6 What does true individualism really involve?
Overcoming market–philanthropy dualism in Hayekian social theory
Introduction
Philanthropy and commerce are often portrayed as motivationally and institutionally distinct forms of social cooperation. Markets are thought to involve large-scale interaction among people who know little if anything about each other, while philanthropy is said to centre on personal relationships between small groups of individuals who are well acquainted with one another’s needs (Hayek 1988, 18–19). Accordingly, markets are viewed as impersonal and amoral spheres of action, in which people are treated as no more than means to one another’s ends, while philanthropy is said to involve a more principled treatment of others as ends in themselves. Consequently, while behaviour in markets is usually said to be driven exclusively by self-interest, philanthropic activity is often said to be motivated by a more altruistic concern for the welfare of others. This tendency to portray markets and philanthropy as distinct, self-contained modes of cooperation is an example of dualism, “the practice of organising thought by means of all-encompassing mutually exclusive categories” (Dow 1990, 143). The works of Friedrich Hayek, and also of other thinkers such as Kenneth Boulding, are often said to exemplify such a dualistic approach (Garnett 2007, 2009).
This paper utilises recent developments in social theory and philosophy to suggest how this dualism between commerce and philanthropy might be overcome, thereby pointing the way towards a more integrated and inclusive, but still distinctly Hayekian, approach to social theory. In particular, the paper draws on recent developments in social theory and philosophy centring on the notion of ‘collective intentionality’ to argue that – even viewed through a Hayekian lens – market exchange and philanthropy bear greater similarities to one another than is often recognised. In particular, it will be argued that both forms of activity involve collective or we-intentions that are quite distinct from the individual intentions, whether self- or other-regarding, that dualists typically assume characterise people’s behaviour in (respectively) markets and the independent sector.
On this view, voluntary market exchange can be thought of not as an exclusively self-interested affair, but rather as involving a shared commitment on the part even of anonymous individuals to engage in mutually beneficial interactions governed by norms of promise-keeping, honesty, the rule of law, and generalised reciprocity. Similarly, philanthropy can be thought of as involving people formulating collective or we-intentions that commit them to furthering a particular cause, from which they themselves benefit (either directly, from the gratitude of the recipients of their largesse, or less immediately, and with less certainty, through a reciprocal gift given at some indeterminate point in the future). In both cases, the pursuit of self-interest is tempered, albeit to different degrees, by a commitment to shared goals and common norms of conduct, within – significantly, as we shall see – a world of (radical) uncertainty.
One implication of this view, of course, is that Hayek’s distinction between small-group activity and the kind of behaviour that gives rise to the extended order of the Great Society is over-drawn; both kinds of endeavour involve collective intentionality and a measure of commitment to various social norms and rules. Notwithstanding the departure this marks from the dualistic position Hayek stakes out in his explicit remarks about the limited role played by altruism in the creation of the extended order of the Great Society, the claims advanced in this paper arguably draw out, build on, and develop some underappreciated aspects of Hayek’s own distinctive view of human nature. Hayek christens his account of human nature “true individualism”, the better to distinguish it from the narrow view of man as an anti-social atom or desiccated calculating machine so often associated with economics:
What, then, are the essential characteristics of true individualism? The first thing that should be said is that it is primarily a theory of society, an attempt to understand the forces which determine the social life of man, and only in the second instance a set of political maxims derived from this view of society. This fact should by itself be sufficient to refute the silliest of the common misunderstandings: the belief that individualism postulates (or bases its arguments on the assumption of) the existence of isolated or self-contained individuals, instead of starting from men whose whole nature and character is determined by their existence in society
(Hayek [1945] 1948, 6)
For Hayek, people are profoundly social beings whose values, motivations, goals, and conduct are all shaped by the nexus of social context within which they live (11–13). The argument developed below is that the theory of collective intentionality can be used to flesh out this notion of true individualism so that it can encompass both commercial and philanthropic activities. In doing so, the paper aims to signpost the possibility of a broader, but still Hayekian, notion of economics as the study of human provisioning in its broadest sense, encompassing both commercial and philanthropic activity.
The structure of the paper is as follows. The following section sets out the key concept of collective intentionality and explains how it can be used to portray market transactions as endeavours in which the contracting parties commit to a joint project that will benefit them all. Next, I argue that this account of the market as involving people forming collective intentions to engage in mutually beneficial transactions is not only quite consistent with the Hayekian portrayal of the market order as a rule-governed social process but also adds to the Hayekian analysis a sense of how, through the use of collective or we-intentions, an individual can identify him- or herself with a group or society in which certain rules prevail. The notion of collective intentionality is then applied to philanthropy, in order to show that – far from being separate domains of human activity involving radically different forms of motivation – the market and philanthropic orders are both parts of civil society, with people’s behaviour in both being driven by the same kind of human inclination towards mutual assistance. Finally, I summarise and draw conclusions, in particular concerning the nature of economics as a discipline.
