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THE HARD FACTS:
Perspectives of Cultural Economics
Harry
Hillman Chartrand ©
Transactions of the Royal Society of Canada 1989, Fifth Series, Volume IV
University of Toronto Press 1990
Abstract
An unanswered question in the history of thought is why economics has become an abstract
discipline void of almost any cultural context. To answer this question, historic, empiric and
theoretic evidence is presented. Early in the 19th century, Jeremy Bentham began to strip
economics of its concern with culture, custom and tradition. Bentham's assumption that
culture was irrelevant was reinforced in mid-century with the schism between Marxist and
mainstream economics. Cultural relativity became Marxist analysis and mainstream
economists adopted an increasingly positivist approach.
Because of the Benthamite legacy, the arts and culture have been thought intangibles and
frills in a bottom-line economy. But a fundamental demographic revolution, involving rapid
urbanization, rising levels of education, increasing participation of women and aging of the
population, has made the arts a significant industry and a force in national competitiveness.
Evolution of art from symbol to source of wealth parallels evolution of the concept of National
Income. Through time, there has been a progressive expansion in the sources of National
Income. In this century, technological change is recognized as the most important.
However,
the nature of technological change has also changed. Today, there are three sources of
technological change. Research in the physical sciences leads to improvements in physical
technology. Research in the social sciences and humanities leads to improvements in
organizational technology, i.e. the ways to organize and motivate capital, labour and
technology. Research in the arts leads to improvements in advertising, consumer research,
marketing and product design. Physical and social science research is centred in the
university; research in the arts in the professional fine arts.
Research involves small amount of resources compared to existing capital stock and labour
force. However, in economic growth it is a catalyst stimulating changes and improvements in
the quality and efficiency of capital and labour. Research results are embodied in abstract
intellectual property rights including copyright, patents, registered industrial design and
trademarks. It is buying, selling and licensing of such rights that constitute the quaternary
Sector of the Post-Modern Economy.
In this new economy, it is creative workers -- artists and scientists -- who are the source of
growth in National Income. They, the laws protecting their creations, and firms relying on such
rights for industrial organization are sensitive to culture, custom and tradition -- as is the
increasingly educated and sophisticated consumer. The Benthamite tradition deeming culture
irrelevant to economic behaviour is no longer valid in a mythic or multicultural domestic and
international economy. But we still await emergence of a truly Humane Science to replace the
pre-Benthamite Moral Philosophy.
Introduction
... better Socrates dissatisfied than a fool satisfied.
J.S. Mill
The fabric of intellectual history is partially woven from the threads of
coincidence. One such thread involves great scholars who, distant in space yet near
in time, raise the same seminal question, or propose similar answers to fundamental
questions troubling the contemporary ethos. An example drawn from cultural
economics and involving a growing divergence between the economic theory of
value and evolving social reality will demonstrate.
In May 1972, Tibor Scitovsky began by stating: "What's Wrong with the Arts Is
What's Wrong with Society" (Scitovsky 1972). Then in September 1972, Kenneth
Boulding in his seminal article "Towards the Development of a Cultural Economics"
raised the related question:
The founding father of economics, Adam Smith, had a strong sense of
the cultural matrix of economic phenomena. One of the most
interesting of the unasked questions of intellectual history is how the
science of economics should have lost this sense and become an
abstract discipline void of almost any cultural context (Boulding 1972: 267).
Finally, in December 1974, John Meisel, in his presidential address to the
Canadian Political Science Association (which seven years before had split from
joint membership in the Canadian political economics association), argued in
"Political Culture and the Politics of Culture":
political science has neglected many critical aspects of ... leisure
culture and... this state of affairs ought to change. To remedy this
neglect ... [we] shall have to ask ourselves whether all that is needed is
an additional focus for research - whether we merely need to explore
and work a heretofore neglected field - or whether what is required is
a fundamental reorientation of the discipline, like those associated
with the behavioural and post-behavioural revolutions (Meisel 1974:
601).
