sturn, richard (2004), the sceptic as an economist’s philosopher? humean utility as a positive...

8/7/2019 Sturn, Richard (2004), The sceptic as an economists philosopher? Humean utility as a positive principle.

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The sceptic as an economists philosopher?

Humean utility as a positive principle*

Richard Sturn

1. Introductory remarks and overviewThe relations between Humes utilitarianism and economic reasoning aredeep and multifaceted. The main argument of this paper can besummarized as follows. The most profound of these relations are connectedto the way in which Hume introduced utility as an explanatory principle,allowing him to disambiguate three distinct elements in social theory: thelogic of social situations; the logic of socio-economic mechanisms andprocesses; and the tendencies and regularities of individual behaviour. Thefoundational character of these relations helps to understand why Humes

influence is often rather dialectical than straightforward, and it helps tounderstand why there is still considerable disagreement concerning thedegree and scope of Humes anti-rationalism, conservatism and scepti-cism.

Not all of the aspects under which Humes profound and complexinfluence poses challenges can be analysed in this paper. Here are three ofthese challenges: first, there is the history of ideas and its vicissitudes.Humes thought had considerable influence on thinkers who representstyles of reasoning that are quite foreign to his own theory. A spectacular

example in case is the anti-enlightenment thinker and early Germantranslator of some of Humes writings, Johann Georg Hamann (1730 88).This Lutheran anti-intellectualist used Humes theory of knowledge in hisattempt to lend credibility to a pronouncedly reactionary turn ofempiricism. Hamann was one of the first in a heterogeneous collectionof modern anti-modernists who used some kind of empiricism as a weaponin the combat against general principles as advocated by enlightenmentthought. Concerning Humes influence on thinkers closer to the main-

Address for correspondenceDepartment of Public Economics, University of Graz, Universitatsstrasse 15/E4,8010 Graz Austria e mail: richard sturn@uni graz at

Euro. J. History of Economic Thought 11:3 345375 Autumn 2004


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stream of modern thinking, John Stuart Mill as well as Humes quasi-contemporaries, Adam Smith and Immanuel Kant, developed views

pertinent to the epistemological and methodological foundations ofsocio-economic theorizing, which sharply differ from the empiricism thatis to be found in Humes epistemological writings. But they did so underthe influence of the critical challenge put forward by Hume, who awakenedKant from dogmatic slumber, as the latter confessed in his Prolegomena(Kant 1783).

Second, great thinkers change, once and forever, the way in whichcertain fundamental theoretical problems are conceived: they clarifydifficulties in defending or rejecting certain types of solutions to theseproblems. Hence the challenge posed by great figures such as Hume is thatthe character of their intellectual contribution as a whole can only beassessed if their oeuvre is considered both backward-looking and forward-looking: from the problem horizons and perspectives they were confronted

with in their time as well as from the questions and problems they left fortheir readers, which are more important for their meaning and impact withregard to posterity than their own doctrine in a narrow sense.

Third, Hume is perhaps most famous for the distinctions and definitionsthat were suggested by him and that are widely quoted and used, such asthe Is Ought distinction, the distinction between acts that bring about

benefits if and only if they are part of a general practice versus acts thatbring about immediate and unconditional benefits,1 the distinction ofnatural and artificial virtues, or the distinction between matters of fact andrelations of ideas, or the definition of pure instrumental rationality. LikeKant, Hume tended to formulate such distinctions and definitions in such acrisp and sharp fashion that they are often read as programmaticcommitments. It should be clear, however, that these distinctions anddefinitions are neither research programmes nor research methodologiesin a nutshell, even though they may have implications for both by enabling

the theorist to ask different questions or the same questions in a moreprecise way. Moreover, suggesting certain distinctions does not imply acommitment to their uncritical use. One may suggest an analyticaldistinction and yet be perfectly aware that it makes sense and is usefulonly for certain purposes under certain conditions, whereas it tends to bemisleading for other tasks.