Collective intentionality and market transactions
Reciprocity is a human inclination towards mutual assistance and manifests itself in people’s willingness to act together to secure their mutual benefit (Bruni and Sugden 2008, 46; Seabright 2004, 27, 54–58). On the view developed in this paper, reciprocity is a wellspring of human action, both in the market and also in what is variously called the voluntary, independent, or philanthropic sector. For Luigino Bruni and Robert Sugden, on whose account of reciprocity this paper relies, both market-based and other, non-market forms of human behaviour involve a human inclination or disposition towards reciprocity or mutual assistance. In contrast to the standard conception of mutually advantageous exchange, in which each party benefits from a transaction that happens – as a contingent matter – to benefit the other, but in which one person’s benefiting is not part of the other’s intention, the notion of assistance “implies an intention on the part of the person who assists to benefit the person who is assisted” (2008, 46). Bruni and Sugden elaborate as follows:
Assistance is intentionally directed towards helping another person in her needs, towards being useful to others. If assistance is mutual, these intentions are reciprocal: each stands ready to help the other in the expectation that they stand ready to help her.
On this view, market transactions are – like philanthropy and other forms of reciprocity – instances of mutual assistance, whereby once they have decided to trade with each other, the relevant parties are committed to securing their mutual benefit. And this understanding of market transactions as mutually beneficial enters into people’s understandings of the market relationships in which they participate, in a way that can be understood using the notion of collective or we-intentionality.
The philosophical literature on collective intentionality suggests that, in addition to having their own separate goals and commitments, the individual members of a group can also possess “collective” intentions that involve them making a commitment to act in concert with one another, as a group, in order to achieve some shared goal. Each member of the group that holds a collective intention conceives of him- or herself as acting as a member of that group and, therefore, as performing part of a profile of actions that, if each member does his or her part, will – it is believed – promote the group’s shared objective. In other words, each individual’s intention is to join with the others in achieving some shared goal (Gilbert 1989, 1996; Searle 1990; Bratman 1993; Bruni and Sugden 2008, 49–50).
Consider, for example, the members of an American football team that is about to try to run a pass play. In that case, the collective intention – held by the members of the team’s offence – is expressed by the statement, “We are executing a pass play.” Of course, each individual member of the offence will have a specific contribution to make towards achieving that goal: the offensive linemen will have their individual blocking assignments; the wide receivers will all have particular pass patterns to run; the running backs will either stay in the backfield to block blitzing linebackers or run pass patterns as so-called check-down receivers; and the quarterback will have a series of “reads” whereby he has to scan various potential receivers of the ball and decide whether or not to pass it to them, or to run with the ball himself, or to throw the ball away. The point, though, is that all of these individual intentions arise only within the context of the shared intention to run a pass play, and they cannot be expressed without that overall collective intention; the individual intentions all derive, and only gain their meaning from, the collective intention, “We are executing a pass play.” When each player performs his or her designated action, he or she construes it as part of the collective intention and acts in the confidence that the other members of the group view things the same way and will therefore also perform their allotted tasks (cf. Searle 1990).
What this example suggests is that collective intentions have two key characteristics. First, the individuals who hold them believe that the intention in question is widely – though not necessarily universally – held by the other members of the group. Second, the individual believes that the intention is mutually or reciprocally held by members of the group, in the sense that they too believe that it is widely held by their fellow members. All the players on the offence need to be “on the same page,” as the saying goes, in the sense that they all need to believe that they are executing the same pass play (rather than, say, a running play). In short, we-intentions involve a structure of mutually reinforcing, reciprocal beliefs, shared by the individual members of the relevant group, such that each believes that the others hold the same belief, and each also believes that the others think the same about their fellow members (cf. Davis 2002, 14).
When it comes to market transactions, the significance of collective intentionality is as follows. Bruni and Sugden argue that the market contracts into which people enter can be thought of as “constituting the contracting parties as a collective agent with respect to whatever joint enterprise is the subject of the contract” (2008, 51). On this view, in signing the contract, each party commits him- or herself to playing his or her part in bringing about a shared goal, namely carrying out some transaction that will be to the joint benefit of both of the parties. According to this perspective, when two people agree to trade with each other and sign a contract, what they are doing is effectively saying to one another, “Here is a plan for a joint enterprise from which both of us can benefit: you help me by selling me the car that I want; and I assist you by giving you the money you need in return. If we both play our parts, then both of us will be better off after the trade than before it.” The point is that, if trade is indeed based on shared intentions of this kind – intentions that stipulate that, “We are involved in a mutually advantageous trade” – then each party acts with the intention of playing his or her part in a combination of actions that is intended to benefit both of them. The contrast with the conventional view of market exchange, according to which people trade with one another with the intention only of advancing their own narrow self-interest and not that of their trading partner, so that mutual advantage emerges only as an unintended consequence of the transaction, is stark (Bruni and Sugden 2008, 46, 50; cf. Sen 1999, 257).
