108. Debt, The First 5,000 Years

Note: This post is the one hundred and eighth in a series about government and commercial ethics. Click here for the full listing of the series. The first post in the series has more detail on the book 'Systems of Survival' by Jane Jacobs which inspired this series.

Well, that was a slightly longer break than I planned, and I can't really promise a return to regular posting, but at any rate, this week's topic is the book, "Debt: The First 5,000 Years' by David Graeber. I was expecting this book to be interesting, but not too relevant to this series of posts, but I was quite wrong about that, as Graeber spends as much or more time talking about ethics as he does talking about money and debt (generally he talks about the two topics together).

In fact, Graeber argues that our current society is so dominated by the morality and logic of exchange that we don't can't even talk about morality without using the language of exchange.

One drawback of the book is that it is not particularly orderly, with Graeber wandering from topic to topic without offering much in the way of summaries or argument structure - so this post will likely suffer from the same deficiencies.

Early on (page 29), Graeber makes the point that barter is a form of economic transaction that is used between strangers and/or enemies, not amongst people who know each other well who would typically either share or use gifts instead of bargaining and negotiating to decide who gets what.  Later (page 68), Graeber notes that a commercial transaction (exchange) imply both separation and equality. On page 81, Graeber characterizes the 20th century as a situation where,

"on one side is the logic of the market, where we like to imagine we all start out as individuals who don't owe each other anything. On the other side is the logic of the state, where we all being with a debt we can never truly pay. We are constantly told that they are opposites, and that between them they contain the only real human possibilities. But it's a false dichotomy. States created markets. Markets require states. Neither could continue without the other, at least, in anything like the forms we would recognize today."

In the fifth chapter of the book, 'The Moral Grounds of Economic Relations, Graeber talks about the different moral systems we have for regulating economic activity,

"Anthropology has shown just how different and numerous are the ways in which humans have been known to organize themselves. But it also reveals some remarkable commonalities - fundamental moral principles that appear to exist everywhere, and that will always tend to be invoked, wherever people transfer objects back and forth or argue about what other people owe them.

One of the reasons that human life is so complicated, in turn, is because many of these principles contradict one another. ... The moral logic of exchange, and hence of debt, is only one; in any given situation, there are likely to be completely different principles that could be brought to bear. ...moral thought is founded on this very tension."

Graeber continues on to argue that we have 3 different ways of relating to each other, and that exchange is just one of these three ways.  The other two ways described by Graeber are Communism and Hierarchy.


Graeber describes communism as the 'default' mode of interaction, in which, for example, if two people are working on a car and one asks the other to hand him a wrench, the other person won't ask what they are getting in return. Graeber notes that even in clearly commercial contexts, such as a local store, there is a tendency towards a communistic approach in which what people are expected to pay depends on their means. He notes that this is why shopkeepers in poor neighbourhoods are almost always from a non-local ethnic group. Someone local would face too much pressure to cut prices for their poor customers who are also their neighbours.

After communism, Graeber discuss exchange, noting that , "what marks commercial exchange is that it's 'impersonal.'" Graeber notes that commercial relations are impermanent and can be broken off at any time, and whether in a bargaining session where both parties are trying to pay each other as little as possible or in a gift-exchange where both parties are trying to outdo one another in generosity, people feel a need to maintain equality. 

Next, Graeber describes hierarchy as a system where adherence to custom and tradition is the primary virtue and this appeal to custom is used to justify the use of force in maintaining a hierarchical social structure. The pattern of custom also takes precedence over any notion of reciprocity, "If you give some coins to a panhandler,  and that panhandler recognizes you later, it is unlikely that he will give you any money - but he well consider you more likely to give him money again."

"This is what I mean when I say that hierarchy operates by a principle that is the very opposite of reciprocity. Whenever the lines of superiority and inferiority are clearly drawn and accepted by all parties as the framework of a relationship, and relations are sufficiently ongoing that we are no longer simply dealing with arbitrary force, then relations will be seen as being regulated by a web of habit or customer."

After describing the three different modes, Graeber notes that these modes always co-exist, "We are all communists with our closest friends and feudal lords when dealing with small children."

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Later, Graeber devotes a chapter to the slippery concept of 'Honour'.  Jane Jacobs classified 'Treasure Honour' as a guardian virtue in 'Systems of Survival' but Graeber sees two sides to honour, "to this day, 'honour' has two contradictory meanings. On the one hand we can speak of honour as simple integrity. Decent people honour their commitments ... to be an honourable man meant to be one who speaks the truth, obeys the law, keeps his promises, is fair and conscientious in commercial dealings ... [but] honour simultaneously meant something else, which had everything to do with ...violence"

Although Graeber sees honour as existing in both a commercial and a guardian sense, he repeatedly notes how violent (guardian-minded)  men are particularly obsessed with honour.

Graeber describes an Irish system of honour in which "one's honour was the esteem one had in the eyes of others, one's honesty integrity and character, but also one's power, in the sense of the ability to protect oneseld, and one's family and followers, from any sort of degradation or insult." This system was strictly hierarchical with greater honour assigned to people of higher rank.

In a key passage, Graeber notes the Irish system seems strange because they precisely quantified the 'price' of honour (it took 21 cows to pay for insulting the king's honour, fewer if you insulted someone of lower rank).

"What makes Medieval Irish laws seem so peculiar from our perspective is that their exponents had not the slightest discomfort with putting an exact monetary price on human dignity. For us, the notion that the sanctity of a priest or the majesty of a king could be held equivalent to a million fried eggs or a hundred thousand haircuts is simply bizarre. These are precisely the things that ought to be considered beyond all possibility of quantification. If Medieval Irish juries felt otherwise, it was because people at that time did not use money to buy eggs or haircuts. It was the fact that it was still a human economy, in which money was used for social purposes, that it was possible to create such an intricate system whereby it was possible not just to mesaure but to add and subtract specific quantities of human dignity - and in doing so, provide us with a unique window into the true nature of honour itself.


The obvious question is: What happens to such an economy when people do begin to use the same money used to measure measure dignity to buy eggs and haircuts? As the history of Mesopotamia and the Mediterranean world reveals, the result was a profound - and enduring - moral crisis."

Further on (page 260), Graeber notes the historical success of China resulting from maintaining a clear line of separation between the hierarchical and commercial spheres,

"In Confucian terms, merchants were like soldiers. Those drawn to a career in the military were assumed to be largely driven by a love of violence. As individuals, they were not good people; but they were also necessary to defend the frontiers. Similarly, merchants were driven by greed and basically immoral; yet if kept under careful administrative supervision, they could be made to serve the public good. Whatever one might think of the principles, the results are hard to deny. For most of its history, China maintained the highest standard of living in the world - even England only really overtook it in perhaps the 1820's"

For the thesis of Jane Jacob's 'Systems of Survival', the most challenging aspect of "Debt: The First 5,000 Years" is that Graeber sees medieval/enlightenment Europe as a place where there was a lot of mixing of Commercial and Guardian roles (on page 346 he refers to the 'familiar but particularly European entanglement of war and commerce"), which according to Jane Jacobs, should lead only to corruption and suffering, but instead, as Graeber notes, the countries of medieval Europe eventually attained the world's highest standards of living. Graeber dwells on the negatives caused by this mixture, the slave trade and all the ills of colonialism, but the fact remains that it was Europe that developed the means to impose their will on the rest of the world through the development of new technology and social forms of organization.

