centrality of human value
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On the centrality of human valueTeresa Carla Oliveira
a& Stuart Holland
a
aFaculty of Economics, CCIM, CEIS UC, University of Coimbra,
Coimbra, Portugal
Version of record first published: 22 Jun 2012
To cite this article:Teresa Carla Oliveira & Stuart Holland (2012): On the centrality of human value,
Journal of Economic Methodology, 19:2, 121-141
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On the centrality of human value
Teresa Carla Oliveira and Stuart Holland
Faculty of Economics, CCIM**, CEIS UC***, University of Coimbra, Coimbra, Portugal
The financial crash of 2008 following the selling of fictitious derivatives was a crisis ofboth rationality and values whose aftermath has thrown the legitimation of deregulatedmarkets, and governments, into question. This paper critiques the Becker metaphor ofhuman capital and submits that human value is central to and the fulcrum of botheconomic and social values. It illustrates that Hume and Adam Smith directlycountered the Hobbesian hypothesis that human nature is based only on self-interest,distinguishes market values from social values, explicit from implicit values andparallels Sen in adopting an ordinal ranking of what people value rather than a search
for cardinality. It draws on cognitive psychology, neural research, revealed preferencetheory and a principle of implicit verification. It also outlines implications for whatAdam Smith centrally valued as concern for the welfare of the whole of society.
Keywords: implicit; legitimation; preferences; tacit; values; verification
There is one and only one social responsibility of business to use its resources and engage inactivities designed to increase its profits. (Milton Friedman, The New York Times Magazine,13 September 1970).
He is not a citizen who is not disposed to respect the laws and to obey the civil magistrate; andhe certainly is not a good citizen who does not wish to promote, by every means in his power,
the welfare of the whole society of his fellow-citizens. (Adam Smith, The Theory of MoralSentiments, 1759, Part VI, Section II, p. 339).
1 Introduction
With globalisation and deregulation, the hegemony of HobbesLeviathanhas passed from
political sovereigns to markets. Much of this was abetted by Milton Friedman claiming
that markets are more efficient than governments; that alone can maximise social welfare
through self-interest countervailed by consumer sovereignty; that business has nothing to
do with ethics; that its deregulation is the basis of a free society, and alleging support for
this from both Adam Smiths invisible hand and Smiths recognition that it is not through
benevolence that butchers, brewers or bakers sell us meat, beer or bread.Yet the presumption that markets are more efficient than governments has been
challenged by the apocalypse of the financial crash of 2008, which itself was a crisis of
both rationality and values. In Europe, since 2009, governments have reacted by cuts in
expenditures and income to placate rating agencies which ranked toxic assets in banks
and hedge funds of which they were clients as safe as US Treasury bonds until they
collapsed, disregarding European Union (EU) treaty commitments to economic and
ISSN 1350-178X print/ISSN 1469-9427 online
q 2012 Taylor & Francis
http://dx.doi.org/10.1080/1350178X.2012.683593
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Corresponding authors. Email: [email protected]; [email protected]
**Coimbra Centre for Innovative Management
***Centro de Estudos e Investigacao em Saude da Universidade de Coimbra
Journal of Economic Methodology,
Vol. 19, No. 2, June 2012, 121141
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social cohesion and posed a major legitimation crisis for democracies in which it appears
that markets rule while governments cannot govern.
This paper relates this to a conceptual framework distinguishing market and social
values. It claims that the market fundamentalism which since the Thatcher and Reagan
eras came to dominate the political agenda of the West failed to recognise the values whichconcern most people in their daily lives and their perception of equity or inequity in
economic and social institutions and outcomes. It submits that markets alone do not enable
people to reveal their preferences for a more just and equitable society and that this is
corrosive for democracy.
In so doing it seeks to recover Adam Smiths neglected claim that functional economies
depend on well functioning societies. It indicates that neoclassical economics has
misrepresented Pareto on optimality and displaced recognition by Walras that competition
can be dysfunctional, especially in finance, and his advocacy of mutual societies in banking
and of public ownership of land and utilities. It draws on both Wittgenstein and neural
research in claiming that neoclassical economics is an example of left hemispheric self-
concern while displacing right hemispheric values and warnings of risk, and deploys
revealed preference theory to introduce the concept of implicit verifiers of social values.
The paper contrasts the concept of human value with Beckers metaphor of human
capital, premised on the unhuman claim that people are identical. It relates human value
not only to labour as a factor of production or values in market exchange but also to what
people value in relationships and life experience. It follows Hume and Smith in countering
the Hobbesian hypothesis that people are fundamentally motivated by self-interest and
proposes that the concept of human rather than only economic value is central to both
social and market relationships, to social contracts rather than only legal contracts and
mutual advantage from non-reciprocal giving such as in Titmuss gift relationship.