For Bruni and Sugden, then, market transactions are – like philanthropy and other forms of reciprocity – instances of mutual assistance, whereby once they have decided to trade with each other the parties to a transaction are committed to securing their mutual benefit. And the fact that market transactions are mutually beneficial enters into people’s own understandings of the market relationships into which they enter, so that they internalise that idea. The parties are jointly intending a combination of mutually beneficial actions and each party thinks of him- or herself as a member of a group and as performing – indeed, as we shall see, as being obliged to perform – his/her part of the set of actions agreed upon by the group in its efforts to pursue the agreed objective. It is this notion of market transactions as being based on collective or shared intentions that – according to this perspective – makes those transactions genuinely social. The relationship is social because, rather than being based on individual intentions – whether they be selfish (taking the perspective of an “I”) or selfless (viewing things from the vantage point of “You”) – it is couched in terms of the shared intentions of a group of people (of the “we” or “us”).
It is important to note that, according to this account, the collective intentions that undergird market contracts are formed only when the contract is made; they do not exist prior to the contract and so do not provide the motivation for the contract. People are free to pursue their own interests in choosing which contracts to make, only becoming committed to a shared goal after the contract has been drawn up. In this way, the approach developed by Bruni and Sugden makes it possible to treat market relationships as genuinely social and as involving mutual assistance while retaining the view that they also involve competition based on private incentives and price signals (2008, 49, 51–52).
A Hayekian account of the market
How does all this bear upon Hayek? Notwithstanding his explicit remarks about the shortcomings of altruism (1988, 18–19, 81), Hayek’s own explanation of how the extended order of the Great Society is brought about reveals a more balanced position, in which people’s pursuit of their goals is tempered by their commitment to certain abstract norms and rules (such as moral norms of promise-keeping and of truth-telling, generalised norms of reciprocity, and formal laws of property, tort and contract) (Hayek 1960, 62–63; 1976, 14, 16–17). “Man is as much a rule-following animal as a purpose-seeking one,” Hayek (1973, 11) says, elaborating on that theme by quoting a passage from the philosopher R. S. Peters:
Man is a rule-following animal. His actions are not simply directed towards ends; they also conform to social standards and conventions, and unlike a calculating machine he acts because of his knowledge of rules and objectives. For instance, we ascribe to people traits of character like honesty, punctuality, considerateness and meanness. Such terms do not, like ambition, or hunger, or social desire, indicate the sort of goals that a man tends to pursue; rather they indicate the type of regulations that he imposes on his conduct whatever his goals may be.
(1973, 147–48 n. 7; emphasis added)
The rules of morals are instrumental in the sense that they assist mainly in the achievement of other human values; however, since we only rarely can know what depends on their being followed in the particular instance, to observe them must be regarded as a value in itself, a sort of intermediate end which we must pursue without questioning its justification in the particular case.
(Hayek 1960, 67; emphasis added; also see Hayek 1976, 16–17)
For Hayek, then, social rules and norms are not goals that people pursue. Rather, they are ethics, laws, and customs to which people submit in order to restrain the ardour with which they pursue their own goals.1
A similar perspective on Hayek’s work is developed by Buchanan (2005, 72, 75–76), who describes what he terms “the communitarian elements in [Hayek’s] own description of the moral order of liberal society” as involving an “ethics of mutual respect and of reciprocity in dealings [whereby] … persons behave in accordance with norms that may be externally classified as exhibiting non-exploitative, non-opportunistic and non-discriminatory treatment of others”. Buchanan elaborates on his account of Hayek’s approach as follows:
Persons are treated as persons, as reciprocating human beings, deserving of mutual respect. This conception [like Sen’s notion of commitment] finds its philosophical roots in Kant’s precept that persons are to be treated as ends and never as means. But, as properly understood and as influential in Hayek’s thought … [t]he Kantian precept enters the choice calculus as a moral constraint rather than as an argument in a utility function.
(P. 76)
In terms redolent of Bruni and Sugden’s work, Buchanan goes on to argue that at the heart of Hayek’s approach is the insight that “there exist mutual gains from exchange between and among any and all potential trading partners – gains that may be realised upon guarantees that behaviour in the exchange process itself does not exhibit effort to secure differential opportunistic advantage” (2005, 75). In highlighting how on Hayek’s account such guarantees are in large measure provided by people’s commitment to “the norm of generalised reciprocity” whereby “persons’ interaction one with another is motivated by the prospect that reciprocal interaction will generate expected gains for both parties”, Buchanan helps us to see more clearly the importance of the norm of reciprocity – and, dare one say it, mutual assistance – in Hayek’s scheme of thought (2005, 27, 45; also see 83, 84).2
People’s willingness to abide by such norms and rules – and the way their commitment to them constrains the goals they are willing to pursue – can be conceptualised in terms of collective intentionality. More specifically, people’s commitment to social norms can be thought of as involving shared intentions to the effect that “We believe that members of our community should do x in circumstances z” (where the phrase “do x” should be interpreted broadly as a placeholder for a variety of injunctions such as, “count as”, “take to mean”, “refrain from”, “donate to”, and so forth) (Davis 2004, 390; cf. Lawson 2003, 36–39). Such rules and norms specify what types of behaviour the members of a particular group – whether it be a small, intimate group such as a family or a larger “imagined community” such as a race or nation (Anderson 1991) – count as “correct”, “honourable”, “considerate”, “mean”, etc., and in effect constitute a set of guidelines that specifies what people have to do in order to identify themselves with the other members of the group and thereby to cultivate and to express publicly their identity as group members (Sen [1985] 2002, 215).