Leaving this challenge aside for now, the main thrust of Graeber's work seems to be the harm caused by the notion of debt when it crosses the boundaries of moral systems. If a commercial debt is just a commercial debt, then if a business venture fails, you declare bankruptcy and move on. If a debt is non-commercial in nature, then it is governed by human relations that take into account the relative status and ability to pay of the people involved. When commercial debts become treated as debts of honour, then people are forced to do anything to pay, no matter how horrific or unpleasant. For example, Graeber describes the depredations of Spanish soldiers in Central America as driven by their own need to pay debts back home.


This distinction between commercial debts and non-commercial ones is perhaps most noticeable in the sheer number of times that Graeber refers to some historical debt forgiveness scheme that was implemented for all debts except commercial debts.To take just a few examples:
Page 256, "where earlier codes had established a 15-percemt annual rate of interest, with exceptions for commercial loans..."

Page 290, "the revival of Roman law ... put new weapons in the hands of those who wished to argue that, at least in the case of commercial loans, usury laws should be relaxed"

Page 390, "It seems to me that we are long overdue for some kind of Biblical-style Jubilee: one that would affect both international debt and consumer debt"

Digging around on the internet, it seems I'm not the only person who noticed this. Here's a quote from a post by Daniel Davies at Crooked Timber:

"The argument I found myself having again and again related to this particular point – on more than one occasion during the history of debt, it was noted almost parenthetically that a particular debt reform was carried out on the basis “except commercial debts”, and I found myself saying “No! Hang on! Tell me more about these exceptions!”.

And I think this because commercial debts between merchants are a really important part of the story here.

..

In general in the commercial world, the ability to put yourself in debt is a privilege, not an obligation – one of the most important aspects of corporate legal personhood, as an introductory legal textbook will tell you, is not the right to sue other people, but the right to be sued. If you can be sued, then you can enter into agreements with other people that they have confidence that the courts will enforce.

...

Although the parallel track of debt as obligation, religion and morality has certainly been there, and is described expertly in the book, from day one it has been recognised among merchants and men of commerce that the point of the debt relation is to serve the organisation and arrangement of commercial need."

 -

Debt as per Graeber’s book is an example of this – the debt contract is basically a tool of industrial organisation that escaped from the laboratory and ran wild.

...

Having said that, there are some situations where Graeber’s analysis seems completely accurate. Countries don’t have bankruptcy codes governing them, and so in the sphere of international debt negotiations, one can see all the pernicious aspects of the “folk-economics” version of the debt contract that Graeber describes. Looking at the relationship between the European Union and Greece, or even Ireland, one can see that the debt relation is being specifically shaped into a tool for exercising power in a way which would not have been possible through democratic means.

...

...it’s a very salutary reminder of what happens when people forget that debt is really only (or really only ought to be) the legal system’s best guess at what kind of arrangements would best serve the general purposes of commerce. It is, as Graeber intimates, when the debt relation takes on an independent life of its own that the problems all start."

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As Davies notes, aside from providing a supporting voice to the notion of economic relations being governed by Guardian or Commercial (or Communistic) values, and aside from enumerating the many ways in which societies throughout history have separated commerce from governance and violence, Graeber ultimately makes the argument that debt in particular is a human relation that needs to be carefully regulated so that we do not mistake commercial debts for moral debts.

Interlude

Not a real post this week, but in lieu of that, I thought I'd pass along some comments from Chris Hedges that I came across the other day:

"Well, you know, the great political philosopher Sheldon Wolin in his book "Democracy Incorporated" calls the American system of government at this point inverted totalitarianism. And I think that’s a very prescient term. He argues that inverted totalitarianism unlike classical forms of totalitarianism doesn’t revolve around a demagog or a leader but finds it’s expression in the anonymity of the corporate state. So that under inverted totalitarianism you have corporate interests that purport to pay fealty to the constitution, to electoral politics, to democratic institutions while massively subverting or controlling the levers of power to annul the rights and desires of the citizenry so that in classical totalitarianism systems, both communism and fascism, politics always trumps economics. But in an inverted totalitarianism economics trumps politics." (emphasis added)

Hedges is echoing my own previous comments regarding how much of the corruption we seeing our time is not from guardians introducing on the economic sector, but rather the other way around, with economic actors bending the state to their own self-interest.

In another interview, Hedges touches on another aspect of the commercial syndrome which can run amuck when it is outside it's appropriate sphere:

"Corporate systems are, in theological terms, and I'm a seminary graduate and can't escape it, are systems of death. They turn everything into a commodity. Human beings become commodities, the natural world becomes a commodity, that they exploit. Until exhaustion or collapse. In that sense, Karl Marx was right. It is a revolutionary force. The revolution has happened. They’ve won.

To appeal to the systems of power, or the illusory systems of power that they place before us, is to essentially become complicitous in the radical reconfiguration that the corporate state intends. They know no limits. The only word corporations understand is MORE. They will push and push and push until human capital is destroyed, until the ecosystem itself is destroyed." (emphasis added)

I don't really have anything to add, my point in quoting Hedges is simply to note another example of someone whose arguments unknowingly align with Jane Jacobs work in 'Systems of Survival' with Hedges criticizing the corruption of commercial actors intruding on the guardian sphere with respect to governance and for taking a 'no limits' approach toward human and natural systems which do (in Hedges' view) have limits. Note how Hedges, with his anti-commercial guardian mindset, comes from a background of being a seminary graduate (i.e. from the primarily guardian-minded world of organized religion).

Note: Post updated to add this link, just to make the abstract point about commercial ethics overrunning their appropriate boundaries a little more concrete.

99. Self-Interest, Hypocrisy and the Commercial Takeover

Note: This post is the ninety-ninth in a series about government and commercial ethics. Click here for the full listing of the series. The first post in the series has more detail on the book 'Systems of Survival' by Jane Jacobs which inspired this series.

I don't have enough time this week to do justice to the rest of 'The Republic' so instead I just wanted to mention this post by Paul Krugman.

Krugman starts by referencing a Mel Gibson movie from a few years back that was entitled, 'The Patriot' but featured a protagonist who was unwilling to fight for his country until his own family was attacked, and then embarked on a campaign for personal vengeance. Krugman links to an essay by Michael Lind that explains how this is hardly an example of what is normally referred to as patriotism.