2 Hume, Smith and the Hobbesian hypothesis
Whether Milton Friedman ever read Smiths (1759)Theory of Moral Sentiments may be
open to question. He certainly is not renowned for citing the quotation from it at the outset
of this paper, nor for Smiths following claim that:
It does not follow that a regard to the welfare of society should be the sole virtuous motive ofaction, but only that, in any competition, it ought to cast the balance against all other motives.(Smith 1759, Part VII, Section II, p. 446)
Yet Friedmans presumption that self-interest is all that should concern business isconsistent with the central claim by Thomas Hobbes in hisLeviathanthat human nature is
fundamentally selfish and uncooperative. Thus, Hobbes (1651, chap. XIV) asserted that
men have no pleasure (but on the contrary a great deal of grief) in keeping company
where there is no power able to overawe them all and that society would be ungovernable
unless it had a single undisputed hegemon. He was influenced in this by the English Civil
War of the 1640s, for much of which he was in France advising the Crown Prince who, on
the restoration of the monarchy, would become Charles II.
Hobbes has been deemed to be one of the first moderns in political theory by a range
of commentators from conservatives and liberals through to Marxists (Macpherson 1962).
One of the bases for this was his contractual theory of sovereignty (Hampshire-Monk
1998; Sen 2009). Yet Hobbes contract, pact or covenant was one-sided in being an
obligation on people to obey a sovereign without reciprocal obligations which was not
typical of Rousseaus (1762) social contract in which people should be sovereign. Hood
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has argued in his The Divine Politics of Thomas Hobbes that despite Hobbes claims to
contest medieval scholasticism, he emerged as a scholastic mechanist (Hood 1964, p. 19).
Hume (1748b) was highly sceptical of Rousseaus social contract theory, despite
regarding him highly enough to gain him a royal pension. Yet both he and Adam Smith
contested Hobbes claim that people were motivated only by self-interest and that societywould be ungovernable without a Hobbesian hegemon. They were influenced in this by the
political settlement of 1688, whereby the highest authority in the land became not
the Crown, whose pretensions to unchecked power in the case of Charles I had caused the
English Civil War, but parliament, its legislation and restraint of sovereign power through
rule of law, even if the lawmakers were an unrepresentative oligarchy (Plumb 1950) and
while Hume (1752) himself deemed many of them knaves.
Yet Hume and Smith also observed that it was not due to the rule of law, or fear of it,
that British society, trade and industry was flourishing in the eighteenth century in a
manner that was unprecedented. Markets were working well not only because it paid to
compete, but also because of trust. Smith (1759, 1776) realised that trust could avoid
incurring costs from written contracts long before transaction cost theory surfaced 200
years later (Coase 1978). Both he and Hume (1739, 1740, 1748a, 1751, 1779) valued trust
not only on ethical grounds but because it was more functional than recourse to law and
litigation, which has been echoed by Sen (2009) in his concept of functioning. Trust had
to be gained, and confirmed from experience. It also might sometimes be misplaced. But in
the main it worked, and worked better the more pervasive it was through society.
In his Enquiry Concerning the Principles of Morals, Hume (1751, p. 298) explicitly
countered what he identified as Hobbes selfish hypothesis as contrary both to common
feeling and to our most unprejudiced notions. He argued that, however, prominent
considerations of self-interest may be, we value benevolence in others, even when their
benevolence is not, and never may be, directed towards us. In this regard, he influenced
Smiths Theory of Moral Sentiments and the central role within it of hisconcept of sympathy,
in claiming that benevolence was a manifestation of natural or social sympathy (Hume
ibid.). His grounds for this was not a claim to natural rights such a made by Rousseau
(1762). Rather, Hume based it on a feeling for humanity and valuing it in others.
Smith (1776, IV, p. 400) only once used the metaphor of an invisible hand in The
Wealth of Nations. By contrast, his concepts of sympathy and mutual sympathy in The
Theory of Moral Sentiments are its founding premises as in his claiming that:
How selfish so ever man may be supposed, there are evidently some principles in his nature,which interest him in the fortune of others, and render their happiness necessary to him, though
he derives nothing from it but the pleasure of seeing it. (Smith 1759, Part 1, Section I, p. 3)
Sentiment in Smiths usage differs from the current use of sentimental, implying
unrealistic feelings or aspirations. For him, and for contemporaries such as Condorcet
(Rothschild 2001), sentiments were integral both to feelings and to judgement, as in
approbation or disapprobation of the behaviour of others whether these were individuals,
or groups, or a profession such as lawyers or academics.
How he then sought to demonstrate this was in line with the claim of Wittgenstein
(1953) that meaning depends on understanding the use of language in context. He
recognised that the variations of the use of sympathy and sentiment in different contexts
are endless, and language wants names to mark them by . . . But still the general sentiment
of friendship and familiar attachment which is common to them all may be ascertainedwith a sufficient degree of accuracy (Smith 1759, pp. 483 484). Such sentiment or
feeling did not demand altruism in the sense of loving others more than oneself. It was
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closer to the biblical injunction, paralleled in other religions, to love thy neighbour as
thyself, but without divine commandment. By contrast also with Friedmans (1970) claim
that making profits was all that should concern business, Smith stressed that:
The wise and virtuous man is at all times willing that his own private interest should be
sacrificed to the public interest of his own particular order or society. Smith ( ibid., Part VI,Section II, p. 346)
Nor was this concern in Smith a contradiction of his later and better known observation in
The Wealth of Nations that it is not from benevolence rather than self-interest that butchers,
brewersor bakers are in business, not least since he was well aware of the central role that the
concept of benevolence played for Hume. Rather, like Hume, he saw them as
complementary self-interest and advantage through competition and the creation of
economic value; mutual interest and advantage in shared social values and functional
societies.