Being aware of the three challenges just outlined is necessary for avoidingdistorted views of Humes role in the development of utilitarian thought, ofeconomic analysis and of social theory in general. Given the specific focus

of this paper, which aims at exploring the significance of his use of theconcept of utility for economic theorizing, this problem is particularlyacute It unavoidably emphasizes particular aspects and parts of his oeuvre

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The remainder of the paper is organized as follows. In section 2 I outlineseveral strands of influence, which give some justification to calling Hume

an economists philosopher. Section 3 analyses Humes utilitarianism,which is considered as a pivotal ingredient to his socio-economic theory andas a methodological and analytical principle, rather than an ethicaldoctrine in the traditional sense. Section 4 discusses the role ofinstrumental reason in the context of Humes account of human agencyand his socio-economic theory. This is a key aspect for understanding thespecific character of Humes utilitarianism. The discussion in sections 2 4prepares the ground for a summary of what can be considered the core ofHumes project in social theory in terms of substance as well as in terms ofmethod (section 5). Section 6 takes up one of the explanatory benefitsmade available by a utilitarian framework as outlined in section 3 in moredetail. As it allows for factorizing the totality of socio-economic inter-dependences into distinct levels of analysis, it eventually provides the basisfor simplified, cartoon-like concepts of human agency, which are useful

with regard to the task of explaining certain social mechanisms andprocesses. Such cartoon-like concepts remain a contested and not always

well-understood issue in economics. It is contended that the strategy offactorization and simplification is crucial in the context of Humes projectof a non-metaphysical explanation of human agency and its normative and

institutional infrastructure as part of nature in general as well as for thedevelopment of economics as a science in particular. Section 7 providesconcluding remarks concerning the practical perspectives of Humestheory.

2. An economists philosopher?

It is well known that Hume emphasized the distinction between matters of

fact and relations of ideas, dividing knowledge into two domains: thedomain of logical statements, which are either necessarily true ornecessarily untrue (i.e. contradictory); and the empirical domain basedon perception and induction, which produces generalizations that are onlycontingently true and are relied on as true only by custom. Humesdistinction between matters of fact and relations between ideas is a usefulstarting point for clarifying the status of knowledge that he thinks is madeavailable by social theory. This knowledge belongs to the sphere of mattersof fact and is hence seen as contingent upon the characteristics of the

environment in which a socio-economic system is bound to operate. But inHumes writings on social theory, this distinction does not inspire a rigidempiricism for which the edifice of knowledge [ ] depends on

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regularities in nature obtruding themselves on the mind, as the late MartinHollis (1994: 73) aptly put it. Holliss remarks refer to Poppers critique of

Humean empiricism, which does not capture Humes own awareness thatsuch a kind of empiricism is difficult to sustain, given the problems ofinductive reasoning.

As shown by his writings on economic and political themes, Humesfork, as this distinction is sometimes called, did not keep Hume as a socialtheorist caught in the web of epistemological problems of radicalempiricism. These problems imply a tendency towards a strongly scepticalposition, not an ideal starting point for somebody who wishes to establishmoral philosophy on a new, scientific basis (cf. Humes Introduction to theTreatise of Human Nature2). Indeed, it is hardly conceivable how Hume couldhave developed all his insights in what nowadays is called constitutionalpolitical economy and economics while uncompromisingly sticking to acompletely passive role of the mind in the epistemological processesgenerating knowledge about social reality.3 Elie Halevy (1928: 9 11) hencedistinguishes two opposing tendencies in Humes thought, which heaccordingly calls dualistic: a tendency towards naturalism on the one handand a tendency towards rationalism on the other. This distinction is a roughone, and it is questionable whether rationalism is the right term, buttalking of dualism captures the concern that Hume pursued: to combine a

general emphasis on the limits of reason with a specific endorsement ofgeneral principles and the use of theoretical systems of socio-economicinterdependencies based on assumptions that can be defended as mean-ingful, such as moderate scarcity and limited generosity (e.g. Hume 1739 40: III.ii.2). Perhaps E.C. Mossners (1954 [1980]: 126) claim that Humeset himself apart as a systematic anti-rationalist (my italics) points to thesame direction. Certainly Humes moderate rationalism has to be keptapart from kinds of Cartesian rationalism building theories entirely onhidden forces driving the springs and wheels of society or that attempt to

construct social theory on the basis of a few axioms or that invokeprovidential design to fill explanatory gaps. But the way in which Humeemphasizes the working of what he calls general principles relevant forempirically meaningful classes of circumstances and conditions suggeststhat his empiricism and scepticism summarize a critical stance towardsknowledge in general and not a nihilistic position concerning the possibilityof standards of scientific reasoning. Reasoning from models, thoughtexperiments and counterfactuals plays an important role for Hume inexamining candidates for such general principles. Important aspects of the

way of his experimental moral philosophy, including his theorizing insocio-economic matters, can be understood as an attempt of coping withthe problems cropping up in the context of inductive reasoning For