Krugman sees a similar confusion when wealthy people who support measures that will benefit the poor or middle class are attacked as hypocrites (for example) for not being selfish.

Says Krugman,

"Which brings me to the subject of this post, the apparently equally misunderstood concept of hypocrisy. I’ve been getting some personal attacks on this front, but it’s a bigger issue than that. Here’s the personal version: suppose that you’re a professor/columnist who advocates higher taxes on high incomes and a stronger social safety net — but you yourself earn enough from various sources that you will pay some of those higher taxes and are unlikely to rely on that stronger safety net. A remarkable number of people look at that combination of personal and political positions and cry 'Hypocrisy!'

...

If you remember the 2004 election, which unfortunately I do, there were quite a few journalists who basically accused John Kerry of being 'inauthentic' because he was a rich man advocating policies that would help the poor and the middle class. Apparently you can only be authentic if your politics reflect pure personal self-interest

...

So to say what should be obvious but apparently isn't: supporting policies that are to your personal financial disadvantage isn't hypocrisy — it’s civic virtue!

...

Lind's essay about Mel Gibson ended with concerns that we may have lost the sense of what citizenship and its duties mean. Indeed. If people can't comprehend what it means to work for larger goals than their own interest, if they actually consider any deviation from self-service somehow a sign of phoniness, we, as a nation, are lost."

Another example, that Krugman doesn’t mention is the field of 'Public Choice Theory' which is premised on the notion that neither civic virtue nor patriotism exist.

Anyway, I just wanted to highlight this post from Krugman because what he is observing is what I have observed myself, and what provides some of my motivation for pursuing this series of posts. It seems as though commercial syndrome virtues are gradually driving out guardian virtues in our discourse, to such an extent that classic guardian precepts such as patriotism and civic virtue are now seen through a commercial lens as either hypocritical or incomprehensible for a growing percentage of the population. And on that note, it's time for a vacation, see you in a few weeks...

97. Guardian Syndrome Derangement Syndrome

Note: This post is the ninety-seventh in a series about government and commercial ethics. Click here for the full listing of the series. The first post in the series has more detail on the book 'Systems of Survival' by Jane Jacobs which inspired this series.

Today's post is about a group of people who excel at creating prosperity via trade, but find themselves politically oppressed, the fruits of their labours taken from them with little recompense. In response, the oppressed group undertakes to escape their chains, using trade where necessary and force where necessary to make their way to an unoccupied piece of land that they can call home, one where they will be free from political oppressors who would use force to take their wealth.

The bible contains a story like this, the story of the Jews escaping from the Egyptians and eventually finding their promised land - a story that Jane Jacobs cites in 'Systems of Survival' as a good example of how the same group of people can find success by alternating between using commercial syndrome morality and guardian syndrome morality, depending on which is appropriate in the circumstance.

But today's topic is not the Bible, but rather something less concise, the book 'Atlas Shrugged' by Ayn Rand. In Atlas Shrugged, the setting is the United States, in the era when railways were still the main form of transportation and planes were a relatively new invention. The U.S. government seems to be run by a collection of corrupt businessmen and politicians and is descending into a mix of fascism and communism. In response, a group of leading industrialists decide to 'Go Galt,' destroying or abandoning their companies, leaving society behind to join a secret community in a remote part of Colorado.

The story, which tells the tale of how the government gradually escalates its level of unprincipled interference with business, is quite lengthy, but luckily the leader of the industrialists, John Galt, sums up Rand's philosophy in a pithy 100 page speech.

Unsurprisingly, as a businessman, John Galt's primary sympathy lies with the Commercial Syndrome. This is made clear enough early on in his speech when he assets that,

"There is a morality of reason ... man's life [is] the life of a thinking being - not life by means of force or fraud, but life by means of achievement."

Galt recognizes that, unlike the Guardian syndrome in which most of the precepts relate to interactions between people, the commercial syndrome contains a number of precepts that apply to man on his own, in his battle against his own laziness,

"You who prattle that morality is social and that man would need no morality on a desert island - it is on a desert island that he would need it most. Let him try to claim ... that he will collect a harvest tomorrow by devouring his stock seed today - and reality will wipe him out, as he deserves."

Just a little bit later, Galt lists some of the virtues needed for his moral system, a list which generally matches up pretty well with the commercial syndrome:

"rationality, independence, integrity, honesty, justice, productiveness, pride."

Finally, a bit later, Galt expresses the commercial basis of his morality explicitly,

"The symbol of all relationships among such men, the moral symbol of respect for human beings, is the trader. We, who live by values, not by loot, are traders, both in matter and in spirit. A trader does not squander his body as fodder or his soul as alms. Just as he does not give his work except in trade for material values, so he does not give the values of his spirit-his love friendship, his esteem- except in payment and in trade for human virtues."

The message is clear, the trader only acts in his own self-interest and cares not for the interests of others. I emphasize this not to criticize, but to contrast with a later point that Galt makes (which we'll get to in a bit).

As for comfort and convenience, Galt makes clear over and over again that this is the primary purpose of existence, perhaps most memorably when he asks,

"who is enslaved by physical needs: the Hindu who labors from sunrise to sunset at the shafts of a hand-plow for a bowl of rice, or the American who is driving a tractor? Who is the conqueror of physical reality: the man who sleeps on a bed of nails or the man who sleeps on an inner-spring mattress."

Only a commercially minded philosopher would take the time in his manifesto to extol the comfort of the inner-spring mattress!

Naturally, in a moral system based on trade, using force is a big no-no for Galt,

"Whatever may be open to disagreement, there is one act of evil that may not, the act that no man may commit against others and no man may sanction or forgive. So long as men desire to live together, no man may initiate-do you hear me? no man may start the use of physical force against others."

Galt spends so much time repetitively criticizing those who would use force for corrupt purposes that it is easy to lose track of the fact that he does condone the use of force when necessary. Perhaps the most remarkable passage of Atlas Shrugged is this one, where Galt describes when he will use force.

"It is only as retaliation that force may be used and only against the man who starts its use. No, I do not share his evil or sink to his concept of morality: I merely grant him his choice, destruction, the only destruction he had the right to choose: his own. He uses force to seize a value; I use it only to destroy destruction. A holdup man seeks to gain wealth by killing me; I do not grow richer by killing a holdup man. I seek no values by means of evil, nor do I surrender my values to evil."

The story backs this statement up, containing a number of instances where Galt and his fellow tribe members throw comfort and convenience to the winds and sacrifice themselves by showing fortitude, employing force and fraud, discipline and obedience in order to successfully fight physical battles against their enemies. On one instance there is a pitched battle vs. troublemakers at a steel factory, in another case, there is a hostage to be rescued.

