J. Schumpeter, Self-interest, the Common Good, and Utilitarianism

We know that both self-interest and the Common Good were old stagers. But around the middle of the eighteenth century, they asserted themselves with a new energy, not only in ethics, but over the whole field of social thought. In particular, they were, or were supposed to be, the basic and unifying principles of all the social sciences, practically the only ones ‘reason’ had espoused. Helvétius (1715–71) compared the role of the principle of self-interest in the social world to the role of the law of gravitation in the physical world.

Even the great Beccaria went to the length of asserting that man is wholly egotistic and egocentric and does not trouble at all about any other man’s (or the common) good. It should be observed once more that this individual self-interest was oriented on rational expectation of individual pleasure and pain, which must, in turn, be defined in a narrowly hedonist sense.

It is true that the eighteenth century authors added qualifications and recognized pleasures that are not usually classed as hedonist, such as pleasures from malevolence, from the acquisition of power, and even from religious belief and practice. In consequence, defenders of that doctrine have been to some extent successful in their attempt to redeem it from the allegation that has made human behavior turn on beefsteaks. But this success—apart from the fact that it does not touch all the other objections that may be raised against any theory that overstresses rationality in behavior—was more apparent than real. For if we go very far beyond the grossest gratifications of the simplest appetites, we come dangerously near to identifying expectation of ‘pleasure’ with all possible motives whatsoever, even with intentional suffering of pain, and then, of course, the doctrine becomes an empty tautology. Worse still, if we allow too much scope to such ‘pleasures’ as may be afforded by exertion, victory, cruelty, and the like, we may get a picture of human behavior and of society that differs totally from the one those men actually envisaged.

Thus, if we are to derive the conclusion they derived from their ideas about pleasure and pain, we have after all no choice but to adopt a definition of the latter that may indeed allow some freedom for going beyond beefsteaks, but only a limited one; that is to say, we have no choice but to adopt a theory of behavior that is at variance with the most obvious facts. Why, then, was it so readily adopted by many good brains? The answer seems to be that these good brains belonged to practical reformers who fought a historically given state of things that seemed to them ‘irrational.’ In such a struggle, simplicity and even triteness are the chief virtues of an argument, and beefsteak philosophies the best answer to a system of super-mundanely sanctified rights and duties. Not that these authors were insincere: we all of us quickly convince ourselves of nonsense that we habitually preach.

We have seen above how the common good or social expediency of the scholastic doctors was harnessed into a particular shape by the eighteenth century votaries of reason. Let us repeat and reformulate. The pleasures and pains of each individual are assumed to be measurable quantities capable of being (algebraically) added into a quantity called the individual’s happiness (felicità); a frequently used German term was Glückseligkeit. These individual ‘happinesses’ are again summed up into a social total, all of them being weighted equally: ‘everyone to count for one, nobody to count for more than one.’ Finally, that social total is substituted for, or identified with, the common good or welfare of society, which is thus resolved into individual sensations of pleasure or pain, the only ultimate realities. This yields the normative principle of Utilitarianism, namely, the Greatest Happiness of the Greatest Number, which is chiefly associated, in recognition of ardent advocacy, careful elaboration, and extensive application, with the name of Bentham. If the idea was of ancient origin and grew so slowly as to defy dating, the slogan itself may be dated more precisely: so far as I know, it occurs first in Hutcheson (op. cit. 1725), then in Beccaria (op. cit. 1764, la massima felicità divisa nel maggior numero); after that in Priestley (op. cit. 1768), to whom Bentham gives the credit for what to him was a ‘sacred truth.’ Hume does not have the slogan, but should be included in this series all the same.

The word Utilitarianism is Bentham’s. The essential point to grasp is that utilitarianism was nothing but another natural law system. This holds not only in the sense that the utilitarians were the historical successors of the seventeenth century philosophers of natural law; nor only in the sense that the utilitarian system developed from the system of the philosophers which, though evident, can be proved in detail from the history of ethics, on the one hand, and from the history of the common good concept, on the other; but it holds also in the much more significant sense, that in approach, in methodology, and in the nature of its results utilitarianism actually was another, the last, natural law system. The program of deriving, by the light of reason, ‘laws’ about man in society from a very stable and highly simplified human nature fits the utilitarians not less well than the philosophers or the scholastics; and if we look at this human nature and the way in which it was supposed to work, as we did above, we realize that the affinity goes much further than that.