On this view, a person’s identity is best thought of in terms of the groups with which (s)he chooses to affiliate him- or herself. More specifically, the position outlined here attempts to capture people’s ability to define who they are in terms of their use of collective intentions or we-language and, in particular, by considering how the use of such language requires them to embrace the views of other group members about what counts as acceptable behaviour, etc. (Lewis 2009, 51–55). Such rules and norms have motivational force because they furnish people who wish to become, or remain, members of a particular community with reasons for acting in certain ways.
Amartya Sen, in a passage that seems to be quite compatible with those from Hayek quoted above, has described this as follows:
One of the ways in which the sense of identity can operate is through making members of a community accept certain rules of conduct as part of obligatory behaviour towards others in a community. It is not a matter of asking each time, What do I get out of it? How are my own goals furthered in this way?, but of taking for granted the case for certain patterns of behaviour towards others.
([1985] 2002, 216–17)
From this perspective, the motivational force of social norms derives from the fact that group members accept the authority of “us” – of “our” shared view of how “we” should behave – to determine certain features of their conduct in the domain defined by the norm.3
Significantly, behaviour that is driven by we-intentions is not reducible to instrumentally rational behaviour (Searle 1995, 23–25; Davis 2002, 20–22, 2004, 392–93). The reason is as follows. An individual’s we-intention centres on what (s)he thinks the intentions of the other individuals in the group actually are, not what (s)he would like them to be, so that there arises the possibility of a tension between what an individual believes a group’s collective intention to be and what (s)he would prefer it to be. If an individual (sincerely) expresses a we-intention in a situation where that tension has indeed arisen, then (s)he has effectively made a commitment to act in accordance with the group’s collectively expressed view that a particular goal should be pursued, or that a particular type of action is required, even though that might not be what the individual would have preferred were (s)he not a member of the group in question. On this view, the shared intentions that arise when a person uses we-language involve him or her imposing upon him/herself obligations or commitments that qualify the unconstrained pursuit of his or her own goals, simply because expressing a we-intention requires the individual to conform to how other people use that same ‘we.’ Hence, people may share a collective goal without each of them also having it as a personal goal (Davis 2002, 21–22; 2004, 399; Anderson 2003, 191–193).
In this way, the notion of collective intentionality makes it possible to conceptualise how people can have sources of motivation above and beyond the instrumental desire to satisfy their individual preferences and pursue their individual goals. People not only have the capacity to behave in an instrumentally rational fashion, asking what they should do in order to satisfy their own individual goals; they also have the (often countervailing) ability to act in accordance with social rules, their commitment to which may involve them stepping back from their individual goals and asking what is the best strategy for us to adopt:
Behaviour is ultimately a social matter as well [as an individual one], and thinking in terms of what “we” should do, or what should be “our” strategy, may reflect a sense of identity involving recognition of other people’s goals and the mutual interdependencies involved.
(Sen 1987, 85)
The members of a social group think of themselves as a “we”, and understand one another to be jointly committed to various goals, including that of upholding shared social rules and norms. In identifying with a group, therefore, an individual understands that (s)he has accepted responsibility for doing his/her part to advance the group’s goals and to uphold the rules and norms that operate within it, making a commitment that motivates his/her subsequent actions. In sincerely using the first-person plural, therefore, a person embraces the obligation in question, acknowledging – not least to him- or herself – that it applies to him/her and therefore taking it upon him- or herself to fulfil it (e.g., by adhering to some social norm or rule) (Davis 2004, 139, 143).
It is, of course, just this kind of constraint on individuals’ choice of goals and conduct to which Hayek is alluding when he describes in the passages quoted above how social and moral rules constrain people’s conduct. Like Sen, Hayek views social rules as imposing “side constraints” on individual behaviour that rule out of court certain goals as no longer being legitimate objects of choice. What the notion of collective intentionality adds to the Hayekian account is a sense of how, via their use of the first-person plural, people acknowledge that social norms and rules apply to themselves. A person who is sincere in using we-language to identify him- or herself with a group has embraced the rules that are observed by members of that group, acknowledging that they apply to him/her and therefore taking it upon him- or herself to observe them (Davis 2004, 138, 143–146).