So notice what has happened here. Galt spends 98 pages of his 100 page speech talking about how the only set of moral values that exists is the commercial syndrome, where self-interest rules, comfort and convenience are paramount and force and fraud are verboten. But then in the other 2 pages he sneaks in this alternate world where, when violence is initiated, suddenly action must be taken, and now force and fraud are not just allowed, but required, and the person undertaking them is expected to be proficient in their use. Not only that, but these actions of force and fraud must only be undertaken in a spirit of sacrifice, in which comfort and convenience are discarded or put at risk, and it is acting in self-interest that is now forbidden!

Later on, Galt allows that government is needed to enforce rules, to retaliate against those who would commit violence, and to defend the state against enemies from outside. Sadly he never seems to explain how it is the people doing this will be paid, or how they will be restrained from using their power to enrich themselves.

I think that if Rand hadn't been inflicted with such a strong a case of Guardian derangement syndrome (or Guardian syndrome derangement?), much like the one that got Thorstein Veblen, she probably could have set out a pretty reasonable pair of moral syndromes that matched up fairly well with Plato and Jane Jacobs. It's just too bad her work is filled with so much distracting pointlessness (such as the endless insistence that reality is real or that only gold can be 'real money') that it takes away from this message.


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As an aside, one of the more ludicrous story elements in 'Atlas Shrugged' is the notion that society collapses because a couple of hundred industrialists head off to Colorado for a while. Which is fine, the story is meant to make a point, not to be plausible, but I thought it was interesting to point out why Rand needed such an unbelievable plot point in her book.

The great weakness of a collection of traders is that they are all out for their own interest and that they are (by definition) incapable of acting in a collective manner. Their nature is competition, not monopoly. In the real world, if Steve Jobs left for Colorado and destroyed the Apple company, there are plenty of others willing and able to manufacture phones and provide a service to download songs from the internet. If General Motors shut down, the other car companies could easily pick up the slack. But in Atlas Shrugged, Rand is constantly creating little mini-monopolies by insisting that there is only one company that can make steel properly, only one railway that can run a decent operation, only one person who can find and produce oil, etc.

Rand needs these monopolies in order to allow her collection of industrialists who go on 'strike' and leave for Colorado to have an actual impact on society, instead of just looking foolish. But Rand, who was so attentive to the nature of the commercial syndrome - the competition, the lack of solidarity that would prevent any strike action from being successful, really should have known better. After all, even the Bible, which certainly doesn't shy away from implausible pronouncements, didn't try to insist that Egyptian society collapsed because it couldn't function without the Jews, so that Moses could come back to give the Pharaoh a long, tedious, 'I told you so.'

96. Guardian free zone?

Note: This post is the ninety-sixth in a series about government and commercial ethics. Click here for the full listing of the series. The first post in the series has more detail on the book 'Systems of Survival' by Jane Jacobs which inspired this series.

This week I'm going to cover a thought experiment I've been turning over in my mind for the last few days. In Systems of Survival, Jane Jacobs explains that Communism is what results when the guardian syndrome takes over the commercial syndrome. With the breach in the 'shun trading' precept from the Guardian syndrome, the Guardians took control of commerce leading to a failure of the commercial precepts (innovation, efficiency, honesty, dissent, etc.) as they were superseded by Guardian precepts such as (make rich use of leisure, be fatalistic, be exclusive, etc.) But what I wonder is, what would happen in the reverse scenario? What if a group of people decided that they would be governed by commercial principles only rather than guardian ones?

My first thought was that, since one of the commercial precepts is to shun force, the only way this community could survive would be to completely avoid all guardian types who would be willing to use force to seize any wealth generated by the commercial activity. Thinking of this I was reminded of the origins of the great trading nation of Venice, in an out of the way lagoon that was safe from the marauding guardian types running rampant in those days. Of course, any member of our hypothetical non-violent commercial society could take over the whole enterprise if they resorted to force, given that the commercial folks would be unwilling to use force to resist. So the commercial society would have to be extremely careful about who was allowed in, since only 100% acceptance of their morals would be a stable situation.

Given the constraints on the use of violence, it seems completely infeasible to me that a pure commercial society could exist for any length of time, or even form in the first place.

In order to make the commercial society at all viable, there needs to be some mechanism for dealing with those who would use force against it. A location with natural defenses (such as an island in the case of England, another great trading nation) would help, but could never be a complete solution. The logical commercial solution would be to hire mercenaries to enforce the rule of non-violence, much in the way that medieval aristocrats had stewards to trade on their behalf.

Of course, the difficulties of this approach are obvious and were well explained by Machiavelli. The mercenary, must be at least two things: willing to use force, and motivated by wealth. It seems clear that the mercenary will eventually decide that they can make more wealth by turning on their paymaster than by simply accepting their pay.

Another option would be for the commercial folks to make an exemption in their rules of non-violence to allow for vengeance to be taken against acts of force or fraud. In other words, when dealing with a person who does not follow their commercial code, they in turn would choose to use a different moral code, one that condones violence as an act of vengeance against those who initiated violence. But this still causes some issues. A google search for the term 'costly punishment' will uncover lots of academic work which has focussed on the question of whether it makes sense, from the rational commercial syndrome point of view, to take vengeance against someone who has used force against you. The trouble is that the act of taking vengeance benefits the whole commercial society by protecting it against the incursions of someone willing to use force, but the cost of taking vengeance (punishing the perpetrator) falls solely on the person who does the punishing.

Researchers starting from a premise of rational self-interested behaviour have struggled to explain why people are willing to go beyond what is 'rational' in their willingness to punish those who have wronged them. But of course, if people have a moral value of taking vengeance this puzzle disappears, much as the Mancur Olson explained that a moral value of loyalty or cooperation could mitigate the puzzle of how collective action can be sustained by large groups.

You can see where this is leading, I'm sure. The commercial society has two options if it wants to survive: the corrupt, unstable, syndrome-mixing solution of hiring mercenaries, or the establishment of a second set of morals, one based on a willingness to take vengeance, even when it is not in your own self-interest to do so, one based on a willingness and an ability to use force effectively.

There seems to be an asymmetry between the two syndromes, reflecting the lack of proportion between the armed and the unarmed that Machiavelli described. The guardians can take over the commercial syndrome and society can still run, albeit not as successfully as it would with the two syndromes kept separate. But the commercial syndrome simply can't exist without guardians. Seen in this view, much of the structure of our government, from the Magna Carta on down, can be seen as an elaborate scheme devised by the commercial folks to maintain the existence of guardians while constraining their ability to interfere with the commercial syndrome as much as possible. Balance of powers between legislatures, senates and executives, term limits, constitutions backed by legal systems, democratic elections, media watchdogs, etc. all serve (or at least can serve, if circumstances are right) to constrain the ability of guardians to take over the economy.