Smith also stressed that there were social dimensions of use value. Use value in the
economic sphere can be served by division of labour. But there is also use value in thesocial sphere for a society which functions on the basis of reciprocal concern for others.
This was to directly influence the later Utilitarians such as Bentham, and both James and
John Stuart Mill (Macfie 1967; Rothschild 2001). It was also to have extensive echoes in
Sens (2009) concept of functioning even though Sen had major reservations about a
Benthamite reduction of values to happiness.
For Hume and Smith, therefore, trust, benevolence and sympathy tend to promote
individual and inter-personal well-being and also the welfare of society. But they also
recognised that whether we are disposed to benevolence or sympathy for others depends
on economic, social and political context. If a politics or economy is dysfunctional,
societies also may become so and reduce what Maslow (1943) later was to identify as the
hierarchy of human needs to self-interest merely in survival.
3 The simulacrum of human capital
As a metaphor, human capital has gained as near universal a currency as Smiths once
only reference in The Wealth of Nations to an invisible hand. Becker (2006) has claimed
that if politicians do not refer to it they do not get elected. They may be less aware that he
also claimed that slavery was the only market, which accurately priced it (Becker 1964).
But we submit that there are flaws in the unrealistic manner in which he conceptualised
human capital, and in his premise-constrained pretensions to be able to measure it.
For example, Becker claimed that all workers are identical, which is a distinctivelyunhuman characteristic. He needed this for his claim that life income streams correlate
with investment in the human capital of formal education, rather than could be
informally learned-from-life or relate to other less tangible factors than the costs of
education, such as Schumpeters (1911, 1949) stress on differences in creative aptitude.
He declined to recognise differences in abilities and skills despite their importance for
employers, who rank them highly in personnel selection (Oliveira 2000, 2001, 2002, 2003,
2006, 2007) and dismissed experience entirely since he found it too difficult to measure
and therefore did not try (Oliveira & Holland 2007).
This is apart from Becker (1964, 1975, 1993) in successive editions of his Human
Capital neglecting that his initial correlations from macroeconomic data between formal
education and income trajectories were dependent on a FordistKeynesian era in which
governments were committed to full employment, and when higher education could assure
a progressively higher income stream for life. Whereas globalisation, de-industrialisation,
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rising structural unemployment and more flexible labour markets since the 1970s have
diminished the life choices and the life chances of graduates in the USA and Europe,
many of whom now are constrained to accept jobs on short-term contracts rather than
expecting careers with assured income increments (Arnold and Cohen 2008).
A further limitation of Beckers claims for human capital is not only that people arenot identical but such life chances or what Sen (1987, 2009) has deemed capabilities
are influenced by economic and social class. Becker (1964, p. 6) claimed in his first edition
of Human Capital that the underlying distribution of opportunities and abilities is not
easily identifiable. Yet other than a passing recognition that children of poorer families
do less well in formal education, he has not even tried to relate this to income, despite the
costs of higher education in the USA prohibiting access to the children of poorer families
even if they do well in secondary education.
Becker (1993) admitted also in the third edition of his Human Capitalthat he had not
sought to analyse or evidence correlations between investment in medical education or
training and trajectories of earnings in health on the basis that, a full analysis of the effects
on earnings of investments in health is beyond the scope of this study (Becker ibid., p.
55). Again, this would directly have raised the issue of social class granted that the high
earnings of doctors in the USA could readily correlate with the premium fees they charge
to the upper three-fifths of the population with access to private health insurance, but
exclude others who either have no corporate health schemes, or cannot afford to pay for
private health care on a personal basis.
At the end of the introduction to his second edition ofHuman Capital Becker wrote that
he anticipated that major insights into the benefits from schooling to women who do not
participate in the labour force [and] the productivity of marriage... will result from an
integration of the theory of human capital with the allocation of time, household production
functions, and the theory of choice (Becker 1993, p. 10). Sen (1984) also has commented onBeckers conceptualisation of marriage as a two person firm, with one hiring the other, that
this may have some foundation in some cases such as those of arranged marriages in Asia,
yet it means that, in Beckers world:
Market transactions take place within the family in an imagined way at imagined prices andimagined wages. (Sen 1984, p. 373)
Pre-nuptial contracts, fashionable among the wealthy and specifying individual financial
interests, do represent explicit market valuations, yet also assume lack of trust and
breakdown. Without them, marriage is closer to an implicit psychological contract based
on presumption of shared values and that the relationship will work rather than fail.
