“PRIZES AND VIRTUES: AN INTERDISCIPLINARY WORKSHOP”
LUMSA University, Rome – April 10-11, 2017

To an economist, a prize, such as a golden medal, is merely a special type of incentive. Any other kind of social scientist would be perplexed by thinking of the Nobel Prize, or of the Medal of Honour, in these terms. In contemporary neoclassical economics, the concept of incentive is a primitive, similar to that of “utility”, “price”, “production” or “consumption”, that all economists use but none feels the need to define: it is a foundation, or a corner stone, of the science of economics. However, if we tried to articulate what economists mean by incentives, we would probably find that they are considered as any “motivation” for adhering to and for complying with some form of contract. Once incentives are intended in this all-embracing way, it immediately follows that prizes and awards are considered simply as their sub-set. Yet many real world prizes and awards do not follow this contractarian, consequentialist logic and cannot be understood within this framework. A more complex understanding of human motivation–we believe–is needed to hold that prizes are indeed not incentives.

This search cannot ignore the history of economic and philosophical ideals. Competing theories of action and motivation were central topics of debate among eighteenth century philosophers. David Hume, Jean-Jacques Rousseau, and Adam Smith’s theories implied much more complex social and economic motivations than mere self-interest, which can be opportunely diverted through an appropriate incentive. Within the Italian school of civil economy, Pietro Verri and Antonio Genovesi elaborated on the unintended consequences of public and institutional actions on individuals’ behaviour. In the same line, Giacinto Dragonetti debated (at a distance) with Cesare Beccaria on the nature and effectiveness of punishments and awards in shaping agents’ choices, both in private and public contexts. From the mid XIX century onward, economists became those social scientists most characterized by the purest anthropology (i.e. that of a human being acting in order to maximize individual utili!
 ty), endorsing utilitarian philosophy and sacrificing previously complex understanding of human actions. In the XX century, microeconomics has continued this process of anthropological reductionism: management theory, as well as agency and contract theory, have distilled the all-embracing theory of incentives.

In the last three decades, behavioural and experimental economics are undermining from within this reductionist model of human behaviour. By taking serious account of concepts such as reciprocity, intrinsic motivation, inequality aversion, and fairness, they are making more complex interpretations of human action and motivation central again, albeit still within the utilitarian framework. In addition, there is an important contemporary philosophical stream of inquiry, the so-called virtue ethics, which competes with utilitarianism yet remains almost unknown to the economic profession. We argue that this research may provide further insights into human action, which seem otherwise intractable within the current anthropological framework, and can cast a new light on the nature and working of prizes as fundamentally different from incentives. In particular, prizes may well suit the rewarding of virtues, because incentive are known to be liable to cause motivation crowding-out.

To advance our understanding of the economics of prizes, awards and their link with virtues,we warmly invite economists, historians, philosophers, scholars in organization and management and other social scientists to answer to this call and submit an extended abstract (max 1000 words).

Keynote speakers:
– Robert Dur, Erasmus University Rotterdam (Economics)
– Bruno Frey, University of Basel (Behavioural Science)
– Ruth Grant, Duke University (Political Science)

“Pier Luigi Porta” Award:
Heirs will honour the memory of the past Heirs’ President Professor Pier Luigi Porta by a special award to the best paper presented at this conference, a stream of research strongly supported by him before dying. Heirs invites all under fourty scholars to apply for this special “Pier Luigi Porta Award”. The award consist in 2500 euro plus travel cost and accomodation for the conference. The prize will be assigned during the social dinner.

Deadline for submissions of extended abstracts (max 1000 words):
February 15th, 2017 (acceptance date: February 25th, 2017)
to: [email protected]

Organization committee: HEIRS & LUMSA University
Luigino Bruni (LUMSA), Vittorio Pelligra (U. Cagliari), Tommaso Reggiani (LUMSA),     Matteo Rizzolli (LUMSA), Alessandra Smerilli (LUMSA).

Contacts:
[email protected]

By Jonathan B. Wight

Follow-up to the previous post:

Joshua Waitzkin, pondering his successes in chess and the martial arts, started The Art of Learning Project, with a related website. It tries to help identify learning practices that contribute to lifelong success.