Like the systems of the philosophers or the scholastics, utilitarianism presents a threefold appeal. First it was a philosophy of life, exhibiting a scheme of ‘ultimate values.’ It is here that we must look for the source of the ineradicable impression that utilitarianism, Bentham’s especially, was something new and fundamentally antagonistic to the older systems. But, as the reader should know by now, the difference was not great so far as the philosophy of the current business of everyday life is concerned. For the sphere of stable, barn, shop, and market, the scholastic doctors were utilitarian enough. The real difference was that the doctors confined the utilitarian point of view to purely utilitarian activity where it is (nearly— not even there wholly) adequate, whereas the utilitarians reduced the whole world of human values to the same schema, ruling out, as contrary to reason, all that really matters to man. Thus they are indeed entitled to the credit of having created something that was new in literature—for it cannot be attributed to Epicurus—namely, the shallowest of all conceivable philosophies of life that stands indeed in a position of irreconcilable antagonism to the rest of them.

Second, utilitarianism was a normative system with a strong legal slant. It was, like the scholastic system, a system of moral imperatives, on the one hand, and of legislative principles, on the other. Bentham considered himself primarily a moralist and legislator, and it was as a criterion of ‘good’ and ‘bad’ legislation that the principle of greatest happiness of the greatest number acquired for him paramount importance. Observe once more the equalitarian element in it which was as essential as the element of happiness. And these two together with the belief not only that any individual was very much like any other, but also that every individual was nondescript and malleable material with few or no innate characteristics of his own, then produced the fundamental political ‘plank’ of Benthamism: educate people and let them vote freely and everything else will take care of itself. But, third, again like the natural law of the philosophers and the scholastics, utilitarianism also was a comprehensive system of social science embodying a uniform method of analysis. And this aspect of it is separable from the two others in the same sense in which the analytic work of the scholastics and the philosophers is separable from the rest of their thought. In other words, it is logically possible to despise utilitarianism, root and branch, both as a philosophy of life and as a political program and yet to accept it, as an engine of analysis, in all or some of the departments of the social sciences. But since, on the one hand, utilitarianism may be not much more valuable as an engine of analysis than it is in the other two respects and since, on the other hand, many economists have not hesitated to declare that it is basic to economic theory—Jevons even defined economic theory as ‘a calculus of pleasure and pain’—the extent of its influence upon analytic work should be cleared up at once.

It is the common failing of laymen, philosophers, and historians of thought to pay exaggerated respect to whatever presents itself as a fundamental principle. Actually, people do not always make use, in scientific work any more than in the practical concerns of life, of the fundamental principles to which they profess allegiance. Utilitarianism being a set of such fundamental principles, we must therefore inquire in every case what role it was allowed to play. So far as economics is concerned, we may, however, return broad answers for four types of cases. First, utilitarian hypotheses are completely valueless in questions of interpretations of history or in questions touching the moving forces of economic history.

Second, utilitarian hypotheses are worse than valueless in all problems involving questions of actual schemes of motivation, for example, in such a problem as the economic effects of inheritance. Third, utilitarian hypotheses are in fact basic to that part of economic theory that is usually referred to as Welfare Economics—the heir to Italian eighteenth century theories on felicità pubblica. We adopt these hypotheses habitually when discussing such problems as the effects of ‘transfers of wealth from the relatively rich to the relatively poor.’ And this is precisely the reason why the propositions of welfare economics never convince anyone who is not already convinced beforehand and irrespective of any argument. For though there is, of course, an aspect of these problems to which the utilitarian approach is appropriate—provided we believe it to be methodologically admissible—this aspect is evidently not the only one: we have proved very little, when we have proved that transferring a rich man’s dollar to a poor man increases welfare in the utilitarian sense. Fourth, in the field of economic theory in the narrowest sense of the term, utilitarian hypotheses are unnecessary but harmless. For instance, we can state and discuss the properties of economic equilibrium without introducing them. But if we do introduce them, results are not materially affected, hence not impaired. This makes it possible for us to salvage much of economic analysis that at first sight seems hopelessly vitiated by utilitarian preconceptions.

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