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instance, he often made use of thought experiments or models based oncounterfactual assumptions for critical purposes, viz. for showing that

certain alternatives can be ruled out. Perhaps it is just the dualistic mix ofrationalism and naturalism (as it is put by Halevy in a simplified way) thatmakes Humes style of reasoning attractive for economists who look formiddle ground between aprioristic pure economics and mere collecting ofdata.

The concept of utility as used by Hume plays a pivotal role in this story, orso I will argue in this paper. Moreover, I will argue that this salient role ofutility is related to the fact that Hume is an economists philosopher inmore than one sense. In philosophy, David Hume was long regarded as anegative thinker or as an extreme sceptic to be attacked rather than read.

An exception is his influence in the development of utilitarian thought. Buteven when summarizing the early history of utilitarian philosophy, JohnStuart Mill called Hume the profoundest negative thinker on record(Ryan 1987: 135) while praising his analytical and critical qualities. JeremyBentham recognized Humes outstanding role as a social theorist andremarked that When I came out with the principle of utility [. . .] I took itfrom Humes Essays. Hume was in all of his glory, the phrase wasconsequently familiar to everybody. The difference between Hume and meis this: the use he made of it was to account for that which is, I to show what

ought to be.4 Bentham was not the only one to argue that Hume was amerely explanatory social theorist (whereas his own achievement consistsin giving social theory based on the same hedonistic psychology a normativeturn for the sake of human improvement). Of course, Bentham overlookshere the foundational difficulties of his own position, which are related tothe problem of deriving normative motivation supporting utilitarianismfrom psychological hedonism. Taking this foundational problem intoaccount, the quotation from Bentham more properly captures the mainphilosophical difference between Hume and later nineteenth and early

twentieth century utilitarian philosophers (e.g., Sidgwick and G.E. Moore) who made the utilitarian shift to ethical cognitivism and intuitionismexplicit. For Moore (1903: 17 20), Bentham is a useful reference toillustrate the naturalistic fallacy, whereas Hume is not mentioned once inPrincipia Ethica: as a merely explanatory theorist5 he is obviouslyconsidered irrelevant and not interesting for an inquiry rigorously confinedto normative theory.

For economists from Adam Smith onward, Hume was not only a sourcefor seminal ideas concerning monetary theory, foreign trade, public goods

and public finance. Economists who got acquainted with Humesphilosophical writings often found, and still find, his conceptual distinc-tions and definitions pertinent to the type of problems that are typically



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dealt with in economics. In other words, they tend to hold him in esteem asa positive thinker (and not without reason, as I will argue). This applies to

the time of Adam Smith as well as to our own. Here are a few examples thatshow the extent to which Hume was and is read and endorsed byeconomists. The first group of statements refer to a general andmethodological level whereas a second group contains more specificclaims concerning the importance of Hume for particular explanatoryapproaches in socio-economic theory.

The Political Discourses of Mr. Hume were evidently of greater use toMr. Smith than any other book that had appeared prior to his lecture,

wrote Dugald Stewart (who certainly was no Humean) in his Life of AdamSmith, LL.D. (Smith 1980: IV.24). Switching to the twentieth century,Humes outstanding role in clarifying the nature of problems comes to thefore in the following statement by Leonard Savage (1954 [1972]: 276),according to whom Hume provided an early and famous presentation ofthe philosophical problem of inductive inference, around which almost alllater discussion pivots. Even though it differs from the two quotationsprovided so far by its negative tone, a passage by McCloskey (1983: 486) fitsinto this picture. McCloskey sees Hume as one of the main contributors tothe methodological declarations of the modernist family from Descartesthrough Hume and Comte to Russell and Hempel and Popper, which he

regards as philosophically obsolete, metaphysical, impossible and, hence,despite its status as official methodology of economics, not followed in praxi.(Humes main contribution to this allegedly misguided methodology is, ofcourse, the foundational approach to human knowledge described above asHumes Fork.)