What we are suggesting, in contrast with Beckers human capital metaphor, is thatwhat people implicitly value is central to whom they are and how they relate to others
rather than only how markets may value them or whether they value themselves in
financial terms. Also that human value is not only economic but primarily social. It is
valued by individuals and valuable to others to whom they relate, whether in a family, or in
social life or at work. Such human value is neither based on nor motivated only by
financial gain. It is valued implicitly without being either capitalised or based on an
assumption of being repaid for the investment in a relationship with others.
4 Walras, Pareto and welfare
There are near as many graduates in economics whom have been taught welfare economics
in the context Walrasian general equilibrium and Paretian optimality as have never read
either Walras or Pareto. Few therefore realise that both stressed that equilibrium and
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optimality were pure but abstract concepts and the radical degree to which they could
differ from actual outcomes. Walras (1896, 1898) in his later work castigated a failure
already evident in his time to recognise the difference. He also had stressed the degree to
which there could be inefficiencies and social diseconomies from markets which needed
countervailance by public policies with examples which, since the repeal of the Glass-Steagall Act, and the subprime crisis, could resonate now, such as banks speculating with
depositors funds.
There is virtually no reference in any neoclassical introduction to economics, whether
Keynesian, monetarist or otherwise to Walras (1865) working for years in the cooperative
movement before becoming an academic and publishing a treatise on its merits. Nor that
he was an advocate of public ownership of land, utilities and infrastructure, including
water, gas, electricity and railways, as well as of mutual societies and cooperatives in
production, distribution and finance in a manner which later would come to be known as a
mixed economy. Nor that he thereby advocated extensive social and public ownership
while distinguishing between a socialism that may involve too much state intervention anda Manchesterism that does not intervene enough (Walras 1875).
There also has been only a narrowed and misrepresentative citing of Pareto in
neoclassical economics. He was trained as an engineer and fascinated by equilibrium when
he found it, but not trapped by it. Evolving as both an economist and a sociologist Pareto
(1896, 1897, 1909b), held that derivatives in calculus were not facts but a conceptual
scheme of the mind and that derivation could be not only by algebra but also from
discourse and its analysis (Pareto 1909a). Sen has critiqued the Paretian concept of
optimality in the sense that a change in income distribution that can make someone better
off without making others worse off as an extremely limited way of assessing social
achievement (Sen 1987, p. 35) and has claimed the impossibility of being a Paretian
liberal (Sen 1970). Yet there is another Pareto optimality principle, which has been
deemed its weak version by some mainstream economists yet is stronger in terms of its
social implications, i.e. that all individuals may gain from a change in income without any
becoming worse off (Pareto 18967).
This would be the case with policies which both can raise welfare and increase social
inclusion not by fiscal transfers such as have been opposed by Germany as a response to
the crisis of the Eurozone but by shifting savings into public investments from which the
private sector gains from matrix and income multipliers. Theorists of rational expectations
and efficient markets have also neglected that Pareto (1909a) stressed that to presume that
past outcomes could be projected into the future was psychological displacement of risk
and as unrealistic as Voltaires Dr Pangloss in his Candidesurveying the ruins of Lisbon
yet still claiming that all was for the best in the best of all possible worlds.
Neoclassical economics also has displaced Pareto and Walras recognition of external
diseconomies since these can be nonlinear and asymmetric. Admitting them would deny
decorating partial or general equilibrium analysis with calculus, and thereby its
presumption to be a science such as physics. Yet negative externalities from unregulated
markets not only may collapse banks and penalise whole societies, but also condemn
humanity to extinction from global warming. Positive externalities from regulation of
finance could safeguard savings from speculative folly. Public mortgage agencies such as
Fannie Mae and Freddie Mac did so in the USA before deregulation, and mutual societies
such as many British mortgage institutions did so before the aptly named Big Bangliberalisation of finance in the 1980s while enabling the joint agency and capability
building stressed by Sen (1987, 1993, 2009).
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5 Values and the matter of the mind
Yet, other than a disposition to refer to rather than to read original texts, there are deeper
reasons why neoclassical economics has sought to reduce values from those of the welfare
of society or social preferences to individual choice. As summarised in Box 1, they are
based in the matter of the mind and especially differences between the left and righthemispheres in brain functioning.
Such differences were recognised by the mid-nineteenth century. The left hemisphere
in terms of Brocas and Wernickes areas was found to be that of conceptualisation,
conscious calculation and language, and the right that of sensing, feeling and intuition. But
more recent neural research (Box 1) has taken this further and indicates striking parallels
with neoclassical economics.
Thus, left hemispheric reasoning is linear which is typical of neoclassical
methodology. It also prefers what is either static or comparative statics, as does
neoclassical growth theory (e.g., Samuelson 1947; Hicks 1965), whereas the right
hemisphere can accept anomalies, asymmetries and flow. The left hemisphere prefers onlyone parameter or variable at a time, as did Solow (1970) in his one good or one product
Box 1 Values and the matter of the mind.
The left hemisphere of the brain is the area of conceptualisation, conscious calculation
and language. The right is the area of imagination, sensing and feeling. They interact.