While accepting Scitovsky's statement, but to answer Boulding and, at the same
time, to shed some light on Meisel's question will require a brief review of the
history of economic thought, analysis of available empirical evidence and
presentation of a theoretical framework explaining the contribution of art and
culture to economic growth and development. These three steps will, for purposes of
this paper, establish what can be called the
hard
facts from three perspectives of
cultural economics
-- historic, empiric and theoretic.
Historic
Economics, as a discipline of thought or "a recognized field of tooled
knowledge" (Schumpeter 1949: 143) emerged in the late 18th century at about the
same time as political rights of the individual became a reality with the American
and then the French Revolutions. Adam Smith, writing just as the flood tide of
revolution began to inundate the Old Order of Privilege and
Preference, demonstrated a strong awareness of the cultural matrix of economic
phenomena (Smith 1776). Two of his successors, however, stripped economics of
its cultural context -- Jeremy Bentham and Karl Marx.
Jeremy Bentham was a lawyer turned reformer. He believed in "La Raison" (Schumpeter
1949: 115) as the ultimate test of value to society. To Bentham, neither
God nor some "natural harmony" was at work in human affairs. Furthermore, it was
Bentham who introduced the premise that culture, custom and tradition are not
relevant to economic analysis:
On the whole the most influential of the immediate successors of
Adam Smith was Bentham. He wrote little on economics himself, but
he went far towards setting the tone of the rising school of English
economists at the beginning of the nineteenth century ...[who]
therefore were inclined to think that the influence of custom and
sentiment in business affairs was harmful, that in England at least it had
diminished, was diminishing, and would soon vanish away: and the
disciples of Bentham were not slow to conclude that they need not
concern themselves much about custom. It was enough for them to
discuss the tendencies of man's action on the supposition that
everyone was always on the alert to find out what course would best
promote his own interest and was free and quick to follow it (Marshall 1920: 628-9).
As a pragmatic political reformer, the opening terror of the French
Revolution, its Napoleonic second act and its denouement -- the reactionary Holy
Alliance -- restrained Bentham from advocating the logical political conclusions of
his radical egalitarianism, i.e. not only redistribution of wealth but also property.
Another way in which he influenced the young economists
around him was
through his passionate desire for security. He
was indeed an ardent reformer. He was an enemy of all artificial distinctions between different classes of men; he declared
with emphasis that any one man's happiness was as important as any
other's, and that the aim of all action should be to increase the sum total of
happiness, he admitted that other things being equal, this sum total would be greater the more equally wealth
was distributed. Nevertheless so full was his mind of the terror of
the French Revolution, and so great were the evils which
he attributed to the smallest attack on security that, daring analyst
as he was, he felt himself and fostered in his disciples an almost
superstitious reverence for the existing institutions of
private property (Marshall 1920: 628-9).
While the political implications of Bentham's radical egalitarianism were held
in check by terror of revolution, it held at least 4 significant implications for
economic thought. First, Bentham assumed that all the pleasures and pains of an
individual resulted from simple physical sensation and could be measured and added
into a quantity called `Happiness'. Assuming the happiness of each individual was
weighted equally, individual "happinesses"
could, in turn, be summed into a social
total which was equal to the common good or welfare of society. Thus the social
good was nothing more
nor less than the sum of individual sensations of pleasure or pain -- the only ultimate
realities (Schumpeter 1949: 131) -- the two sovereign masters of humanity (Clough
1964: 825).
The assumption that pleasure and pain could be measured became reified
as
money. Lack of money was the source of misery. Enough money was the source of
happiness. This led to equating value to society -- of an object, product, process or
person -- with its dollar price in the marketplace. This assumption fostered
development of an illusory calculus which became the centrepiece for the economic
theory of consumer behaviour -- the marginal utility theory of value (Blaug
1968:
304). It also provided Marshall and Pigou with the foundation for contemporary
welfare economics.