In the context of the enlargement of the scope of economics beyond themarket sphere and the growing interest in overcoming limitations imposedby homo oeconomicus-methodology, prominent modern economists and gametheorists confess to be directly inspired by Hume: he is not only credited

with seminal ideas in particular fields mentioned above, such as monetarytheory, trade theory and public finance,6 but is regarded as the forerunnerof broader research programmes, such as experimental economics, gametheory, institutional economics and evolutionary economics. The followingquotations provide an illustration of the extraordinary intellectual scopeand diversity of the ways in which theorists of different strands try to makesense of Hume. Russell Hardin (1988: 18), a philosopher who is in thebusiness of importing game theoretical insights into utilitarian reasoning,characterizes Humes contribution as follows: Hume specified the range of

problems in a coherent system that fits the strategic structure of theproblems. The problems include benevolence, justice, and the choice ofparticular governmental arrangements Ken Binmore (1998: 506) declares

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Hume the true hero of his Game Theory and Social Contract II and creditshim with the following theoretical innovations: [. . .] Hume effortlessly

formulates the idea of an equilibrium in such a transparent fashion that thedepth of his insight passes almost unnoticed. Hume is the original inventorof reciprocal altruism, the first person to recognize that the equilibriumideas now studied in game theory are vital to an understanding of howhuman societies work. He understood that one must look to evolution for asolution of the equilibrium selection problem. He even anticipated moderngame theorists in seeing constitutional reform as a problem in mechanismdesign. This goes beyond and is much more specific than a generalendorsement of Humes naturalist account of normative phenomena. As itis based on the idea that moral norms ultimately depend on our feelings oron what we like, this naturalism seems attractive for social theorists whostick to the key role of individual preferences in the explanation of socialphenomena of all kinds.

Moreover, Binmore (1998: 19, 176) states that the basis of moderndecision theory is the Humean principle that reason is the slave of thepassions and sees Humes sympathy mechanism as an inspiration for hisown approach to interpersonal comparisons of utility. Indeed, Humesdefinition of instrumental rationality in the Treatise of Human Nature is

widely regarded as an informal anticipation of the axiomatic summary of

the requirement for formal coherence of preferences as provided byRamsey (1931: 156 98). Alan Gibbard (1992: 10) calls this conception ofinstrumental reason the Hume-Ramsey view.

To move to a different theoretical camp, Friedrich Hayek (1960: 420)chose Hume as constant companion and sage guide for his influentialmagnum opus The Constitution of Liberty, which focuses the role ofspontaneous social order in human societies. Interestingly, Hayek (1960:455) acknowledges that Sir Arnold Plant, the intellectual mentor of RonaldCoase, drew his attention to Humes work on justice and property.7 This is

remarkable because it illustrates the seminal character of Humes work forthe economic analysis of legal and institutional matters. Moreover, Hayek isnot the first thinker in the Austrian tradition influenced by Hume. In thelast third of the nineteenth century, Hume played a considerable role in

Austrian intellectual traditions relatively close to the Austrian school ofeconomics, for instance, within the so-called Second Austrian school of

value theory represented by theorists such as Alexius von Meinong andChristian von Ehrenfels, who is the author of a naturalist ethics explicitlycombining Mengerian marginalist conceptions with evolutionary motives

(see Sturn 2000: 135 79).For Vernon Smith (2003: 470), Hume is an eighteenth-centuryprecursor of Herbert Simon and of the concept of a rational order as



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an undesigned ecological system that emerges out of cultural and biologicalevolutionary processes: home-grown principles of action, norms, traditions,

and morality, which is to be contrasted with Cartesian constructivistrationality and which is advocated by Smith as an important basis forexperimental economics. Christian Bay (1958: 33) called him a precursorof Darwin in the sphere of ethics, and Hayek considers passages in

Dialogues Concerning Natural Religion (Hume 1976) as an anticipation ofDarwinian evolution. Indeed, in the Dialogues we find prescient remarks

with regard to properties of evolutionary explanations, which can be seen asa starting point for filling some gaps in the explanatory sketches concerningbasic institutions that Hume developed in A Treatise of Human Nature. It isnot without reason that Hume was a hero of Darwinians such as ThomasHuxley.