But advances in neuroimaging indicate that they not only have different functions but
different values.
Kinship, partnership and cooperation are right hemispheric attributes, as are sympathy,
empathy and moral sentiments (Smith 1759).
Narrowing meanings is left hemispheric and typical of analytical philosophy, the
attempt to reduce meaning to formal logic and algebra, the codification of laws, and a
reduction of values to only those which are explicit.
Right hemispheric brain functioning is typical of pre-Socratic philosophy, of the
evolution of drama, music and poetry, imaginative narrative, metaphor, lateral thinking
and also an implicit sense of justice.
Intuition and recognition are a right hemisphere attributes. Inhibition and denial are left
hemisphere specialities.
The right hemisphere can dismiss false premises and deductions as absurd. The left
hemisphere sticks to the false premise as in thats what it says here in terms of both
rules that have been taught and norms that are professionally expected.
The left hemispheres world is self-consistent, because it is axiomatic as in
Samuelsons (1947) Foundations of Economics but thereby displaces what can be
most important in human behaviour including social rather than only market values.
Crucially, in terms of the non-evolution of economics lamented by Veblen (1898), the
right hemisphere learns up. The left hemisphere learns down.
Main sources other than references to economics: Cutting (1997), Decety and Jackson(2004), Decety and Cacioppo (2010), McGilchrist (2009) and Panksepp (2003).
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macroeconomic model which not only displaced reality, but also the basic principle of
neoclassical microeconomics of consumer choice.
Theleft hemisphere sticks to formal logic and premise dependent reasoning. It prefers its
own explicit virtual world. The right hemisphere can address and try to resolve what is
implicit and can dismiss false premises and deductions as absurd. The left hemisphere sticksto a premise that may be false, as in thats what it says here, such as the presumption of
perfect information or perfect competition, or Beckers premise that all people are
identical. It is reductionist in simplifying its view of the external world, and is self-
referential. The right hemisphere knows both tacitly and implicitly, as from informal
learning from life (Cutting 1997; Panksepp 2003; McGilchrist 2009).
The left hemisphere therefore functions in an abstract, decontextualised, disembodied
world of its own imagination. It prefers and claims certainty even if this may be unreal, as in
the logical atomism of the early Wittgenstein (1922) and neoclassical economics. The right
hemisphere is more open to context in its sense-making (Wittgenstein 1953, 1958, 1980,
1982) and to threats. It is on the look out rather than looking into, unlike theories of
rational expectations and efficient markets.
Neuro-imaging indicates that how and what we are disposed to think also affects
synaptic growth and tends to reinforce how we then view and interpret the external world
(Lee 2009; Nader and Einarssom 2010; Wang and Morris 2010; Alberini 2011). But this
also means that the more we premise and teach that x correlates with y, the more we and
others may presume that it will do so in future. As with the projection of past strings of
prices and market values which was misinformed by rational expectations and efficient
market theories and thereby displaced the Pareto Pangloss warning that this could be
psychological displacement of realities.
Damasio (1994) has deemed the concern of the West with only explicit reasoning as
Descartes error. Goleman (1996) has paralleled this in stressing that many people, andmany managers, lack emotional intelligence. McGilchrist (2009) has claimed that left
hemispheric dominance of thought, not only since Descartes, has been more typical of
Western than of Eastern societies. Gaukroger (2006, 2011), a historian of science, has
claimed that this reduced Western values to those which were conscious and explicit, rather
than sensed or felt, which was exceptional in oriental cultures, despite their developing
sophisticated advances in mathematics and science long before the Western Enlightenment,
as also has been demonstrated extensively for China by Needham (1986).
Spengler (1918, 1923) recognised the achievements of Western societies in science but
argued that Cartesian rationalism is constrained by being premise dependent, not thinking
outside its self-constructed domains and, especially, displacing human by market values inconstantly striving for profit rather than well-being. He also crticised its Faustian
pretension in presuming to build a world oneselfto be oneself God (Spengler 1918, p. 43,
his emphases). Of which a striking parallel in the sense that only gods are presumed to be
all knowing is the neoclassical presumption of perfect information. Or a simulacrum
such as Beckers human capital in the sense of A thing having the appearance but not the
substance or proper qualities of something; a deceptive imitation or substance, a pretence
[or] the worshipping of false gods (Oxford Shorter Dictionary).
This has implications for both modes of thought and models of economic governance.
For it is notable that China did not succumb to the left hemispheric pretension that subprime
and other derivative markets were rational or implied value. Whether this was conscious or
right hemispheric in terms of sensing and intuition may be open to question. But the
outcome is verifiable. Following the subprime crisis and the near collapse of the western
financial system, China emerged with three of the four largest banks in the world (FT 2009).
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Moreover, these have operated on Walrasian principles within a mixed economy
framework, channelling savings into investments in a Keynesian manner, financing growth
and higher levels of employment (The Economist2012). Whereas the cost to the West of
salvaging banks whose Friedmanite and Hobbesian self-interest should have maximised
social welfare has meant a fiscal crisis inhibiting growth, a denial of the principles ofpostwar welfare capitalism and a legitimation crisis for Western democracies.