Beyond these institutional mechanisms, I see two other bulwarks against the guardian takeover of the commercial syndrome. The first is simply strong guardian morals. The shunning of trade by guardians, the fortitude that disregards material wants, the willingness to sacrifice for the community, all of these traits serve to prevent the guardians from using their privileged position to enrich themselves at the expense of the economy. The second is the existence of competition between nations. This seems a bit counter-intuitive, since competition between nations can take the form of war, which is the most guardian of all activities, but war requires resources to be prosecuted successfully, and a country which maintains a strong commercial culture will have more economic resources to devote to the war effort. And aside from war, the citizens of the country with the weaker economy will naturally want to see their country imitate the country with the stronger economy. We could see both of these forces at work in the Soviet abandonment of communism in favour of capitalism.

Similarly, it seems to me that two of the great flourishings of commercial life occurred in Greece and in Europe, and that both of these emerged from geographical areas where the terrain, combined with the technology of the time, favoured the creation of a number of small competing states.

Anyway, this was just another random train of thought post, the next post will examine the source of this bout of meandering.

90. Peak Oil and the Commercial Syndrome

Note: This post is the ninetieth in a series about government and commercial ethics. Click here for the full listing of the series. The first post in the series has more detail on the book 'Systems of Survival' by Jane Jacobs which inspired this series.

I guess it took a little longer to get back to the blog than I was expecting, due to post-vacation fatigue and busy-ness. It will be a short post this week as well, as I work my way back into the blogging flow.

While I was away, I was thinking about the relationship between energy supplies and the commercial syndrome. There is certainly causality in one direction as the innovation inherent in the 'Protestant Work Ethic and the Spirit of Capitalism' unlocked the energy in first coal, and then oil (not to mention natural gas, nuclear, hydroelectric, solar, etc.), as western civilization leaped ahead of the rest of the world in technological progress and material standards of living (i.e. comfort and convenience).

But what about the other direction? What if innovation fails in the face of our current energy requirements and the amount of energy available per person starts to decline for the first time in a number of decades/centuries?

The commercial syndrome is based around win-win transactions, but to keep the engine of trade and innovation going, new inputs are always needed. It seems logical to me that the commercial syndrome will flourish most when energy inputs are rising and economic growth is strong. In these circumstances, people are less concerned about distribution and more concerned with just improving their own lot.

But if I consider my limited knowledge of the history of civilization, the current strength of the commercial syndrome seems like a bit of an anomaly, with the guardian syndrome dominant in most times past (although part of that may just be that the guardians wrote more stuff down about themselves and built bigger monuments and so on).

I'd always figured that, even if we struggle to find enough oil or replacements for oil to avoid a downturn in our energy consumption, there's so much inefficiency in our economy that we should be able to manage reasonably well just by not wasting so much energy. But I worry that in an energy downturn, there will be less of a sense that all boats can ride a rising tide, and there may be a tendency to revert to guardian-style battles over distribution of the no longer rising tide of pies.

Looking at the rise in inequality and drop-off in wage increases that occurred in most Western countries around the time of the first oil crises in the 70's, it's possible that we've already been in this situation to some extent for decades now.

Anyway, this is just a train of thought and I certainly wouldn't come to any conclusions based on it, but I do worry that if we can't continually increase our energy consumption, we'll run into serious political problems that will aggravate what would otherwise be manageable energy issues. Certainly our non-response to the threat of climate change doesn't offer much reason for optimism in terms of how well we will deal with any sort of limitations on our insatiable quest for comfort and convenience.

79. Capitalism and Freedom, Part 2

Note: This post is the seventy-ninth in a series about government and commercial ethics. Click here for the full listing of the series. The first post in the series has more detail on the book 'Systems of Survival' by Jane Jacobs which inspired this series.

This week's post is a follow-up on last week's post on the book 'Capitalism and Freedom' by Milton Friedman.

Last week I promised to explore in more detail an example of where Milton Friedman got carried away with his 'market good, government bad' mindset. The specific topic I want to cover is Friedman's comment that,

"The view has been gaining widespread acceptance that corporate officials and labor leaders have a 'social responsibility' that goes beyond serving the interests of their stockholders or their members. This view shows a fundamental misconception of the character and nature of a free economy. In such an economy, there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition, without deception or fraud.¹"

As we'll see, the trouble with this statement is that while it is true that businesses have an obligation to pursue profits, Friedman unnecessarily constrains their other moral obligations, ruling out things like taking action to fight pollution as being a violation of a company's duty to pursue profits first.

This will be a lazy post for me, since I'm going to let Joseph Heath do most of the talking, via his essay, "A Market Failures Approach to Business Ethics" Really, you'd be better off just reading Heath's whole essay - it's easy to follow and not particularly long, but I'll summarize the main points here that are relevant to our Systems of Survival theme.

Heath first argues that the obligation of the business to earn profits is not a simple reflection of self-interest on the part of company shareholders but rather is a moral duty. The profits earned are a reflection of the ability of the shareholders ability to deploy resources where they are wanted/needed by the population - so the greater the profit, the greater the gain to society, and hence the duty to earn profits.

Naturally, many people will find this a little hard to swallow. Heath reasons that one reason people find this difficult to accept is that, unlike say a doctor's obligation to their patients, the obligation of a a manager to make profits is more like the indirect role played by trial lawyers in which an action which in and of itself has little moral justification (making money for shareholders / defending accused criminals) has value because of the role it plays within a system with various parts.

Heath:

"We understand implicitly that the professional conduct of doctors is to be entirely governed by their obligations to their patients, and thus that they are not permitted to let considerations of self-interest intrude. Profit-maximization has precisely the same status for managers.

...

Health is widely regarded as a good thing, and thus the doctor’s actions serve to promote a state of affairs that is morally desirable. This makes the doctor’s actions directly justifiable, even intrinsically altruistic. Things are more complicated in the case of business. It is not clear that profits are intrinsically good. Furthermore, when a manager makes a decision that disadvantages workers in order to benefit owners, the profit maximization imperative generates a distributive transfer that is by no means morally sanctioned. In fact, under the typical set of circumstances, the transfer will be regressive, and thus problematic from the moral point of view.

The asymmetry arises from the fact that profit maximization is only indirectly justified. It is useful to note that this problem is one that business ethics shares with legal ethics. The adversarial trial system imposes upon lawyers an obligation to do whatever is in their power to defend or advance the interests of their client, even when these interests are highly refractory to the concerns of justice. Thus the professional obligations of lawyers often conflict with the imperatives of everyday morality. What justifies their behaviour is the fact that they operate in the context of an institution with differentiated roles. The desirable outcome is a product of the interaction between individuals acting in these roles, none of whom are actually seeking that outcome. Justice is best served when there is both vigorous prosecution and vigorous defence.

Thus the effective trial lawyer 'promotes an end which is no part of his intention.'"