One important part of this, as all parents know, is resilience.  How readily can students and children carry on after confronting failure, humiliation, or other trauma? 

There are some interesting ideas for developing resilience in our students.  One key way is by emphasizing process over outcomes (or results). This again is somewhat of a deflection away from the traditional Western economic approach, embracing aspects of Buddhist and other Eastern ethical orientations, as well, perhaps, of Kantian ethics.

Before hanging up on this idea, listen to Josh’s short explanation of how to use language to shape expectations about the learning process and build resilience in your students.

By Jonathan B. Wight

Joshua Waitzkin is the child prodigy and chess champion about whom the book and movie Searching for Bobby Fischer were written.

He since has gone on to become a world champion in the martial arts.

He’s been on the top of fame, surrounded by paparazzi, and yet somehow—he says through meditation—he’s been able to keep his feet on the ground.

His book The Art of Learning: An Inner Journey to Optimal Performance is on my list of summer reading.

Until then, you might want to listen to his wide-ranging interview with Tim Ferrus about peak performance, life, balance, and other issues.

This is of interest to those interested in virtue ethics. Waitzkin does not begrudge the standard utilitarian logic of the cost/benefit approach to life and success. But he notices that at the top of any field this approach will (he claims) lose out to more holistic approaches that embrace intuition and emotion that are critical for creativity.

Waitzkin extols the feeling of intrinsic connection with the activity as critical to ultimate success.  He calls this love. If you are doing something simply for the extrinsic rewards, fame, fortune, and so on, you will miss out on that secret ingredient.

The key point he ends with is, “Don’t forget about the love.”

Mark D. White

Our readers may be interested to know about a new book coming out soon from Oxford University Press that I co-edited with Jennifer A. Baker entitled Economics and the Virtues: Building a New Moral Foundation. From the blurb:

While ethics has been an integral part of economics since the days of Adam Smith (if not Aristotle), many modern economists dismiss ethical concerns in favor of increasing formal mathematical and computational methods. But recent financial crises in the real world have reignited discussions of the importance of ethics to economics, including growing calls for a new approach to incorporating moral philosophy in economic theory, practice, and policy. Ironically, it is the ethics of virtue advocated by Aristotle and Adam Smith that may lead to the most promising way to developing an economics that emphasizes the virtues, character, and judgment of the agents it models.

In Economics and the Virtues, editors Jennifer A. Baker and Mark D. White have brought together fifteen leading scholars in economics and philosophy to offer fresh perspectives on integrating virtue into economics. The first section covers five major thinkers and schools in the virtue tradition, tracing historical connections and suggesting new areas of cooperation. The second section applies the ethics of virtue to modern economic theory, delving into its current practices and methodology to suggest areas for integration with moral philosophy. Finally, the third section addresses specific topics such as markets, profits, and justice in the context of virtue and vice, offering valuable applications of virtue to economics.

With insights that are novel as well as rooted in time-tested ethical thought, Economics and the Virtues will be of interest to economists, philosophers, and other scholars in the social sciences and humanities, as well as professionals and policymakers in the fields of economics and finance, and makes an invaluable contribution to the ongoing discussion over the role of ethics in economics.

Many if not all of the contributors will be familiar names: besides me and Jennifer, they include Christian U. Becker, Tim O'Keefe, James Otteson, Michael Baurmann and Geoffrey Brennan, Eric Schliesser, Andrew Yuengert, Christine Swanton, David C. Rose, Seung (Ginny) Choi and Virgil Storr, and Jason Brennan. (You can see the complete table of contents at Amazon, OUP, or my personal blog.)

Personally, this book has been a dream of mine for a number of years, and working with Jennifer, Adam Swallow and (the late) Terry Vaughn at OUP, and all the contributors, made that dream a reality in every possible way.

Economics and the Virtues has already been reviewed by Adam Gurri at Sweet Talk, where he calls it "a valuable source of insight, especially for economists used to operating within only one framework." Will Wilkinson of the Niskanen Center and The Economist calls it "a fascinating volume" and "an indispensable collection for anyone interested in moral psychology, economic theory, or the morality of markets," and pre-eminent philosopher and Kant scholar Onora O'Neill calls it "a rich and rewarding collection" that "explores classical accounts of the virtues, and argues that they remain essential not only to character but to culture, including the culture of markets."