6 On the centrality of human value
What we are claiming is that such a crisis and the premise dependent response to it in the
EU of seeking to placate bond markets by austerity reflects the displacement of social by
market values. Also, the need in redressing this not only to adopt alternative policies, as
the Roosevelt administration did in the 1930s New Deal (e.g. EESC 2012), but to gain
centrality for human value rather than simulacra such as human capital. Napoleoni (1975)
has stressed that Hume, Smith and Marx saw value not only in economic terms but in
complementary multi-dimensional personal and social domains. Sens approach to
value reflects this which is where he differs from both neoclassical economics and a
utilitarianism which had derived only one principle, hedonic value pleasure from
Smith. As he put it in Development as Freedom:
To insist that there should be only one homogeneous magnitude that we value is to reducedrastically the range of our evaluative reasoning. It is not, for example, to the credit ofclassical utilitarianism that it values only pleasure, without taking any direct interest infreedom, rights, creativity or actual living conditions. To insist on the mechanical comfort ofhaving just one homogeneous good thing would be to deny our humanity . . . . (Sen 1999,p. 77)
What he proposed instead is a plurality of values (Sen 1987) and making way for a varietyof human acts and states as important in themselves ( Sen 1993, p. 33). This includes not
only hedonism but the Aristotelian principle ofeudaimoniaor purposeful living, which is
consistent with Marxs (1844) concept of overcoming multiple dimensions of alienation
rather than only the alienation of surplus value, Rousseaus stress on overcoming
individual, social and political alienation (Rousseau 1752, 1757, 1762) and what Riesman
1950, 1954) later was to express as self-direction rather than other-direction.
What we are proposing is consistent with such plurality of values but also submits that
human value is central to both the economic and social domains and the fulcrum of
economic and social value. Reflecting this, Figure 1 allows that such value, like the value
of both capital and labour, has multiple dimensions similar to the sets-within-sets ofmeaning such as have been central to the theory of capital and the value debate
surrounding it, whether mainstream (e.g. Harcourt 1972), or Marxist (Mandel 1962, 1971;
Olin Wright 1981), or Neo-Ricardian following Sraffa (Sraffa 1960; Steedman 1977;
Hodgson 1981).
The figure distinguishes between explicit market values and implicit social values, and
relates also to left and right hemispheric brain functioning (Box 1). On its left side, the
more one gets to market the more explicit is an exchange relationship, as with a contract
to buy or sell, or of employment. The more one is concerned with property and property
rights, the more explicit are the terms and conditions of such rights, again in formal
contracts. Human and social rights also may be explicit, as in codes or conduct against
ethnic or gender discrimination, or a charter of universal rights,1 but whether or not they
are respected tends to depend on whether they are implicitly valued and have become tacit
rules and implicit norms of behaviour (Oliveira 2007).
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Yet Figure 1 also relates to the meanings-in-use and context of concepts (Wittgenstein
1953) and their relation to both explicit and implicit sets and subsets of meaning (Matte
Blanco 1975, 1988) as follows.
. Capital has historic value, anticipated future value, exchange value and use value.
But so does human and social value.
. People value what they have gained from personal and social relationships in the
past, and may anticipate it in future with greater or lesser justification. They also can
explicitly exchange or implicitly transfer values to others such as children and finduse value in both economic and social relationships.
. Market values sanction inequality, and tend to promote it. Human value relates
centrally to issues of equity and of procedural and distributive justice, as in the
manner stressed by Sen (1987, 2009).
. Market exchange can enhance welfare but also may minimise it if, in labour
markets, this is at subsistence levels of well-being (Smith).2
. Property rights may reinforce or contradict social rights depending on context and
the private or social basis of ownership of property and how it is managed.
. Social value is consistent with Humes concept of benevolence or Smiths sympathy
and mutual sympathy.
. Shared social values enable functional societies in the sense of both Hume and
Smith and may enhance capabilities (Sen 1987, 2009), whereas lack of them may
prove dysfunctional.
The Centrality of Human Value
Left Hemispheric Right Hemispheric
Human
ValueSocial
Value
Economic
Value
Property
Rights Social Norms
Market Exchange Social Exchange
Competitive
Advantage
Mutual
Advantage
Formal Knowledge Informal Knowledge
Market Innovation Social Innovation
Welfare
Welbeing
MARKET DOMAIN SOCIAL DOMAIN
EXPLICIT VALUE IMPLICIT VALUE
INEQUALITY EQUITY
Psychologicaland SocialContracts
LegalContract
PrivateGain
SocialGain
Figure 1. The centrality of human value.
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with others, echoing Walras, has analysed as an associative economy or more generally
has been deemed a third sector.
