the tradition of
reason. The tradition of rationality is concerned with the act of self-interest as such, whereas the notion of reason is about the transcendent logic of such an action, instructed by, for instance, an ideology. Following the tradition of reason, this would lead to the idea that an action can be rational in a certain tradition of thought, but not in the other. For an elaborate account on this difference, consult: Freyberg-Inan (2016). However, in this thesis, I will predominantly use the notion of rationality, wherein I mean to encapsulate the notion of reason as well.
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can acquire entirely new reasons to validate an action, without being conditioned by prior motivations. Hence, there is more room for objectivity in this approach:
‘[P]ractical reason is not conceived merely as a capacity for working out the implications of one's existing desires and commitments; it equally involves the capacity to reason about what it would objectively be good to do, and to act on the basis of this kind of evaluative reflection. Normative reflection is thus taken to be independent of one's prior motivations, and capable of opening up new motivational possibilities’ (Wallace, 2018).
Thus, to intentionally choose a course of action depends on one’s capacity to practically reason and on one’s subjective motivations but could also depend on ideas about what is objectively good to do as a fundament on which to ground reasons for certain actions. The apparent discord on the reasons for intentional actions carried out by agents is based on the fact that practical reason is inherently linked to the notion of rational action and is thus linked to observable behaviour, for we cannot know for certain what kinds of thought processes give rise to particular actions. Important here for my argument is that the agent in the internalist conceptualisation of intentional action is likely to be the HE. The systems or sets of motivations upon which the HE decides are important in this thesis and will be elaborated on further in the subchapter on the HE as mode of subjectivity.
Another important notion dominant within the debate on rationality is instrumental rationality, which is a principal concept within the framework of this thesis as well. Instrumental rationality is the idea that agents are ‘instructed’ by their rationality to take the means necessary to achieve a desired end (Kolodny & Brunero, 2018). Some philosophers contend that instrumental rationality is the most important constituent of practical rationality. Others have even stated that instrumental rationality is the whole of practical rationality (Kolodny & Brunero, 2018). The idea of instruments to get to a desired end boils down to the instrumental principle: an agent is rationally required to take the means necessary (and available) to achieve the desired end.
However, this principle does not necessarily oblige an agent to take the available means. The instrumental principle is rather a structural requirement that governs the attitudes of an agent. For example: to build a bridge, one needs to make sure that the bridge can carry its own weight (end E). To make the bridge carry its own weight the columns and supports have to be designed in such a way that they can carry the bridge’s weight (means M). To get to E, an agent
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is required to take actions that achieve M first. The instrumental principle in this example works according to the structural requirements of M to achieve E. So, to get to E, he is required to take M, and his attitude towards E is thus governed by the requirements of M. However, he is not obliged to take M, for he can make M and end in itself, or he can alter his desired E into building no bridge at all. This seems obvious but is nonetheless an important notion because the instrumental principle does not tell us anything about the reasons for an agent’s action. Furthermore, it detaches reasons for actions from their moral values. If M is necessary to reach E, according to the principle, the agent is required to take M, even if M is not necessarily the moral choice. If he would not take M because of its moral flaws, he could be perceived as acting irrationally. This would lead to a conclusion where acting morally, or in other words, making a normative judgment, could be irrational:
‘This thesis appears to threaten the “rational authority” of morality. It seems possible that acting morally on some occasion might not be a suitable means to an agent’s ends. If so, then according to this thesis, it would not be irrational for her to refuse to act morally on such an occasion’ (Kolodny & Brunero, 2018).
Thus, if instrumental rationality is the whole of practical rationality, as many have argued, it seems to be the case that morality loses its ‘rational authority’. Take the earlier stated characteristics of HE, where he acts according to the ‘utility function’ (Krugman, 2007): the HE deliberates consciously on his options, his available means to a desired end, and is thus acting according to the instrumental principle. If this is so, then HE as the dominant actor in modern economics, is a person who in some cases would champion instrumental rationality over morality. As Niccolo Machiavelli already observed in the 16th century:
‘For a man who wants to make a profession of good in all regards must come to ruin among so many who are not good. Hence it is necessary to a prince, if he wants to maintain himself, to learn to be able not to be good, and to use this and not use it according to necessity’ (Machiavelli, 1532/1998: chapter XV, p. 61).