(You can also see Jennifer's and my post at OUPblog discussing "The Big Short" in relation to the theme of the book.)

Jonathan B. Wight

Mark White calls attention to a Wall Street Journal review of Strangers Drowning: Grappling with Impossible Idealism, Drastic Choices, and the Overpowering Urge to Help (2015) by Larissa MacFarquhar.

What happens when people have an almost pathological urge to help others? The people described in this book undertake “extreme ethical commitments”—such as adopting 20 children, undertaking a dangerous political protest despite having a young son, and refusing to wash dishes because this takes time away from environmental activism.

This last example is  juvenile, and reminds me of the humorous claim made about Gandhi: “You will never know how much it costs us to keep that saint, that wonderful old man, in poverty!”

The implication is clear—the supposed saintly one who extols benevolence toward others often does not fulfill the most basic moral virtue of prudence—taking appropriate regard for one’s own life and responsibilities. One has a duty to oneself as well as to others.

A virtue ethicist would say we need balance. It is fine to be generous and altruistic toward others, but not if that makes you the ward of the state or a burden on others. Some of the people described in this book seem to lack that balance, and that would not be virtuous, regardless of the motive for helping or the focus on others.

Mark D. White

I'm happy to report that my friend Ricardo Crespo has published a new book with Routledge titled A Re-Assessment of Aristotle's Economic Thought. In conjunction with the book's publication, Routledge has posted an interview with Crespo, beginning with the following poignant question:

Why a re-assessment of Aristotle's economic thought today?

This is an interesting, exciting time for economics. On the one hand, standard economics has become increasingly sophisticated –current micro and macroeconomics bear little resemblance to their 1970s counterparts. Asymmetrical information; industrial organization; new developments in game theory, econometrics and uncertainty management; rational expectations, and dynamic stochastic general equilibrium are all revamping economics.

On the other hand, valuable inputs from other sciences are enriching economic approaches, like the contributions from psychology that have led to behavioral and happiness economics, or the influence of experimental sciences on experimental economics and of neurology on neuroeconomics, as well as the sociological and anthropological notions on identity, reciprocity, gift and institutions used in economic theory developments or the borrowings from ethics that paved the way for capability approaches. New ideas are booming, and it is very hard to anticipate what economics will look like in 20 years.

As new scenarios unfold, we urgently need to rely on philosophy, as its role resembles that of an orchestra director, coordinating all the instruments to produce a harmonious melody. In fact, the greatest economists all started off as philosophers. Adam Smith was a professor of moral philosophy at the University of Glasgow, and his close friend and colleague, philosopher David Hume, also wrote interesting essays on economics. The list of other outstanding ‘economist-philosophers’ notably includes John Stuart Mill, Karl Marx, Carl Menger, Frank Knight, Ludwig von Mises, John Maynard Keynes, Friedrich von Hayek, Joseph Schumpeter, Herbert Simon, Albert Hirschman, and Amartya Sen. These names are associated with very different positions, but we need a neutral, more panoramic philosophical view. My candidate to provide it is Aristotle.

Read the entire interview here, and if you read the book, please feel free to comment on it below.

Jonathan B. Wight

Raghuram Rajan looks back at the exchange between Paul Krugman and Carmen Reinhart and Kenneth Rogoff.  He wonders:

"Why do high-profile economic tussles turn so quickly to ad hominem attacks?"

Part of the answer is in the unsatisfactory results from empirical work, especially in macroeconomics. It is hard to say much with certainty.

Pundits won’t get many readers with wishy-washy conclusions, so the natural tendency is to fudge—by professing more certainty than the data would warrant.

Another aspect has to do with the verbal attacks (and physical threats) on Krugman, which have made him more than a little defensive. The old joke goes, “Just because you’re paranoid, doesn’t mean they’re not out to get you….”