8 Implicit values and implicit verifiersYet if implicit values make sense in terms of the well functioning of both economies and
societies, how can one verify them whether with a verification principle such as that of
logical positivism (Carnap 1934; Ayer 1936) or falsify them in terms of Poppers (1959)
falsification principle? As Hume (1740) stressed and Smith (1759) echoed, all perception
and cognition is subjective. Whatever Kants claims forsynthetic a prioripropositions that
are universally valid, and in the search for which he was provoked by Hume, or Rawls
concern to demonstrate a transcendental justice, ought cannot be derived from is
(Hume 1739, 1740; Kant 1781, 1783, 1788; Rawls 1971, 1993, 2001).
Poppers claim that something cannot be verified rather than falsified stemmed from
his finding that both Freudian and Adlerian analysts in the Vienna of his youth alwayswere ready to claim that pathological behaviour proved their theories, although they
were different.3 Yet there is a difference between claiming to prove a theory and finding
consistency in what people perceive, sense or feel in terms of values. Thus, if with less
profile now in this regard than Poppers stress on falsification, Hayek observed that finding
that different people:
perceive different things in a similar manner . . . must be regarded as a significant datum ofexperience which must be the starting point in any discussion of human behaviour. Hayek(1937, p. 37)
This both is consistent with Paretos alternative principle of derivation from what people
actually say, and compares directly with Smiths observation in his Theory of MoralSentiments that:
It is by finding, in a vast variety of instances, that one tenor of conduct constantly pleases in acertain manner, and that another constantly displeases the mind, that we form the general rulesof morality. Smiths (1759, p, 470)
Thus, when people attribute value to something or someone this is subjective. But if
it is found that what they value is shared by and common to the experience of others
it becomes a datum which in this regard is as objective as other data in social analysis and
whose consistency may indicateboth statistical and social significance in such commonality.
Sen (1974, 1976, 1982, 1985) has shown that consistency can be found in ordinal
ranking both of poverty and of well-being. Ordinal ranking also can avoid whatWittgenstein (1953), with reason, claimed could be asking the wrong question in asking
for a cardinal or absolute criterion for value or seeking truth in a Kantian transcendental
sense of a synthetic a priori axiom or Rawls (1971, 1993, 2001) search for a
transcendental criterion of justice.
Rather, finding implicit verifiers for what is true for people in their own or shared
contexts, through discourse, is inductive in terms of deriving conclusions from what can be
found empirically and also analytic in relating it to either already known or new concepts,
such as those of learning-from-life and of learning-from-work rather than only lifelong
learning, reported below. It is both synthetic anda posteriori in the sense of identifying
what people have derived from their experience, and precisely what Hume and Smith did
in observing and finding evidence for benevolence and trust in human behaviour. It gains a
cognitive and conceptual connection with peoples understanding of their own realities
(Hume 1740; Smith 1759) and needs no metaphysical search for a priori cardinality.
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9 Values and implicit learning
In illustrating that consistency can be found in ordinal ranking in the measurement of both
poverty and well-being, Sen (1974, 1976, 1982, 1985), has cited consistent responses to
questionnaire-based surveys (e.g. Mack and Lansley 1985). A similar approach
(Oliveira 2003), but based on one-to-one discourse rather than a questionnaire, was afour-country case study which was the outcome of a remit to the European Commission from
the Lisbon European Council to identify and deconstruct the concept of lifelong learning
which, at the time, lacked much deeper meaning in use by governments than serial retraining.
The methodology in the case study was informed by the claims of Reber and others for
implicit learning (Reber 1989, 1993; Berry 1997) and those of Nonaka and Takeuchi
(1995), Baumard (1999) and Ambrosini and Bowman (2001) that tacit knowing can be
surfaced by discourse. But it was also informed by Polanyis (1962) claim that there is a
tacit coefficient in any statement, the case of Matte Blanco (1975) for interfacing conscious
and unconscious logic in sets-within-sets of meaning, and the parallel case of Cleeremans
(1997) that implicit learning is an interface between conscious and unconscious processes.The case study also drew on sets of criteria drawn from the theory of candidate choice in
personnel selection such as knowledge, abilities and skills or KAS, and values, beliefs and
personality or VBP (Anderson and Shackleton 1990, 1993; Anderson 1997; Guion 1997;
Anderson, Lievens, van Dam, and Ryan 2004; and Figure 2). The methodology was of
semi-structured interviews with 240 persons, age and gender balanced, in Italy, Ireland,
Hungary and Portugal.
To operationalise concepts such as values learned-from-life or learned-from-work
meant training the researchers in the project to identify implicit meanings and sets-of-
meanings in discourse. In coding transcripts of one-to-one discourse, they were encouraged
to distinguish subsets within the domains of implicit learning from childhood, education,
recreation and relationships in both work and life as illustrated in Figure 2 of which four such
domains from life experience are social and one work both economic and social rather
than exclusively economic.
The findings from the four-country case study are given in Table 1. Of these the most
outstanding are that values ascribed to learning-from-life at over 75% massively outstrip
those of,3% learned from the formal education that Becker assumes is investment in
human capital.