Next, Heath explains that the moral duty to seek profit flows from the first theorem of welfare economics which states that economic (pareto) efficiency is maximized when a bunch of conditions known collectively as 'perfect competition' are met, with one of the conditions being a number of firms competing to make the most profits.

Heath:

"Thus the primary reason for introducing the profit motive into the economy is to secure the operation of the price mechanism. The price mechanism is in turn valued for its efficiency effects. It allows us to minimize waste. The formal proof of this is often referred to as 'the first fundamental theory of welfare economics” (hereafter FFT), or else, in a nod to Adam Smith, the 'invisible hand theorem.' The central conclusion is that the outcome of a perfectly competitive market economy with be Pareto optimal – which means that it will not be possible to improve any one person’s condition without worsening someone else's."

Where things get tricky is that there are a number of other conditions for perfect competition (recall our earlier posts on Walter Schultz's 'Moral Conditions of Economic Efficiency')

The trouble is that competition only leads to efficiency if a number of conditions are met, the most commonly recognizes ones being the avoidance of force and fraud. As Heath notes, Friedman implicitly recognizes these moral obligations when he insists that the responsibility of the business is to, "to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition, without deception or fraud."

Where Friedman gets into trouble is in ignoring other possible violations of economic efficiency, most notably, the loss of efficiency caused by externalities that aren't priced into a business' products. For example, if company A drives company B out of business by offering lower prices, not because company A was better managed than company B but because company A lowered costs by dumping toxic chemicals into the water supply instead of paying to treat them like company B did, then this is not a gain in efficiency for society.

Heath:

"Despite some confusion, it is clear that Friedman's managers have genuine ethical responsibility to shareholders, and that this responsibility is derived from the FFT. The problem is that Friedman arbitrarily limits the set of obligations to those that support only some of the many Pareto conditions.

For example, Friedman argues that pollution reduction is one of the illegitimate responsibilities pressed upon managers in the name of 'social responsibility.' But pollution is a negative externality – a cost associated with some economic activity that is transferred to a third party without compensation. These externalities exist because the set of markets is incomplete. We cannot exercise property rights over the air that we breathe, for example. As a result, while we can charge people for dumping noxious substances on land that we own, we cannot do the same when they dump it in the air. For this reason, one of the Pareto conditions specifies that there must be no externalities. Any corporation that pollutes is essentially profiting from a market imperfection. This means that there is no difference, from the moral point of view, between deception and pollution – both represent impermissible profit-maximization strategies.

Friedman's decision to prohibit deception, while giving the wink to environmental degradation, is arbitrary and unmotivated."

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¹ This quote is from Capitalism and Freedom, page 133, but you can also refer to Friedman's article, "The Social Responsibility of Business is to Increase its Profits," which covers the topic of this post specifically.

The Trouble With Credit - Brief Follow-Up

This is just a follow-up to a (somewhat lengthy) post I wrote a while back on why credit is not like other products in that the typical commercial syndrome goals of maximizing competition and hence output does not have the same beneficial effect in this particular market as it odes in other commercial markets.

The topic is micro-credit, and blogger David Roodman, who seems quite familiar with this topic, makes a comment somewhat along the lines on my post in justifying why there should be special regulations in place (for example a cap on profits or return on assets) on micro-lenders,

"Credit is not an ordinary product. It is weighed down by millennia of baggage, for the good reason that it can do real harm. It is like a drug in that it is potentially healthy in small doses, but also potentially addictive. So it stands to reason that sellers of this product must take unusual steps to counteract its special problems of reputation and risk."

In the comments, objections from commenter Bhagwan Chowdhry - who comes across as a classic level 2 thinker - clarify Roodman's opinions further.

Here's the back and forth:

Chowdry:

"I don’t understand the bandwagon that everyone has jumped on about MFIs and lenders in general about not making too much profit. Isn’t profit precisely the incentive mechanism to encourage competition which would lead to lower interest rates? This is a robust mechanism that has worked for centuries in many different economies."

Roodman:

"Bhagwan, I probably should have been more precise about this in my post: I think it is reasonable to consider capping (not eliminating) profit in microlending because credit markets are not ordinary. If we were speaking of businesses that sell soap (or savings) to the poor, I would not see the case. If businesses try to sell to much soap to the poor, the market will quickly correct their excess in the standard way. Laissez faire will work pretty well. Not so with credit, as we have seen: the correction is often long delayed, to almost everyone’s detriment. Conceding this market imperfection opens the way for intervention. At the least, I don’t think laissez faire is obviously optimal. Far from being impractical, capping ROA is being done now by the groups I mentioned, and both are seen as leaders in the field in India."

Bhagwan:

"Simply asserting that “credit markets are not ordinary” is not a compelling argument. One needs to understand more clearly what frictions prevent competitive entry in credit markets."

Roodman:

"Bhagwan, I have blogged extensively on what is going on in Indian microfinance now, so I am not just making that simple assertion of abnormality. In point of fact, the problem is not barriers to entry but, if anything, the opposite.

I don’t doubt that capping ROA is suboptimal. When are real-world solutions ever optimal? Do you have a practical, politically pragmatic alternative that is superior? Please share it. Laissez faire has failed spectacularly."

Bhagwan has the final word (last I checked):

"David, you say, “the problem is not barriers to entry but, if anything, the opposite.” Yes, I understand that you, and others, have written a lot about problems caused by “excessive” borrowing. The question one has to answer is why a profit-maximizing lender would not guard against excessive borrowings? Perhaps, the lenders do not face full consequences of their imprudent lending practices because they might be lending “other people’s money.” We know the solution to that problem – make sure they are not too big to fail."

I only posted this since it's nice to see smart folks like Roodman lending support to my speculative post. Otherwise, there's not much of a moral here, other than that some people never learn, but some do, I suppose.

Casts of Mind

"perhaps to be too practical is madness, to surrender dreams this may be madness"

There's a funny section in Jane Jacobs 'Systems of Survival' where she illustrates how differently someone with a commercial syndrome mindset views things vs. how someone with a guardian mindset views things. In the book, Jacobs weighs the benefits of a society like medieval Europe where people are separated by birth into either a guardian life or a commercial life vs. our current approach which allows people to do whatever they please, allowing greater flexibility, but potentially at the cost of some moral confusion.

Anyway, I only bring that up, because the most rational, most commercial syndrome minded pundit in Canada is, in my opinion, Dan Gardner, so I was wondering ahead of time how Gardner would react to the two week, irrational, Guardian syndrome festival that is the Olympics.

Gardner didn't let me down, as he churned out post after post after column after post after post after column after post after post after column after post after post after post after post after post after post after post on the Olympics, every last post critical, with all of the posts amounting at root to Gardner pleading with Canadians to stop being so irrational, taking pride in the Canadian athletes when everybody knows that you only buy medals not win them, or that athletes have to work too hard as children to become world champions or that McDonald's food isn't necessarily the healthiest choice or whatever he felt might serve his goal of convincing people not to support the irrational Olympics.