We all say things in the heat of the moment that best not have been said.  Hard to remember, but virtue ethics asks us to be humble, to be temperate, and to forgive.  Where are these attributes in the economics research manual? 

Jonathan B. Wight

This post is for those of us who need to be reminded to bring balance into our lives.  (Yes, this concern does sound like virtue ethics.)

Dr. Randy Linde (an endocrinologist) helped save my life when I was in my 20s.  He has been an inspiration since then.  What are the key lessons on life balance he’s learned after a career of patient care?  A prescription (Rx) is simply a recipe; in virtue ethics terms it is a habit.  Randy offers these prescriptions, “all tried and true”:

1.  Treasure your best friend.

2.  Find something to make you smile each day.

3.  Get plenty of sleep.

4.  Mainly eat organic vegetables.

5.  Get some exercise each day.

6.  Don't take yourself too seriously.

And I would add:

7.  Maintain a vibrant capacity for wonder.

8.  Delight in daily meditations.

Readers: what would you add or subtract?

Mark D. White

The latest Royal Institute of Philosophy Supplement (70, 2012) examines a number of issues concerning human nature. From the editors' introduction:

The study of human nature has always been of central importance to philosophy. ... Questions such as ‘what is human nature?’, ‘is there such a thing as an exclusively human nature?’, ‘through what methods might we best discover more about our nature?’, and ‘to what extent are our actions and beliefs constrained by it?’ are of central importance not only to philosophy and science, but also to our general understanding of ourselves as people who belong to the human species.

The essays collected in this volume collectively address key issues and taboos surrounding the theme of human nature by bringing together philosophers working in a multitude of areas including the philosophy of cognitive science, evolutionary psychology, the philosophy of biology, psychoanalysis, ethics and moral psychology, developmental psychology, the philosophy of mind and action, the philosophy of psychology, the philosophy of religion, and the history of philosophy.

The  papers all looks fantastic, but because of my interests in both virtue ethics and evolutionary psychology (or biology), I found Rosalind Hursthouse's contribution, "Human Nature and Aristotelian Virtue Ethics," most intriguing:

Given that it relies on claims about human nature, has Aristotelian virtue ethics (henceforth AVE) been undermined by evolutionary biology? There are at least four objections which are offered in support of the claim that this is so, and I argue that they all fail. The first two (Part 1) maintain that contemporary AVE relies on a concept of human nature which evolutionary biology has undercut and I show this is not so. In Part 2, I try to make it clear that Foot's Aristotelian ethical naturalism, often construed as purporting to provide virtue ethics with a foundation, is not foundationalist and is not attempting to derive ethics from biology. In Part 3, I consider the other two objections. These do not make a misguided assumption about Aristotelian ethical naturalism's foundational aspirations, nor question AVE's use of the concept of human nature, but maintain that some of AVE's empirical assumptions about human nature may well be false, given the facts of our evolution. With respect to these, I argue that, as attempts to undermine AVE specifically, they fail, though they raise significant challenges to our ethical thought quite generally.

Mark D. White

In the New York Times, psychologist Barry Schwartz (author of The Paradox of Choice: Why More Is Less) warns us of "The Danger of Too Much Efficiency," in which he argues that, while efficiency is generally a good thing and enables increases in standards of living, more efficiency is not necessarily better. The first half of his piece is an excellent summary of the benefits of efficiency, which he illustrates using the concept of friction:

...firms compete to become more efficient, and we as consumers, along with Bain and its like, benefit from this competition.

What stands in the way of efficiency is friction. When automobile manufacturers struggle to squeeze as many miles per gallon as possible out of their car designs, friction is the enemy. Their aim is to design a vehicle that uses every ounce of fuel to move the car forward.

And so it is in the world of finance. As the historian Niall Ferguson reminds us in his book The Ascent of Money, hard as it is to imagine, people didn’t always have money. The invention of money went a long way toward reducing the friction, the inefficiency, in financial transactions. No longer did the farmer have to bring sacks of potatoes to the marketplace to trade for eggs and milk. Money was a medium of exchange that greatly reduced what some have called the financial coefficient of drag.