In the Benthamite tradition, however, maximizing pleasure was restrained by
the tenets of Ethical Hedonism, a very Protestant Ethic. This ethic, beyond concern
with the moral value of work, also involved social inhibitions against conspicuous
consumption (Veblen 1899). Such ethical or moral restrictions were reinforced by
the lingering effects of feudal sumptuary legislation which made "status forgeries
illegal and created the disincentive of trial and punishment" (McCracken 1988: 33).
But, as noted by Daniel Bell (Bell 1976: 20-22), when the Protestant ethic collapsed
during the Industrial Revolution, only hedonism remained -- in all its unrestrained,
irrational incarnations. Without a generally accepted moral code, the law became the
accepted social institution to moderate individual pleasure-seeking. Benthamite
traditions concerning crime and punishment in fact continue to guide both the law
and economic research, e.g. Bentham's famous and seemingly plausible dictum `the
more deficient in certainty a punishment is, the severer it should be' (Becker 1968).
Second, for Bentham culture, custom and tradition were irrelevant to
economic analysis because they were irrational and interfered with application of
pure reason in the maximumization
of Happiness, a neologism coined by Bentham
himself (Bell 1976: 224). Yet this radical individualism flies in the face of
demonstrable traditional and ideological attachments which shape an individual's
actions into collective acts (Bell 1981: 70-72).
Third, in the Benthamite tradition all men were not just equal but also
nondescript and malleable (Schumpeter 1949: 132-4). Therefore, tastes were the
same, or would become so through another Benthamite policy -compulsory
education. Questions of taste and style were, therefore, irrelevant to economic
investigation.
Even aesthetics were affected, shrinking to analysis of the pleasurable
sensations evoked by a work of art. In this aesthetic, a thing is beautiful because it
pleases, it does not please because it is `objectively' beautiful (Schumpeter
1949:
126-7). This aesthetic, combined with Benthamite emphasis on functional utility,
meant that application of artistic effort to contribute
beauty of form to the function
was rejected as "irrational". In industrial design and architecture, this aesthetic
reached its logical conclusion in the aphorism: form follows
function. This
contributed to the development of a simplistic and sterile consumer theory of
economic behaviour and a theory of production in which design is not, in theory,
considered a factor.
Fourth, Bentham's Utilitarianism reshaped not only the definition of means but
also the ultimate ends of human activity. As a philosophy of life it ruled out as
contrary to reason all that is really important to the individual. The Utilitarians are
credited with:
having created something that was new in literature... namely,
the shallowest of all conceivable philosophies of life that stands
indeed in a position of irreconcilable antagonism to the rest of them
(Schumpeter 1949:132-4).
While Bentham was restrained by the terror of revolution, Karl Marx saw
revolution as the hope for the working man and for the final triumph of human reason
in economic and political life. Perhaps this reflects the fact that Marx was born into
the romance rather than the terror of revolution. In many ways, however, Marx is the
direct heir of Bentham. In a sense, he simply extended Bentham's logic beyond the
inhibiting fear of revolution.
By the mid- to late-19th century, political economy had split into two
opposing camps reflecting, among other things:
-
conflicting views concerning the impact of culture or stage of cultural
development on economic behaviour - yes for Marxists, no for the mainstream;
-
conflicting theories of value, specifically whether labour was the only productive
economic factor as Marxists believed or, whether capital was also productive as
the mainstream contended;
-
conflicting beliefs in the efficacy of collectivist solutions to political economic
problems such as the role of the Party as revolutionary vanguard and the
dictatorship of the proletariat
versus
individualist solutions such as pluralistic
democracy and the market mechanism; and,
-
conflicting theories about the legitimacy of private property deemed exploitive
by the Marxists and essential by the mainstream.
The
intensity of this schism became, by the mid-20th century, as potentially
apocalyptic as the European Religious Wars of the 16th and 17th centuries.