It is time to bring the two parts of our argument together. Recall first of all that, according to Bruni and Sugden, market transactions can be thought of – indeed, are effectively thought of by participants in markets – as involving collective intentions along the line of: “We are engaged in mutually beneficial trade.” We have also seen, second, that – according to scholars such as Amartya Sen and Elizabeth Anderson – the way in which social and moral rules of the kind that Hayek argued are central to the extended order of the Great Society affect people can also be conceptualised using the notion of we-intentions. We can now put these two ideas together by arguing that the kind of commercial morality – the general confidence in people’s intentions to honour contracts and eschew fraud – that Hayek believes is one of the building blocks of the market order can be conceptualised using the notion of collective or we-intentionality (Bruni and Sugden 2008, 49–58; Lewis 2009, 57–60), along the following lines: “We are part of a mutually beneficial transaction that will take place in accordance both with the rule of law and with certain norms prevalent in our group or society, such as promise-keeping, honesty, fairness, etc.” As Paul Zak has put it:
[A] mutual decision to exchange requires an understanding that both parties to the transaction must be made better off if the exchange is going to occur. If one makes unreasonable demands, then exchange will fail and the gains from trade will be lost … [B]ecause uncoerced market exchange requires gains for both parties … exchange itself is necessarily other-regarding. The “win–win” aspect of exchange is known to all parties, and therefore a buying decision is contingent on understanding that the producer needs to make a fair profit to stay in business and that consumers have budget constraints and alternative suppliers. In reasonably competitive markets, sharing the gains from exchange is the norm; a variety of field and laboratory evidence reveals that excessive greed results in an absence of exchange and a subsequent loss of the gains from trade (Babcock and Loewenstein 1997; Cooter and Rubinfeld 1989). Neuroeconomics experiments show that the human brain is finely tuned to punish those who violate sharing norms. Fairness is part of human nature.
(2011, 226, 213–14)
On this view, in entering into a transaction, people are committing themselves to a venture that they intend to be mutually advantageous and to be undertaken in accordance with the intersubjectively shared social rules and norms that prevail in their community.
Behaviour that is underpinned by collective intentions of this kind can be seen to be especially important once it is recalled that formal contracts are highly likely to be incomplete, both because of the transaction costs of negotiating and drafting such contracts, and also because bounded rationality and the existence of radical uncertainty imply that it is simply impossible for people to foresee all of the contingencies that might impinge upon their transactions (especially if they are drawn out over time). The question then arises of what the parties will do if an unforeseen contingency does indeed arise. Standard economic analysis, of the kind that is based on the notion of singular or “I”-intentions, might suggest that each party would strive to turn the unforeseen event to his or her advantage, opportunistically exploiting its occurrence whenever it is in their narrow self-interest to do so. The analysis presented here, however, suggests something rather different. For if it is the case that the parties of a transaction are motivated by a shared commitment that it should be to their mutual advantage, then they are under an obligation not merely to adhere to the letter of their contract but to respond to unforeseen contingencies in ways that continue to promote the shared goal of mutual assistance, which will in turn require that they refrain from opportunistically exploiting each other even when an unforeseen event gives them a chance to do so (Bruni and Sugden 2008, 41, 53–55; cf. Hayek 1960, 66–68).
Consider, for example, two businesses: the first is a garment manufacturer; the second supplies the manufacturer with fabric. Suppose for the sake of argument that they have entered into a contract specifying that the fabric supplier will supply the garment manufacturer with a certain amount of a particular kind of fabric for a certain price. However, because of an unexpected change in the kind of garments that have to be made, the manufacturer now requires a slightly different type of fabric. The fabric supplier might exploit the situation by refusing to change the specification unless the garment manufacturer pays a considerable extra sum of money. However, such opportunism would be inconsistent with the notion that the transaction should be mutually advantageous. If the two parties understand that, by entering into the contract, they have made a joint commitment to securing their mutual benefit, then the fabric supplier will feel obliged to adhere to the spirit of that agreement by complying with the manufacturer’s request without precipitously raising the price of the fabric, thereby ensuring that the transaction remains mutually advantageous. What this example, which is based on a study of the behaviour of firms in the New York City garment industry, is meant to illustrate is that if the parties of a contract view themselves as joint partners in a mutually beneficial series of actions, they will (have good reason to trust each other to) respond to unforeseen contingencies by acting in good faith, eschewing narrowly self-interested and opportunistic modes of conduct in favour of actions that are in accordance with norms of fairness and reciprocity. As one of the businessmen interviewed as part of the study put it, “Trust means that he’s not going to find a way to take advantage of me. You are not selfish for your own sake. The partnership comes first” (Uzzi [1997] 2001, 213–216, 224–25; Lewis 2008, 184–190).
On this view, market transactions are instances of mutual assistance, whereby – once they have decided to trade with each other – the parties to a transaction are committed to securing their mutual benefit, subject to the intersubjectively shared rules and norms that prevail in the community from which the contracting parties are drawn. As a result, the parties in question are obliged to be “mutually responsive” to each other’s needs in the sense that they must adapt their behaviour to unforeseen circumstances in order to do their best to be useful to one another and to advance towards their agreed goal (Bratman 1993). The importance of such behaviour has been underlined by Nobel Laureate Kenneth Arrow, who has commented that:
[T]here has to be some kind of commercial morality for contracts to be executed … a theory which depends merely on reputation is not enough because there will always be circumstances when it pays to violate the rule … So the economic system – the self-seeking, laissez faire system – would not work without the presence of these non-laissez faire, non-self-seeking norms.