But Schwartz recognizes that increasing efficiency by reducing friction is not the only important concern to individuals or society. After summarizing the efficiency gains from securitizing mortgages and increased access to consumer credit, he turns to the downside:

All these examples tell us that increased efficiency is good, and that removing friction increases efficiency. But the financial crisis, along with the activities of the Occupy movement and the criticism being leveled at Mr. Romney, suggests that maybe there can be too much of a good thing. If loans weren’t securitized, bankers might have taken the time to assess the creditworthiness of each applicant. If homeowners had to apply for loans to improve their houses or buy new cars, instead of writing checks against home equity, they might have thought harder before making weighty financial commitments. If people actually had to go into a bank and stand in line to withdraw cash, they might spend a little less and save a little more. If credit card companies weren’t allowed to charge outrageous interest, perhaps not everyone with a pulse would be offered credit cards. And if people had to pay with cash, rather than plastic, they might keep their hands in their pockets just a little bit longer.

Rather than focus on his policy recommendations (with which I have much disagreement, as regular readers of this blog can easily imagine), I want to address his normative analysis of efficiency, which with I have much sympathy. I do think, however, that the particular way in which he criticies the emphasis of efficiency is strange, and obscures his greater point to some extent--a point with which, again, for the most part I agree.

Using the Aristotelian language he adopted in his more recent book (written with Kenneth Sharpe), Practical Wisdom, Schwartz recommends finding the "golden mean" of efficiency rather than simply purusing its maximum level. While I don't disagree with this in principle, I do think it is an odd way to put the problem, since it suggests that we can find the optimal level of efficiency without consideration of other values. If there is a golden mean of efficiency, the only way to find it is to determine how much efficiency is consistent with other values we want to promote (such as justice, dignity, and equality). This is really no different from the Aristotelian determination of the golden mean of characteristics like courage, in which the extremes of foolhardiness and cowardice offend other values and ends, as opposed to being internally inconsistent.

But I find the golden mean analysis to be misleading in a deeper sense when applied to efficiency. The reason we can't determine the optimal level of efficiency is because it is an empty value--it's a mean to an end, not an end in itself. And as such, it should be maximized in order to provide the means to pursue valuable ends, except insofar as it conflicts with those ends themselves. In other words, the pursuit of efficiency must be limited, but out of recognition that other values are more important, not that there is something inherently bad about a certain level of efficiency. The only "danger with too much efficiency" is that it implies that important values have been neglected in its name.

To a large extent, this all cashes out the same way; my disgreement with Schwartz on this issue is largely rhetorical rather than substantive. He emphasizes the excessive attention given to efficiency, and then recommends that it be frustrated (by increasing frictions through regulation) in order to correct the resulting problems. But as I said above, the issue is not an excessive focus on efficiency, but on neglect on other values which should temper it. It is as if we said that, if people neglect their families to spend time at the gym, then we should discourage gym use by raising membership fees or reducing hours of operation. But exercise--also a good thing in general, though it can be taken too far in many ways--is not the problem here. The neglect of family is the problem, and it is that neglect that should be addressed. In general, our focus should be placed directly on the neglected values (justice, equality, and so forth) rather indirectly on limiting the threat to them (too much efficiency).

Indeed, Schwartz does emphasize the importance of corrective norms, although he resorts to regulation to bolster them:

Perhaps we can use the criticism of Bain Capital as an opportunity to bring a little friction back into our lives. One way to do this is to use regulation to rekindle certain social norms that serve to slow us down. For example, if people thought about their homes less as investments and more as places to live, full of the friction of kids, dogs, friends, neighbors and community organizations attached, there might be less speculation with an eye toward house-flipping. And if companies thought of themselves, at least partly, as caretakers of their communities, they might look differently at streamlining their operations.

True, increased observance of these norms would increase friction and reduce efficiency, but that shouldn't be the goal--the goal should be increased observance of the norms themselves! Again, the result is the same, but I worry that focusing on efficiency as the "target variable" risks obscuring the more important issues behind it.

I think Schwartz would agree with me that, in the end, the best way to conceptualize of efficiency is as a means to an end, in which the values we hold individually and collectively are promoted by it at the same time that they temper its pursuit.