In the above I have given an outline of the ways in which rationality is generally conceptualised and what the surrounding debate is about. The characteristics of rationality are taken up in the broader theoretical framework of rational choice theory (sometimes called ‘decision theory’) (Wallace, 2018). Rational choice theory lays out the underlying mechanisms
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regarding instrumental or, for that matter, practical rationality. According to rational choice theory, practical rationality is about performative consistency. If actions are carried out with the desire to ultimately achieve the (subjectively perceived) ‘best’ outcome, these actions could be considered rational. This ‘best’ outcome is seen as a maximisation of expected utility (Wallace, 2018). This idea evidently corresponds with the instrumental principle and the utility function, and thus with the most dominant ideas on rationality. Moreover, this theory makes use of mathematical reasoning since in essence it is a calculation, a mathematical consideration of possibilities and means needed to achieve an end with maximum utility. This is called ‘the maximizing conception of practical rationality’ and is predominant in modern economics (Wallace, 2018). Proponents of this theory argue that they can explain all preferences by employing the notion of ‘revealed preferences’: preferences can only be ascribed to agents on the basis of actual human behaviour. In this way, rational choice theory can account for every action a human carries out, in economics as well as in other social domains.
‘Decision theory, on the resulting interpretation of it, becomes an all-encompassing framework for understanding free human behavior, according to which all agents who act freely are striving to produce outcomes that would be optimal, relative to their current preferences and beliefs’ (Wallace, 2018).
Finally, an important notion to be discussed when deliberating rationality is the idea of bounded rationality. First coined by Herbert Simon in 1957, bounded rationality is an influential reaction to the perfect rationality assumptions made by the ideal model of HE (Wheeler, 2018). Since I am occupied with outlining the ‘ideal’ model of the HE, I will not go into this concept at length. In essence, bounded rationality is a critique regarding the possibility of being perfectly rational. It stresses the influence of irrationality in human behaviour, but most dominantly it criticises the assumption that the HE as a hypothetical agent could ever have an all-encompassing bird’s eye view on its choices of action and their consequences. In Wheeler’s (2018) words: ‘[the HE] has complete information about the options available for choice, perfect foresight of the consequences from choosing those options, and the wherewithal to solve an optimization problem (typically of considerable complexity) that identifies an option which maximizes the agent’s personal utility.’ Bounded rationality challenges these assumptions by proposing that there are limits to our rationality. We are limited by our cognitive abilities, by the available amount of time and by the tractability of the problem. We are therefore often not looking for optimal outcomes but rather for outcomes that satisfy us. Herbert Simon criticized
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the reliance of modern economics on the methodological concept of the HE, even though we are aware of our bounded rationality. His critique has been taken up by ‘softening’ assumptions of rationality in various ways, even as the ideal concept of the HE underlying (neo)classical models remains fully rational.
To conclude this section on HE and rationality, the question must again be posed: what kind of person is the HE? Rationality and self-interestedness are two quintessential concepts within the character of HE. Rationality is perceived as instrumental: mathematical calculations are employed to rank preferences hierarchically, founded on the ability to overview all choices, all consequences of these choices and having enough time to decide which course of action would lead to an outcome of maximal utility. Self-interestedness expresses itself in the way the HE reasons. The HE is an agent occupied solely with itself, rationalising its way towards maximum utility for itself. Can it also be that maximal utility involves the well-being of others? In other words, is there room for altruism within the model of HE? There probably is, but essentially it will boil down to the expected maximum utility idea, which is inherently linked to subjective, personal preferences and expectations. If within these preferences the well-being of others is included, it is so to satisfy the HE itself. This idea flows alongside the earlier stated proposition that the HE in any case champions rationality, even if acting rationally according to the theory of instrumental rationality means acting immorally.
So far, the ins and outs of the HE’s rationality have been treated in the above. In the following, the character of the HE will be further unravelled. This will be done by elaborating on the concepts of individualism and self-interestedness. The red thread in the following section is the question what it means that the HE is inherently individualistic and self-interested, and what these traits entail.
2.3 Individualism and self-interest
Next to its presupposed instrumental rationality, there are two other concepts that can be distilled from the character of the HE. The HE is inherently a self-interested being, which is necessarily linked to individualism. Therefore, I will commence this subchapter by answering the question regarding the definition of this ‘-ism’ by briefly introducing its basic history and its surrounding conceptual debate, by consulting Friedrich Hayek’s Individualism and Economic Order (1948). After this, I will answer the question of what the notion of self-interest means and what it involves. To address this question, I will provide a short account of Albert Hirschman’s 1977 essay The Passions and the Interests, distil a definition of self-interest and