(1990, 139)
(See also Arrow [1973] 1984, 150–52 and [1973] 1985, 139; Sen 1977, 332; Seabright 2004, 56–59; Buchanan 2005, 42; and Zak 2011, 6, 15.) Such behaviour, if it does indeed redound to the mutual benefit of both parties, can be thought of as being rational, not in the sense of the instrumental conception of rationality presupposed by standard rational choice theory, but rather in the sense that it involves the discipline of subjecting one’s choices – not only of actions, but also of goals – to reasoned scrutiny. As Hayek put it, “Rationality … can mean no more than some degree of coherence and consistency in a person’s action, some lasting influence of knowledge or insight which, once acquired, will affect his action at a later date and in different circumstances” (Hayek 1960, 77).
It is also worth noting, with Bruni and Sugden (2008, 52), that because market interactions involve a shared commitment to mutually beneficial exchange, they may well give rise to feelings of friendliness and goodwill as the participants warm to one another’s efforts at mutual assistance. In this way, the interaction that takes place in markets can become imbued with additional social and affective content, giving rise to social relations – of trust, for example, and of friendship – whose reach extends beyond the narrowly commercial confines in which they were engendered. It is not a coincidence that the original meaning of the term catallaxy was “to change from an enemy into a friend” and “to admit into the community” (Hayek 1976, 108). In this way, viewing market transactions as involving genuinely social relations of mutual assistance, based on collective intentions for mutual benefit, lends support to the view, outlined most notably by Virgil Storr (2008, 2009), that the market is an area of social life where social as well as commercial ties are formed, so that what were initially business or business-like relations spill over into broader forms of sociability.4
Overall, then, the account of market behaviour presented here implies the unsustainability of the binary opposition that Hayek attempts to establish between the other-regarding motives that (he believes) characterise the micro-cosmos and the narrowly self-interested behaviour (he claims) typifies the extended order. The account presented here suggests, far from being confined to the face-to-face world of small groups of known associates, the notion of mutual assistance is also an important part of (people’s understanding of) the kind of interaction that takes place in markets. If it is indeed the case, as Cornuelle ([1965] 1993, 38) has argued, that the independent sector “functions at any moment when a person or group acts directly to serve others,” then we can see from the account of the nature of market transactions presented above that such behaviour is not entirely absent from the market, manifesting itself in the efforts of trading partners to assist one another. It is also, as we shall see, an important element in philanthropic activity.
The role of collective intentions in philanthropic projects
Philanthropy has been defined as “voluntary giving and association that serves to promote human flourishing” (Ealy 2005, 2). Two key features of philanthropic activity are often mentioned, both of which – I shall argue – can be encompassed by a view of philanthropy as involving donors and recipients sharing collective or we-intentions for mutual assistance. In the first place, philanthropy is said to involve behaviour that is in some sense, often left rather vague, “benevolent” or “altruistic”, involving one-way transfers or gifts of money from donors to recipients (albeit ones that may be balanced by non-pecuniary benefits – such as gratitude or friendship – that accrue to the donors) (Boulding 1973, 1–3; Dobuzinskis 2009; Grosby 2008; Henderson 2009). Second, such disinterested behaviour is often said to involve the donors of largesse identifying with others and thereby forging a sense of their own identity (that is, a sense of who they, the donors, really are) (Schervish 2009).
The vantage point provided by the notion of collective intentionality suggests that philanthropy involves genuinely social relationships that see donors and recipients commit themselves to a shared goal of mutual betterment, of being useful to each another. As James Otteson has put it:
True philanthropy is undertaken by free and accountable beings in the service of other free and accountable beings, and the demands it places on both parties unite them in a joint project of making human life better … [W]e are made better by acting philanthropically to help others realise their own ends.
(2009, 25; emphasis added)
Paul Schervish, a commentator on philanthropy with whose views the approach outlined here bears strong affinities, elaborates on the nature of philanthropic projects as follows:
At its best … philanthropy unifies individuals in caring relationships that enrich the receiver and giver alike … [Philanthropy involves] … a sense of ‘we-ness,’ as the specific mobilising impetus that spurs the caring orientation … [T]his we-ness, ‘the sense of being connected with another or categorising another as a member of one’s own group,’ is a central determinant of helping and results from the combination of personal beliefs and associational ties that brings the needs of others into one’s purview.