Does Hume deserve all this praise as a prescient hero of various strandsof modern economics in terms of method as well as in terms of substance?Or does it merely show that some economists managed to make sense ofHume in their own way and for their own theoretical purposes? I will arguein this paper that the answer to both questions is a qualified yes. Theclaims collected above highlight certain aspects of Humes reasoning in a

way that should be taken seriously. But their very heterogeneity suggeststhat they are in need of qualification. Before analysing some of the issues at

stake in more detail, five general caveats are briefly sketched in order toprevent simple misunderstandings that may crop up when discussingHumes influence on economic reasoning in general and the influence ofHumes utilitarianism in particular:

Caveat 1: Referring to the first generation of the marginal revolution,Hume is not a forerunner of neoclassical economics in the narrower senseof Walrasian or Jevonian analysis; for instance, the idea that demandbehaviour could be, in general, somehow derived from marginal utilityschedules is not foreshadowed in his reflections on consumption. The main

systematic reason for this is not the lack of marginal analysis. For Hume,demand behaviour is part of a social learning process and henceendogenous.

Caveat 2: I also take it as obvious that Hume was not a forerunner of amethodology based on the neo-classical homo oeconomicusin the sense that is

well captured by a passage by Oscar Lange, according to whom thepostulate of rational utility maximization provides us with a most powerfultool for simplification of theoretical analysis. For, if a unit of decision actsrationally, its decision in any given situation can be predicted by the rules of

logics (and of mathematics). In absence of rational action such predictioncould be made only after painstaking empirical study of the uniformities inthe decision patterns of the unit (Lange 1945: 30) As will be shown below

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the analysis of the logic of the situation (invoked by Lange in the abovequotation) has considerable importance for Hume. But in a Humean

framework this works only for specific types of situations (not in any givensituation), and predictions can never be based on pure instrumentalrationality. The latter cannot be taken as a general explanatory substitutefor empirical patterns of motivation. Predictions must rely on empiricallybased estimates on the motivational force of different kinds of passions andtheir relevance in certain types of situations and circumstances.

Caveat 3: As argued above, Humes influence on economic thought iscomplicated by intricate foundational problems of modern social andeconomic theory, such as the problem of induction, the role of theoreticalmodels and the status of methodological individualism in positive economictheory. Concerning these issues, things are made even more difficult by thedifferences that exist between (a) what McCloskey (1983: 486) calls theofficial methodology of economics; (b) its more or less reflected actualpractices; (c) Humes empiricism as summarized by authors such as Popper(which is regarded as being more or less close to the previously mentionedofficial methodology); and (d) Hume as a social theorist and politicaleconomist who endorsed some kind of mix between rationalism andnaturalism (to use Halevys terms). Of course, these different levels ofargument should be kept apart.

Caveat 4: A zone with pitfalls for economists who are in the business ofimporting Humes thought into economics is created by Humes specificconceptualization of the relationship between socio-economic theory andethics. The way in which normativity is dealt with and differentiated in

various versions of normative economics, most notably in modern welfareeconomics and social choice theory, does not fit well into the Humeanpicture of a non-cognitivist meta-ethics, which, in a sense, is nothing butexplanatory social theory. Whereas in the Humean approach there is noplace for axiomatic derivation of normative criteria used to evaluate

alternative social states, the idea that normative criteria are a subject matterof explanatory social theory cannot be easily accommodated within theframework of welfare economics. This applies to welfare economics in thePigovian (more closely utilitarian) tradition as well as to the New WelfareEconomics, which rejects interpersonal comparisons of cardinal utility andincludes Social Choice Theory. Humean economists like Hayek mayrhetorically reject all of those orthodox strands, but this does not solve thefoundational problems of the policy recommendations they wish tosupport.