The funniest part was in the comments on this column, where commenter 'Shiner' repeatedly, politely, tries to get Gardner to admit that maybe people just like to cheer for the home team to win and if that's irrational, who cares - but Gardner was completely incapable of even acknowledging the question, getting more and more upset and snippy throughout the exchange without ever engaging Shiner's main point. To the pure rational (commercial syndrome) mind, any activity that doesn't promote comfort and convenience is irrational and rational is a synonym for 'good' or 'right'. The notion that something could be both irrational and good just doesn't compute.

Most of the time, a commitment to rationality is a good thing, as when Gardner is debunking homeopathic medicine quacks or pointing out the inefficient way we go about satisfying our obsession with security. But during the Olympics, an uncompromising commitment to rationality just seems a little silly. Speculating, I think that may be part of the appeal of the Olympics - in a world dominated by rational commercial thinking, the Olympics represent a rare outpost of acceptable guardian type activity. Anyway, not to worry Dan, the Olympics are over now, so you have a couple of years of unrelenting rationality to look forward to. :)

38. Commercial Syndrome Revisited

Note: This post is the thirty-eighth in a series. Click here for the full listing of the series.

This post is a little different from the ones that have come before. Rather than describing a particular concept or book, this post returns to the original purpose of the series - probing into the nature of the two ethical 'syndromes' identified by Jane Jacobs in her book 'Systems of Survival'

This post looks in more detail at the commercial syndrome, trying to apply some of what we have covered in the previous 37 posts in the series. My thoughts on this are still pretty jumbled and that's likely to be reflected in this post, but nevertheless, here goes.

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As a starting point, I've taken the list of ethics in the commercial syndrome, per Jacobs, and grouped them as follows:

Group 1

Shun force
Come to voluntary agreements
Respect contracts
Be honest

Group 2

Be optimistic
Be thrifty
Be open to inventiveness and novelty
Use initiative and enterprise
Invest for productive purposes
Be efficient
Collaborate easily with strangers and aliens
Be industrious
Dissent for the sake of the task
Compete

Group 3

Promote comfort and convenience

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The commercial syndrome describes the economy of trade or exchange, and the first group are the ethics that serve to ensure that any trades that take place are beneficial to both sides (i.e. win-win / pareto-efficient).

They correspond to the constantly repeated concern about 'force and fraud' that I've encountered in book after book. For example, these are the values that David Gauthier wrestled with while trying to figure out which ethical values might be needed in perfectly competitive market. Basically, they are mechanisms to ensure that trade doesn't result in any negative 'internalities.' (if externalities are an effect of a transaction on someone not party to the transaction, then an effect on someone who is part of the transaction must be an internality)

Where these first 4 ethics are respected, people will develop trust that will allow them to greatly increase the number of transactions they participate in, by reducing transaction costs. Think back to the ridiculous transaction cost of the trade between Mal and Patience that I described here.

Note that these ethics require the setting aside of short term self-interest, although it remains an area of controversy whether the short term self-interest is set aside in return for a greater long run self-interest (i.e. enlightened self-interest), or if it is set aside out of concern for the other party to the trade or for the benefit of society.

We can think of the first block as representing the 'moral conditions of economic efficiency' to use Schultz's phrase. Without these moral values, trade will fail to achieve efficient outcomes. Although they may not be necessary in a perfectly competitive market, in almost any at-all realistic conception of a market, they are necessary. For example, if all trades could be conducted without placing goods at risk of theft or seizure, then there would be no need for an ethical value abjuring the use of force. But it is difficult to exchange goods without placing them within reach of seizure by the person you are trading with or other thieves.

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The second group is a set of ethics relating to maximizing the number of trades made over time. We might refer to these as the 'moral conditions of economic maximization'

Thrift privileges savings over consumption and provides the means for productive investment. Initiative and enterprise as well as Inventiveness and novelty create opportunities for productive investment. Productive investment is only productive if it generates sufficient opportunities for profitable exchange. Efficiency and Industriousness serve the maximization of opportunities of exchange for a given investment. Collaboration with strangers and aliens allows for the greatest possible range of trading partners. Dissent for the sake of the task privileges maximization of trade opportunities over obedience. Optimism encourages people to take the risk of innovation and investment. etc.

It seems reasonable that these two blocks of ethics should be linked in a syndrome since if the trades follow the first block of ethics so that they are beneficial on net, why wouldn't you want to make as many as possible?

But this is exactly the question which an economist might raise: why would you need ethics in order to maximize trade? – why wouldn't people *want* to make as many beneficial win-win trades as possible? Aren't people just self-interested maximizers out to make as big a pile of money as possible? Taking Gauthier's view of ethics as an impartial restraint on behaviour, to the extent that 'natural' human behaviour corresponds with the behaviour needed to maximize trade, then no ethics would be necessary.

However, as we'll see as we go through the list of ethics in this group, there are a few disconnects between human nature and 'homo economicus'.

If we think back to Weber's example showing how capitalist enterprise might disrupt a stable market, we see that the drive to compete and to innovate and to use initiative and enterprise generally comes from putting self-interest ahead of the group interest, and therefore runs contrary to much ethical teaching.

When a company cuts its prices, or improves its products, or invents new ones these actions are not beneficial to everyone, they have a harmful effect on the other companies in their industry. In fact, cutting prices can be harmful to the company itself when its competitors follow suit, and a cozy profitable cartel degenerates into a cut-throat competitive market. In the more extreme case, new inventions often cause old industries to disappear entirely in the process known as 'Creative Destruction'.

As I discussed earlier, in most areas of human activity, cooperation is considered a good thing and the motto is 'United we stand, divided we fall.' But the ethics of 'compete' and 'innovate' and 'show initiative and enterprise' all reflect the commercial world where cooperation is considered 'collusion' and the motto is 'United we stand, then we go to jail for anti-trust violations.'


Moving on, if you think back to the article by Steven Pinker that I linked to, he listed 5 areas where researchers had identified fundamental human areas of morality. One of these was community, so you can see how an ethic of 'Collaboration with strangers and aliens' might be required to overcome this element of human nature.

Another area mentioned by Pinker was authority. So 'Dissent for the sake of the task' is required as an ethic to overcome the natural respect for authority we have.

Note that something that both 'Collaboration with strangers' and 'Dissent for the sake of the task' have in common with 'Compete' and 'Innovate' and 'Show Initiative' is that they all tend to undermine any attempt at monopoly or monopoly-like behaviour by a group of people (i.e. cooperation/collusion). This is most obvious in the case of compete, but note how if a community was attempting to successfully boycott another community or group, this would require near or total unanimity. If all the movie theaters refuse to allow black people to buy a ticket then they all remain even. But this mass refusal creates a possible profit for any theater willing to break the ban. An ethic of 'collaborating easily with strangers and aliens' will serve to undermine any attempt at monopoly or restraint of trade along these lines.