(Schervish 2009, 38, quoting Martin 1994 and Jackson et al. 1995)
In the language of collective intentionality, donors and recipients are effectively saying to one another: We are involved in a joint endeavour in which we can serve each other and from which both of us can benefit: I, the philanthropist, will help you by donating funds that will enable you to advance a project that is dear to you, and which falls within the boundary of those projects that are acceptable to me; and you will assist me by enabling me to fulfil the obligations I feel to particular groups or causes within society and to develop my ability to make a difference to the lives of others. If we both play our parts, then both of us will be better off after the project has been fulfilled than we were before it” (cf. Bruni and Sugden 2008, 57–63; Schervish 2009, 40–41).5 Moreover, in using we-language to express their commitment to philanthropic projects, and to working with recipients – and, possibly, other donors – to bring shared projects to fruition, donors are able to express their attachment to those other groups or causes and thereby cultivate a sense of their own identity (Lewis 2009, 55–58; also see Schervish 2006, 477–478, 484–485, 2009, 39, 41–42).
By focusing on what Schervish aptly refers to as “the inherent mutuality” involved in philanthropy, the approach outlined here attempts to transcend the dualism of narrow self-interest and selfless altruism in order to portray philanthropy as “an act of mutual nourishment” whereby people “do things to help others and themselves at the same time” (2009, 41–42, 37). Such behaviour can, of course, be thought of as being animated by what Tocqueville refers to as “the principle of self-interest, properly understood” whereby “an enlightened self-love continually leads [people] to help one another and disposes them freely to give part of their time and wealth for the good of the state” (Tocqueville [1835] 1966, 526; also see Cornuelle [1965] 1993, 55–64, 1992, 6; Henderson 2009, 143; Schervish 2009, 38).
The significance of all this for our present purposes is, of course, that the accounts of market transactions and philanthropy sketched above suggest that both kinds of conduct can be thought of as manifestations of the same general disposition for human beings to engage in shared projects for mutual benefit. It is reciprocity – understood as a human inclination towards mutual assistance, or as exchange broadly defined – that is the wellspring of both kinds of action. In both cases, people form collective or we-intentions for mutual assistance and thereby commit themselves to joint ventures that each of them intends to be mutually advantageous. And in each case, people’s commitment to that goal obliges them both to adhere to certain social rules and norms and also to respond flexibly to unforeseen contingencies in ways that are consistent with the shared intention of mutual assistance, as for example when, in the event of unanticipated and genuinely unavoidable increases in a project’s costs, donors might feel under an obligation to find the extra funding required to bring the unfinished project to a successful conclusion.
Far from reducing economic life to narrowly self-interested behaviour alone, this approach therefore acknowledges an important role in commercial transactions for the very kind of other-regarding motivation that is said to characterise philanthropy. On this view, there is in fact a continuum of different types of commercial transaction, and associated motivations, ranging from spot transactions, where trades are completed almost instantaneously and the scope for trust and mutual assistance is limited, to more protracted exchanges where, because the long time lag between payment and completion allows considerable scope for unforeseen events to impinge upon the transaction, there is more scope (and need) for the kind of reciprocal adjustment to which collective intentions for mutual benefit give rise. In this way, the notion that transactions might be drawn out over (real, historical) time acts as a (metaphorical) solvent that, by breaking down the barriers that divide commercial transactions from philanthropy, allows an essential role for the kinds of motives that drive philanthropic behaviour in commercial life as well (cf. Danby 2002, 15, 28–32). In a similar vein, rather than reducing philanthropy to pure, unreciprocated altruism, the perspective outlined above acknowledges that donors may well gain any one of a variety of benefits from the gifts they make, including the satisfaction of promoting a cause that is close to their hearts, enjoyment deriving from the gratitude of those they assist, or even relief from assuaging guilt, so that – as in the case of commercial transactions – there exist a variety of different kinds of motivation in the case of philanthropy (Boulding 1973, 5; Dobuzinskis 2009; Henderson 2009).
In short, there is a continuum of different kinds of exchange – or, as Garnett (2010, 13) has put it, “multiple modes of reciprocity” – that vary both (1) according to the time lag between payment and completion of the transaction and consequent scope for mutual assistance to play a significant role, and also (2) according to the precise objects being exchanged (typically money for goods, in the case of market transactions, but also money for other less tangible gifts in the case of philanthropy). And what this suggests, of course, is that the divide between (behaviour within) the markets and (the type of conduct involved in) philanthropy is not as sharp as commentators like Hayek often seem to suggest. Far from being separate domains, governed by different kinds of motivation, the market and the philanthropic order are both parts of civil society, with people’s behaviour in both involving joint commitments to mutual support and assistance: “No part of the economy [is] conceived as inherently commercial or philanthropic. The general presumption [is] that every aspect of the economy is comprised of commercial and philanthropic elements” (Garnett 2010, 16; also see Bruni and Sugden 2008, 46–48, 62–63 and Henderson 2009, 142).