Caveat 5: Last but not least, some parts of Humes reasoning are simplynot understandable without referring to questions and problems that werepivotal in the intellectual traditions that inspired Hume Important parts of



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Humes thought in general and many of Humes distinctions in particularare better understood by locating them in theoretical contexts that are

beyond the scope of utilitarian debates. This is illustrated by two different,but equally important perspectives on Humean thought beyond theutilitarian context, referring in the first case to philosophical traditionsdistinguishing perfect and imperfect duties and conjectural history in thesecond.

(i) Jerome B. Schneewind (1990: 354 77) locates Humesthought primarily by coordinates provided by the problemsof Grotian natural law theory and the scholastic distinctionbetween intellectualism and voluntarism. The Grotianperspective is useful for understanding Humes distinctionbetween natural and artificial virtues. In utilitarian contexts,this is often regarded as an anticipation of the distinctionbetween rule-utilitarianism and act-utilitarianism, Humeendorsing the former. As J. B. Schneewind (1990: 52) pointsout, from a historical perspective it is more accurate todescribe it as Humes attempt to show how perfect as well asimperfect rights and duties can be explained by a non-teleological virtue-centred theory.

(ii) The general theoretical framework of Humes historicalthinking should not be reduced to prescient remarksforeshadowing thinking in terms of evolutionary mechan-isms. Mary Poovey (1998), amongst others, has shown thatsome of Humes positions must be understood in the contextof the development of British conjectural history. Moreover,Humes natural history can also be located with regard tothe coordinates set by French histoire raisonnee (Rotwein 1987:

vol. 2, 692 5).

3. Humes methodological utilitarianism: Utility as a positive principle

The interpretive approaches suggested by Schneewind, Poovey and othersprovide indispensable insights necessary in order to understand theproblems, the scope and the horizons of Humes theorizing. That allnotwithstanding, it is contended here that Humes utilitarianism occupiesan important place in the analytic framework of his social theory. I start

with some commonplace observations on Humes utilitarianism. The

concept of utility is an indispensable part of the vocabulary of Humestheory. Even a superficial reading of his texts provides ample evidence forthis Hume played an important role for the utilitarian tradition Of course

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his utilitarianism is no act-utilitarianism. Act-utilitarianism has much lesspotential than rule-utilitarianism: (i) to take on board economical and

sociological insight about the role of socio-economic arrangements: and(ii) to make sense in a framework characterized by an emphasis on thelimits of reason and epistemological problems. More specifically, Hume stillis the classical reference for those utilitarians who wish to defend a non-cognitivist meta-ethics (see Smart 1978). Bentham held Hume in highesteem, and so did John Stuart Mill, who characterizes the differencebetween the contributions of Hume and Bentham as follows: Bentham, whowas far inferior to Hume in Humes qualities instead carried the warfareinto things practical (Ryan 1987: 136). The intensity and scope ofBenthamite warfare is at odds with Humes scepticism concerning thepractical role of reason. In part it may be considered as an echo to Humescombats against superstition, most notably against the false beliefs leadingto the useless monkish virtues. Bentham widens the institutional scope ofsuch combats and extends them to all kinds of supposedly inefficientinstitutions, customs, habits and norms. For Hayek, who liked Hume butranked Bentham under the main protagonists of false constructivism andrationalism, this extended warfare was the result of an excessivelyrationalistic, shallow and misleading theory of social institutions andnorms. It is commonly understood that Humes utilitarianism is less

rationalistic, less reform-oriented and more conservative as compared toBenthams and Mills approaches.

All those common observations are not false, but they are not sufficientlyspecific to characterize the distinct role of Humes utilitarianism within thecontext of his theory. They are based more on the mere vocabulary and failto do justice to the overall architecture of Humes theoretical edifice. Firstof all, Humes utilitarianism needs to be understood at two levels: (i) in itsrelation to his non-cognitivist meta-ethics; and (ii) as an ingredient of hisnaturalistic theory of social and economic life and its normative

infrastructure. Concerning (i), utilitarianism a la Hume does not implythat the point of morality is the maximization of social utility. Utility isintroduced as the common standard and final test for all kinds of humaninstitutions, because the utilitarian psychology allows for accommodatingthe basic idea that morality is more properly felt than judgd of (Hume1739 40: III.i.2), not in order to emphasize the advantages of a rationalmeasuring rod applicable to alternative socio-economic arrangements.Moreover, the rules of morality and justice, or put more generally, thesphere of normativity as a peculiar social phenomenon, are characterized

and differentiated by specific properties and supported by patterns offeelings that Hume adapted from non-utilitarian theories of normativephenomena As was pointed out by Schneewind his famous distinction