KASKnowledgeAbilitiesSkills
VBPValues
BeliefsPersonality
Context
CRITERIA
Identifying learning-from-work and learning-from-life
Childhood
Relationships
Education
RecreationWork
DOMAINS
Figure 2. Identifying learning-from-work and learning-from-life.
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allegedly New Public Management in the National Health Service (NHS) (Le Grand
1991; Le Grand and Barteltt 1993).
Yet, Le Grands recommendations of quasi-markets for the NHS in terms of criteria
for performance management were less new than Taylorist in terms of time and motion
studies, Fordist in terms of increasing patient throughput and hierarchical in a Weberiansense that bureaucracy was rational but also soulless, and needed direct democracy to
challenge its alienation of employees. Such New Public Management assumed that
change could be imposed top-down without dialogue with health professionals or
delving down to learn up on what their own experience and values represented in terms
what they believed in, what motivated them and the degree to which this was based on a trust
relationship with patients (Oliveira and Holland 2007).
Such quasi-markets also, in Sens terms, as well as those of Hume and Adam Smith,
did not assure functional social outcomes, but proved dysfunctional. By presuming that
health professionals were knaves and could not be trusted and introducing Taylorist
performance criteria within a Foucauldian context of surveillance rather than Hume and
Smiths presumption of trust, administrative costs as a share of total costs by needing new
layers of management for performance evaluation and surveillance in the NHS near
doubled its administrative costs, just as Titmuss had foreseen if the NHS were to replicate
the administrative costs in private sector health provision in the USA (Leys and Player
1911; Titmuss 1971; Pollock 2004; Oliveira and Holland 2007).
Since when a series of studies have shown that health service workers in the UK have
come deeply to resent the presumption that they only were only self-interested suppliers of
health as a commodity. Nurses have resented the implication that they were doing a job
for clients rather than committed to and valuing health care as a public service
(Bolton 2004; Pollock 2004) as have doctors and medical ancillary staff (Arnold 2009).
11 Conclusion
This paper has drawn on the central role attributed to human values by both David Hume and
AdamSmith, including that trust, benevolence and sympathy werevital for well-functioning
societies. It has claimed that the Smiths famous claim that it was not through benevolence
that butchers, brewers or bakers sell us meat, beer or bread was not a contradiction of this but
that, like Hume, he saw self-interest and mutual interest as complementary self-interest
and advantage through competition and the creation of economic value; mutual interest and
advantage in shared social values and functional societies.
It has challenged the metaphor of human capital on the grounds that it is unrealistic inassuming that all people are identical and that in neglecting learning from experience
Becker has missed that most learning, including the learning of values, has been from life
rather than formal education. It has shown the mainstream neoclassical theory has presumed
to be Walrasian and Paretian yet displaced their stress on the importance of distinguishing
theory from actual outcomes and the manner in which Walras understood both limits to
welfare from markets and advocated social and mixed economy policies including mutual
and cooperative ownership and control of finance.
But it has suggested a deeper criticism of neoclassical economics in that its displacement
of values other than market values has been typical of left rather than right hemispheric brain
functioning and has been pathological in that its premise dependent principles have been
self-referential rather than inferential and displaced realities including both externalities
and risk. It has not sought a cardinal or transcendental criterion for values but has
demonstrated that an ordinal ranking of values basis is empirically verifiable.
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In doing so it has submitted that Popper was wrong in claiming that there can be no
verification rather than falsification, and Hayek right in the counter claim that when there
is evidence that people share a common experience this becomes a datum capable of
verification. In drawing on concepts such as implicit logic it also has introduced the
principle of implicit verification. It has qualified but paralleled Samuelsons principle ofrevealed preference by drawing on evidence of the feasibility revealing tacit and implicit
values.
The paper has challenged a misrepresentation of Hume in the case for the introduction
of quasi-markets through allegedly New Public Management in the UK by Julian Le
Grand and his premise that public sector workers are fundamentally self-interested rather
than committed to values of public service and vocational concern for the well-being of
others. One of its main implications is the case for recovering the centrality of human
value rather than the simulacrum of human capital, and gaining legitimation from this in
democratic processes which can assure more direct democracy within organisations, as
advocated by Weber, especially in the public and social domains where governments
could commit to this, as well as the need for political democracies to gain legitimation
from ensuring that markets serve people rather than that people serve markets.
Notes
1. Such as the UN Charter of Human Rights and the right to well-being in the sense of the UNDPcriteria of health, longevity, education and standard of living which Sen has played a key role inboth instigating and developing.
2. Which Smith recognised in theWealth of Nationsin the tendency of markets to reduce wages toa subsistence level, and recommending the legalisation of working men associations tocountervail this.
3. The Adlerian analysts included Adler himself, whom Popper knew well.4. Humes text continues
. . .
When there offers, therefore, to our censure and examination anyplan of government, real or imaginary, where the power is distributed among several courts andseveral orders of men, we should always consider the separate interest of each court and eachorder; and if we find that, by the skilful division of power, this interest must necessarily in itsoperation concur with the public, we may pronounce that government to be wise and happy(Hume ibid.).
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