To Make a Market

The author has two avowed aims: first, to show how Adam Smith and Georg Hegel have defined the debate in political economy, and, second, to address normative issues raised in ‘market societies’. As part of this framework, Herzog a) insists that markets cannot be understood apart from their larger contexts, hence the stress on political-economy as opposed to a narrow conception of economics (i.e., University of Chicago); and b) recognizes that normative issues are not adequately addressed in political theory that ignores markets and is restricted by the individual vs. community debate (pp. 61-62, 80). The presumptions are that markets are here to stay, hence the irrelevance of socialism and communism, and that both Smith and Hegel can be best understood by detaching them from their libertarian and communitarian interpreters respectively. This is a splendid beginning.

I shall focus on three issues: (1) the interpretations of Smith and Hegel; (2) whether any new light is shed on the normative issues of market societies; and (3) whether the great debate has indeed been adequately framed in terms of Smith vs. Hegel or by Herzog herself.

Showing a remarkable grasp of the primary sources and the secondary literature, Herzog recognizes the importance of reading Smith’s Wealth of Nations in the light of the Theory of Moral Sentiments. Doing so removes the pernicious ‘Adam Smith debate’­ i.e., the notion that Smith contradicts himself with a focus on self-interest in Wealth of Nations whereas in Theory of Moral Sentiments he is concerned with other-regarding behavior, and reflects the extent to which Smith shows the harmony of private interest with the common good. This harmony is grounded not only in a metaphysics/theology about the natural order but is exhibited in Smith’s insistence that a market economy is not a zero-sum game, that growth and opulence are a good thing, and in the famous metaphor of the ‘invisible hand’ that appears in both works.

Herzog does an even better job on Hegel, rescuing him from the authoritarians of both the left and of the right who have for so long buried the insights of the Philosophy of Right. Popper is rightly taken to task and even Taylor is criticized for making “individuals nothing but vehicles” of Geist (p. 48n). It should come as no surprise that Kant who proclaimed ‘unsocial sociability’ and Hegel who relished the ‘cunning of reason’ had both read and been influenced by Smith, especially the metaphor of the ‘invisible hand’.

Anyone who understands what Hegel meant by ‘dialectic’ should not be surprised to find that he endorsed the notion that a market was a perfect example of the logic of competition and cooperation. More importantly, Hegel looked upon individualism in the form of modern subjective freedom as the final stage of history [a notion made popular by Fukuyama]. Hegel’s system “comprises numerous liberal elements, such as” private property, “the rule of law, free choice of profession, extensive religious toleration and liberty of conscience, and freedom of opinion and of the press.” (p. 51). Like Smith, Hegel overcomes the individual vs. community debate by arguing for how individual freedom is best realized in a certain kind of community (Sittlichkeit) involving what we would now call the intermediate associations of Tocqueville or civil society. Individual autonomy was as important to Hegel as it was to Smith (p. 121).

In identifying and addressing the normative issues raised by market societies, and despite her attempt to overcome the limitations of the narrow economists and political theorists, Herzog reflects the democratic-socialist bias of much of modern political theory (Rawls, Sandel, and the other usual suspects) and provides no serious discussion or discussion at all of the works of Hayek, North, and Buchanan even though they are mentioned in passing. Herzog draws attention to Smith’s discussion of the bad effects of the division of labor and Hegel’s identification of the social threat of the ‘rabble’. These morph into the now familiar alleged problems of market failure.

These alleged failures fall into three categories:

a. Not enough (poverty)

b. Enough but not equally distributed (equality)

c. Social dysfunction1 (too much wealth leads to consumerism)

d. Social dysfunction2 (underclass)

The specific problems are poverty, the distribution of resources/opportunities and the otherwise social dysfunction of some members of market societies. In larger theoretical terms, Herzog inquires into whether there can be “Justice in the Market” (chapter 5), that is, whether it makes sense to ask if market outcomes are deserved. Admitting that Hayek and libertarians would deny that the question has any meaning in a market economy, and recognizing that markets promote certain virtues (Smith, and Deirdre McCloskey on bourgeois virtues), she opines that markets are sometimes incompatible with traditional morality (p. 113) or some people’s expectations. What she does not take into account is that so-called traditional morality often contains elements that reflect a classical collectivist conception of society that is out of sync with modernity – an insight that would require a closer reading of McCloskey and perhaps Jane Jacobs.

Libertarians and classical liberals will be exasperated by such claims as “natural resources getting scarcer and scarcer” (p. 160) and that “Wilt Chamberlain’s talent was discovered in a state [public] school, which would not even exist in a Nozickean state.” (p. 118). Herzog has apparently not read Simon and is not cognizant of how private schools in the U.S. have programs of identifying talented minorities (intellectual and in sports) and giving them a free ride. As an aside and not limited to Herzog, I have recently been struck by the ignorance of so many Europeans about American culture as a market society.