It was, of course, the turmoil of these wars which led to the triumph of secular
science. The schism, however, completed the fissioning of the old Moral
Philosophy -- the total of all the sciences of mind and society (Schumpeter
1949: 141) -- into sociology, political science, psychology and what can be
called Market Economics. This further contributed to economics losing its
original sense of culture and becoming an abstract discipline which assumes
itself unaffected by culture and disembodies the volitional behaviour of labour
into a shadow of homogenous units (Boulding 1972: 267).
The
Benthamite Legacy
Following
Bentham, each generation of mainstream economists struggled for release from
Utilitarian inhibition. John Stuart Mill tried to modify Benthamite
confidence in the calculus of happiness by, among other things, apparently
observing "better Socrates dissatisfied than a fool satisfied" to
express different orders of pleasure and the importance of qualitative as well
as quantitative factors in economic analysis (Barber 1967: 94-5). He also
highlighted the cultural factors contributing to the subjugation of women (Mill
1869). Similarly, Marshall attempted a reconciliation of the Benthamite
calculus of happiness with the English historical school and its insistence on
the cultural and historical context of economic behaviour (Blaug 1968: 305).
Keynes, like Mill and Marshall before him, thought that he and his generation
had finally thrown off restrictive Protestant hedonism and escaped the Benthamite
tradition (Innis 1951: 79-80):
I do now regard that as the worm which has been gnawing at the insides
of modern civilization and is responsible for its present moral decay. We used to regard the Christians as the enemy, because they appeared
as the representatives of tradition, convention and hocus-pocus. In
truth, it was the Benthamite calculus, based on an over-valuation of the
economic criterion, which was destroying the quality of the popular
Ideal. Moreover, it was this escape from Bentham, ... which has served
to protect the whole lot of us from the final
reductio ad absurdum
of
Benthamism known as Marxism (Keynes 1949: 96-7).
In spite of Keynes' hope, as well as his involvement with Bloomsbury and his
role in establishing the Arts Council of Great Britain (Keynes 1975), the impact of
Bentham continues. Perhaps this too reflects fear of revolution, fear of Marx's
revolution come true in Russia. It places limits on what phenomena are considered
legitimate subjects of economic investigation. It continues to blind mainstream
economists to the cultural context of economic behaviour. Daniel Bell, quoting the
author of the most widely read economics textbook in the history of the world,
observed:
Paul Samuelson has noted that many economists would "separate
economics from sociology on the basis of rational or irrational
behavior, where these terms are defined in the penumbra of utility
theory." Utility is defined as egoism, or self-interest, and rationality is
defined as consistency - that is, preferences are transitive ....
Yet the crucial question is whether the obverse of the rational is the
irrational rather than the non-rational , and whether or not non-rational
motivations can provide a valid assumption for an understanding of
economic behaviour, i.e. to behavior which seeks to enhance the
wealth and welfare of mankind (Bell 1981: 70-72).
Put another way, can non-rational motivations provide the foundation of an
inclusive or
catholic
economics to balance the materialistic, protestant, exclusionary
rationality of contemporary economics? In this regard, Tibor Scitovsky (1972, 1976,
1989) has gone further than anyone in re-tooling economics to account for
`irrational' behaviour, e.g. cultural activities including the arts. Where Bentham used
the associationist psychology of his, day to define pleasure and pain as the ultimate
principles of behaviour, Scitovsky, after investigating contemporary clinical
psychology, substitutes `comfort and stimulus'. But the Scitovsky model still uses
marginal utility. On the one hand, he argues that the similarity between productive
and cultural activities explains why the economist's neglect to include culture
explicitly in the model of human behaviour has not detracted from its usefulness. On
the other, he notes the ultimate obstacle to greater artistic creation is the Puritan
ethic (Scitovsky 1989). He does not accept that a Benthamite cultural bias has
become part of the analytic mechanism itself.
To escape Western cultural bias implicit in utility theory, one can envisage a
mythic economics
based on depth psychology of Carl Jung (Jung 1964), or a
multicultural economics
that explicitly allows for the effect of culture, custom and
tradition on economic behaviour.