Similarly, the creation of new financial institutions not regulated as banks allowed people to get around the monopolistic behaviour of the banks who had historically presented a united front in refusing to lend large sums of money to subprime borrowers for the purpose of buying houses, even though any one of them could have made large profits (in the short term at least) by making such loans.

The need for an ethic to support 'Industriousness' seems obvious enough. People are 'lazy' (i.e. less industrious than is optimal for the production of as many trade-able goods as possible) by nature, so any ethic that makes people work longer or harder would support increased trade.

Along with 'Industriousness', 'Efficiency' must counter natural laziness, and they both are only positive ethics in an environment in which no limit on growth is needed or in one where some other force is imposing a limit on growth. What I mean is that, when it comes to an activity which is primarily about taking (as opposed to trading) - think fishing or logging - a combination of industriousness and efficiency will leave you with barren hillsides and lifeless seas. For most of human existence, we got much of our sustenance by taking from nature, so industriousness and efficiency were potentially dangerous values. But for areas of trade where limits on growth are not needed in the same way (e.g. computer hardware development) industriousness and efficiency can be a formidable force.


'Thrift' and 'Investing for productive purposes' both must counter the natural bias towards short term thinking that people have. Thrift means postponing consumption, as does investing for productive purposes. What is the ratio of people who struggle with procrastination vs. people who struggle because they are always getting hard things over with quickly? This ties in with the concept of hyperbolic discounting, discussed earlier.


Optimism runs counter to what seems a natural human tendency toward fatalism and risk aversion. Many aspects of human life (particularly in earlier days) are non-linear in the sense that getting twice your daily intake of food is merely a nice bonus whereas getting half your daily intake of food means death. This leads to a sensible tendency towards risk aversion in many situations. However, risk aversion works against the spirit of innovation and risk taking that is central to capitalist development, so optimism and openness to inventiveness and novelty are needed as ethical values to help overcome this.

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Note that while competition is a spur to the second block of ethics (if you don't innovate, the competition will, if you won't sell to Myanmar, your competition will), it has a more mixed relationship with the first block of ethics. Competition helps to ensure that trades are truly voluntary in the sense that if a company is behaving dishonestly or not respecting contracts, you can punish them by moving to their competitor, whereas, if the company has a monopoly, your options are limited. But, on the other hand, companies can be driven to dishonest behaviour, to not respecting contracts, to the use of force (against unions, for example) by competitive pressures. Another way of looking at the first block of ethics is to see it as a set of restrictions on the domain of competition.

In a simple exchange, self-interest, group interest and social interest are in alignment (if the first group of ethics is adhered to), but in a capitalist market, there is a conflict between self-interest and group interest and the second group of ethics is the ethics for promoting the interest of the self at the expense of the group. The project of Adam Smith and many that came after was to demonstrate that despite this conflict with the group interest, there is nonetheless a benefit to the social interest that justifies this 'selfish' behaviour. And that although cooperation is helpful in most areas of human endeavour, cooperation (collusion) between market competitors carries a social cost.


I think this distinction is why the force of the first group of ethics is much stronger than the force of the second group. The moral condemnation of a country that invades another to seize it's oilfields is stronger than the moral condemnation of a group of oil producing countries that work together (i.e. collude) to keep the price of oil high.

So on the one hand, the commercial syndrome is simple. (Ethical) Rules to make sure trades are beneficial, and rules to ensure you make as many trades as possible. But
notice how ethically complex the commercial syndrome is at the same time. On the one hand, you have a block of (economic) efficiency ethics whose purpose is to prevent you from pursuing your short term self interest in ways that are harmful to society (force and fraud). On the other hand, you have a block of ethics whose purpose is to encourage you to pursue your short term self-interest, in ways that may be harmful to yourself (in the longer term) and are certainly harmful to your competitors, but which yield a net benefit to society. The common element, as stated by David Hume, is what is useful (beneficial) to society as a whole.

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Finally, we have 'Promote comfort and convenience.' Reading about 'industriousness' and 'thrift' and 'innovation' and 'efficiency', you might start to wonder, what is the point of all this. Why accumulate money if you never plan to put it to any good use other than making more money? As modest as it sounds, 'Promoting comfort and convenience' is the goal of the commercial syndrome.

Weber alluded to this in recognizing that a modest, yet comfortable home was one of the things that even the ascetic Protestant groups he described recognized as being a reward for keeping the capitalist faith of thrift and so on. Any fantasy novel reader will recognize that while a medieval castle in invariably grand but damp and drafty, the home of a merchant is almost invariably less opulent but comfortable and cozy (excluding evil merchants, of course). The question is why?

I think the answer lies in the distinction between positional goods and non-positional goods. As discussed earlier, the pursuit of positional goods is a zero sum game since any gain is offset by a negative externality to those who did not gain. The whole goal of the commercial syndrome is to play a non zero-sum game. But it only works when the profits generated by the system are used to support non-positional (non status related) human goals.

It does us no good to generate massive wealth if we spend that wealth building houses larger than our neighbour's, that we then leave half empty because we don't need all that space. It does us no good if we spend half our lives trying to get an academic degree with more letters than the next guy so we can beat them out for a job we only needed a year or two of post secondary education to do competently.

But if instead that money goes towards central heating, to improved medical care, to cars that have airbags, to high speed rail lines and so on, then we are making progress with our wealth in making life more comfortable and convenient for ourselves.

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One thing worth keeping in mind is that the list of commercial ethics was constructed to contain only those elements that differ from the guardian syndrome, so to some extent what we see here is an echo of the ethical requirements of guardian work. i.e. If industriousness was also helpful in guardian work, then it wouldn't be on the list, so the presence of industriousness reflects as much the lack of need for industriousness in guardian work as it does the need for it in commercial work.

This means that in order to better understand the commercial syndrome, we will need to go into more detail on the guardian syndrome (and vice-versa) and then we will need to consider the two syndromes together as an interlinked system.

One problem with this post is that the analysis is largely static. But the ethical syndromes can only, in my opinion, be truly understood as dynamic systems where some of the important effects of the ethics can only be seen as time passes. For example, market competition creates a process of 'natural selection.' For another example, force and fraud produce two conflicting effects: the benefits to the perpetrators giving them greater size and influence (bad money drives out good) and the reaction from other participants (shunning of fraudsters, punishment from guardians, emigration from a corrupt area, etc.)

To truly understand the syndromes will require a fully functioning dynamic model of both syndromes and their interaction to show how they can develop and be stable (or not) over time. Some of this work is already underway, and I plan to cover some of it in future posts, but for the next few posts, I'll likely shift focus a little bit from what has mainly been static analysis of the commercial syndrome to a static analysis of the guardian syndrome. One step at a time.