Conclusion
This account advanced above can be thought of as a response to Garnett’s plea for a “spectral view of social phenomena” according to which “[n]o part of the economy would be conceived as inherently or exclusively ‘commercial’ or ‘philanthropic’”. The general presumption would be that “every aspect of the economy is [potentially] shaped and propelled by a mixture of commercial and philanthropic elements” (Garnett 2007, 27). Whereas the standard understanding of market relationships juxtaposes two binary opposites – namely, market/social and self-regarding/self-sacrificing – the approach developed here offers a way of conceptualising a relationship between two individuals both as a mutually beneficial exchange and also as a genuinely social interaction that is imbued with intrinsic value in virtue of this social content. Contrary to the dualistic view that market interactions can only be instrumental and impersonal, and that non-instrumental behaviour and concern for others arise only in the case of small groups such as the family, the view advanced here suggests that market interactions can take the form of genuinely social relationships whose participants understand themselves as engaging in a shared plan for mutual betterment, thereby providing a way of transcending the dualism between (ostensibly) other-regarding activity of the kind involved in philanthropy and narrowly self-interested market-based activity. In stark contrast to dualistic perspectives that provide conceptual space for only two (mutually exclusive) kinds of behaviour, each of which is confined to one particular domain of social life, the approach outlined above affords conceptual room for a whole range of intermediate types of behaviour that involve different degrees of (willingness to provide) mutual assistance and which arise in all parts of civil society.
If it is true that certain human capabilities – most notably the capacity for reciprocity and mutual assistance – are central both to commerce and philanthropy, then it is also the case that those capabilities are likely to give rise to behaviour that produces orderly outcomes of the kind that make society possible on a large scale only if they are channelled by certain social institutions that – in Paul Seabright’s memorable phrase – “make it possible for us to deal with strangers by persuading us, in effect, to treat them as honorary friends” (2004, 4; also see 1–9, 27–28, 48–102 and Zak 2011, 14–18). While this essay has focused on the human capabilities themselves, that should not divert attention from identifying and analysing (the properties of) the requisite institutions. It is worth noting in this context that, just as there is a competitive process of selection whereby participants in markets decide with whom to make a contract, so too in the case of philanthropy must there be a process of selection whereby donors decide which potential recipients to support. Their efforts to do so will not, of course, be informed by price signals, and the outcomes of decisions cannot be summarised via profit and loss accounts, giving rise to the question of how recipients are to be chosen and projects evaluated. The key issue concerns whether there exist mechanisms in the world of philanthropy that make it possible for donors to receive signals and forms of feedback, analogous to market prices and profit and loss calculations, that can help them to husband their scarce resources and deploy them in ways that best promote their preferred causes (Boettke and Prychitko 2004; Chamlee-Wright and Myers 2008).
If it is indeed the case – as seems eminently reasonable – that the Hayekian project can be thought of as an attempt to explore the institutional foundations of the market (Vaughn 1999; Lewis 2015), then one of the aims of this essay has been to broaden the scope of that project by undermining the dualism between self- and other-regarding motives that Hayek strove to establish and thereby persuade his latter-day followers that the set of institutions to be explored in Hayekian social theory should include not only those ostensibly devoted to commercial pursuits but also – as Cornuelle ([1965] 1993) has argued – those involved in the so-called independent sector (Garnett 2009, 2010). On this view, the discipline of economics is best thought of neither as involving one particular analytical method (e.g., rational choice theory), nor as focusing only on one particular set of activities or institutions (commerce or market), but rather as an attempt to analyse (the interplay between) all those human capacities and social institutions that make it possible to meet people’s needs and thereby sustain the extended order of the Great Society (Boulding 1973, 13; Lawson 2003, 141–164; Garnett 2007, 25–27).
Acknowledgments
I am grateful to Robert Garnett, Lenore Ealy, and participants in the 2011 APEE conference in Nassau, the Bahamas, for very helpful comments on an earlier version of this essay. The usual disclaimer applies.
Notes
1 “Civilisation largely rests on the fact that … individuals have learnt to restrain their desires for particular objects and to submit to generally recognised rules of just conduct” (Hayek 1979, 7; also see 1960, 62, 435–436 n. 36). On this view, the Hayekian good society is “not laissez faire without qualifying adjectives” but rather an extended “nexus of reciprocity … generalized to include all mutual agreements up to and including the political” (Buchanan 2005, 84, 78).
2 As Buchanan puts it elsewhere, “The market, as an organisational form, will work well only if participants are presumed to be motivated by self-interest, but only within the discipline imposed by mutuality of respect for trading partners. The market order in which persons deal, one with another, strictly in terms of opportunistic self-interest would be neither efficient nor tolerably just … The required ‘laws and institutions’, mentioned by Adam Smith, include not only formal rules of conduct but also the institutionalised ethics of mutual respect or reciprocity” (2005, 26).
3 See also Hayek, who writes that “it is acceptance of … common principles that makes a collection of people a community … A group of men normally become a society … by obeying the same rules of conduct” (1960, 106–07). In Buchanan’s words, social rules “may emerge from a process of cultural evolution, as Hayek suggests, while at the same time offering adherents a concrete means of identifying one with another and, thereby, satisfying personal desires for community membership” (1985, 79).
4 For a Hayekian account of the psychological mechanisms through which this might come about, see Lewis (2012, section 6).
5 For more on how donors can benefit from their philanthropic endeavours, see Haidt (2006, 134) and Gunderman (2007, 42).
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