Not all schools of Western economics,
however, lost sight of the role of culture,
custom and tradition. Rooted in the German Historical School of the late 18th and
early 19th centuries (Schumpeter 1949: 807-824), one school maintains the linkage -
Institutional Economics. This school includes American economists Thorstein
Veblen, John R. Commons (Commons 1934), W.C. Mitchell and Clarence Ayres, as
well as European economists Max Weber, Sydney and Beatrice Webb, Selig Perlman
and especially Joseph Schumpeter whose work stressed the influence of class,
technological change and institutional setting on economic behaviour (Schumpeter
1942: 1949).
Like the mainstream, Institutionalists consider the competitive marketplace
the most efficient and effective institution ever devised for economic production
and consumption. However, they also recognize: the trade union as a legitimate
political institution functioning in the economic arena (Commons 1909); the impact
of culture, custom and tradition (Veblen 1899); and, the effect of law on the nature
and form of economic behaviour (Commons 1926).
Legal and cultural relativism is also part of the legacy of Canadian economist
Harold Innis, particularly his work on the economic impact of communications
technologies (Innis 1950, 1951). He recognized that all scholarship must be
grounded in analysis of the radical particularities of time and place, history and
geography (Carey 1981: 79). Through his study of communications media, Innis
identified a fundamental relationship between culture and communications. A culture
is extensive in time, i.e. it has duration, to the extent its dominant communications
medium is durable, e.g. stone, clay or parchment. Alternatively, a culture is extensive
in space if its dominant communications medium is easily transported, e.g. papyrus
and paper. Using this hypothesis, Innis tried to explain the rise and fall of empires
through history.
One of Innis' colleagues, Marshall McLuhan, took this relativism, first to
the
medium is the message,
and then to human consciousness altered by the emergence
of new electronic communications media (McLuhan 1978). Elsewhere I have noted
the unique nature of contemporary communications media (Chartrand 1987a). In
many ways, however, Innis is the Father of the Information Economy (Porat 1977).
He was the first to recognize communications media as an economic staple in the
Post-Modern Economy.
Thus Institutionalism is characterized by
cultural, historical and legal
relativism, inductive method and general systems analysis.
On the other hand,
mainstream economics is characterized by
positivism, deductive method and
mechanistic systems analysis.
In essence, two questions separate Institutionalists
from the mainstream. First, can economic behaviour be simply reduced to
quantitative expression? Second, even if in theory this can be done, do
we
possess,
or will we ever possess, the necessary technology of measurement? I think not, in
part because "even in the physical sciences, a
new notion of quality now emerges at the thermodynamic level - a quality which is
irreducible to quantity (Jantsch 1975: 95)."
There is at least one ongoing debate between Institutionalists and mainstream
economics which takes the guise of
Cultural Economics versus the Economics
of
Culture
(Seaman 1981).
Cultural Economics
can be defined as
the study of the
evolutionary influence
of
cultural differences on economic thought and behaviour.
Cultural Economics assumes economic behaviour varies according to cultural
context. The seminal and leading exponent of transdisciplinary, relativistic cultural
economics is Kenneth Boulding (Boulding 1972; 1973; 1985; 1986].
The Economics of Culture, on the other
hand, can be defined as the study of the allocation of scarce resources within
the cultural sector. It assumes objective laws apply to economic behaviour
regardless of cultural differences. It places emphasis on the scientific nature
of economics and application of abstract mathematical techniques. The seminal
and leading exponent of the positivist economics of culture is William Baumol (Baumol,
Bowen 1966; Baumol 1977; 1984; 1987; Baumol, Baumol 1984).
Between the two is Scitovsky (Scitovsky 1972, 1976, 1989) who, on the one
hand, insightfully and explicitly recognizes the impact of culture and, on the other, is
attempting to re-tool Benthamite analysis. All three are required for a complete
understanding of economic phenomena, if for no other reason than that all three
form part of the contemporary economic ethos. But we still must await, it appears,
for the emergence of a
truly Humane Science
to replace the integration of thought
embodied in pre-Benthamite
Moral Philosophy.
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