These embarrassing moments aside, Herzog is commendably interested in the relationship of market societies to autonomy. In her interpretation of Hegel, she maintains that while market societies encourage autonomy such societies also can either undermine autonomy or serve as an obstacle to it. To be sure the lack of autonomy is a problem within market societies, but the real question is whether this reflects market failure or the failure of some people to adapt to markets and to embrace autonomy. Herzog subscribes to the former and attributes this insight to Hegel. On the contrary, I would maintain that Hegel’s discussion of the rabble sees the latter as failures rather than as victims. Interpreting the poor as victims is an idea that developed in Great Britain in the last half of the 19th-century, long after Hegel’s death in 1831. Herzog admits that Hegel “brushes over it [the problem of the ‘rabble’] without offering any solution…” (p. 155).

Hegel’s disdain for Jacobinism and the rabble was quite possibly the inspiration for Oakeshott’s delineation of the anti-individual as someone who chooses not to embrace autonomy. Even worse is Herzog’s failure to make clear that the ‘state’ in Hegel is not the government. Hegel strongly disapproved of the ancient Greek polis. Providing public services and administering the law are functions of civil society and not the ‘state’ in Hegel’s sense. Still worse is Herzog’s attempt in her “rational reconstruction of Hegel” (p. 137) to assimilate Hegel to Rousseau by adding “democratic control of the government, a thought that is present only in rudiments in Smith and Hegel” (p. 145). Herzog herself seems to support the ‘Republican’ tradition as expressed by Pettit and Skinner.

This leads us now to the issue of Herzog’s thesis that the seminal conversation of modernity is between the two poles of Smith and Hegel. If anything, Herzog has done a very good job of assimilating Hegel to Smith. The real debate, as argued by Capaldi and Lloyd in their book The Two Narratives of Political Economy, is between Locke and his successors on the one side (including Hume, Smith, Tocqueville, Mill, Hayek, Oakeshott, etc.) and Rousseau and his successors on the other side (French Socialists, Marx, the Progressives, etc., and most academic political theorists except for the students of Strauss, Voegelin, and Oakeshott). Moreover, that debate has evolved rather than being static.

Reading Herzog has convinced me that Hegel belongs on the Locke/Smith side of the debate, although that was not her intention. The first important element of the Locke liberty narrative is an endorsement of the Technological Project (control nature for human benefit rather than conform to nature; in Hegel this comes out as remaking the world in the human image); as Hegel put it, “Through work…the bondsman becomes conscious of what he truly is….and thereby becomes for-himself, something existing on its own account….Through this rediscovery of himself by himself, the bondsman realizes that it is precisely in his work wherein he seemed to have only an alienated existence that he acquires a mind of his own.” (#195-96 of the Phenomenology of Spirit).

Work not only allows us to liberate ourselves from nature’s dominance but to develop our self-consciousness and sense of freedom. We not only impose meaning on nature but discover our autonomy in the act of self-disciplined creation. Hegel has taken Locke’s insight that labor creates value and developed it into the insight that the Technological Project is the spiritual quest of modernity. The other important elements are the market economy; limited government, rule of law [Hegel offers an early version of the Rechtsstaat], and a culture of personal autonomy. Rousseau, on the other hand, was a thoroughgoing critic of the Technological Project, suspicious of markets, in favor of government by the general will as opposed to limited government, had no use for the rule of law, and saw fulfillment within a collective of equals that negated individualism. It is the heirs of Rousseau who have been held captive by the individual vs. community picture – not Hegel.

Herzog understandably steers clear of Hegel’s metaphysics, but it is that metaphysics that clarifies why Hegel was not an authoritarian. Given his teleology, the failure of the rabble to achieve autonomy does not negate the notion that autonomy is the ultimate goal. With regard to the state, it is not the state that creates or legitimates private property; as in Locke, private property is the indispensable condition of autonomy. The state embodies the ideal that autonomous individuals are not part of a zero-sum world, that there is no conflict between ultimate self-interest properly understood as the autonomy of any one person with that of all other persons; that the pursuit of autonomy by each enhances the conditions of autonomy for all – something Kant alluded to in the categorical imperative, but more importantly an expression of Smith’s unseen hand expressed in Germanic vocabulary. There is in Hegel no substantive collective goal; the collective goal is procedural = the norm of maximizing every individual’s autonomy.

I think it is important to acknowledge a continental tradition of liberty, a tradition expressed in the writings of Constant, Kant, Hegel, Guizot, and Tocqueville – however much this tradition may have languished. Serious scholars need not concede the greatest philosophers of the 18th and 19th-centuries to the political left.