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between natural and artificial virtues can hardly be understood withoutconsidering the horizon of problems set by modern natural law theorists

such as Hugo Grotius. All this reinforces the position that utility cannot be acalculus for determining the socially desirable pattern of legal rules andsanctions, incentives, moral imperatives, practical motifs or population sizealong the lines of later government house-utilitarians.

With regard to (ii), utility primarily is a methodological device in theexplanation of socio-economic phenomena in general, and the explanationof normative phenomena such as virtues, moral sentiments and rules of

justice in particular, which he considered to be in need of de-mystification,given their super-natural status in traditional ethics. The concept of utilityplayed a basic role for Hume in his attempt to explain the most complexhuman phenomena in a way that neither invoked a complex ontology norprovidentialism (which played a role in the social theory of some of hisBritish contemporaries, as Poovey 1998, shows).

Humean utility is an explanatory principle in two different meanings:as a heuristic principle; and as an analytical principle. As a heuristicprinciple it implies that attempts to explain normative phenomenacannot dispense with understanding their indispensable role in stabiliz-ing complex patterns of exchange, which mediate interdependencies incomplex socio-economic systems. This does not imply that a fully-fledged

explanation is available along the lines of this heuristic principle, nordoes it preclude other explanations for observed social phenomena ingeneral, some of which may be not useful at all, as Hume was acutelyaware of. (Monkish norms and virtues are Humes paradigmaticexamples.) More specifically, the mechanisms and processes whichsupport norms and virtues in their indispensable role and particularlythe individual motifs driving these mechanisms are related to a textureof cognitive processes and passions that cannot be reduced to orexclusively explained in terms of utility. But this dimension of utility is

crucial for Humes project of understanding moral norms andinstitutions as something developed within the limits of human nature.These phenomena must be explained in terms of their utility under theconditions, tendencies, constraints and distortions of human knowledgeand human action, instead of invoking divine wisdom or providence toaccount for the fit between moral norms and the human good. The wayin which Hume treats utility as a heuristic principle (without getting intometaphysical considerations about its nature) resembles the way in whichNewton invoked gravity as a real cause for the mutual attraction of

particles.Apart from this role in a kind of explanatory heuristics, utility has a morespecific analytical function in Humes social theory

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(1) Something like the concept of utility (or more precisely, aconsequentialist conceptualization of environmental circumstances,

choices and consequences) facilitates the conceptualization ofdistinctions between: a) individual goals and motifs for action: b)external natural circumstances and constraints of actions: and c)the social contingencies and interdependencies relevant for theconsequences of actions. Deontological conceptions of norms, orconceptions of norms that inform rather than constrain, are not sohelpful for making these distinctions explicit. Distinctions like theseare important for a non-metaphysical social theory as they arenecessary to grasp the importance of the specific logic imposed bycertain types of social situations or of social processes andmechanisms (such as the logic of competitive mechanisms), whichneed to be analysed in their influence on social outcomes. I willcome back to this issue in section 6.

(2) In combination with the concept of sympathy, utility provides theepistemic and motivational link from individual motifs to thecollective good in the sense of the benefits of all individuals. Theconcept of utility thus provides a language to describe and analysetypes of social situations that are now known as coordinationproblems, which may or may not be complicated by distributive

conflicts of interest. An important subclass of coordinationproblems is public good problems, a classical characterization of

which is given by Hume (1739 40: III.ii.7). The language of utilityabstracts from the manifold historically grown institutional andmotivational patterns that have evolved around the practicalsolution of these problems. This abstraction is a virtue if one isinterested in general principles driving the formation of institu-tions. A one-dimensional metric of benefit like the concept of utilityis necessary to identify abstract and general types of social situations

or, more specifically, general structural types of coordinationproblems. According to Elie Halevy (1928: 13), we find in Humethree logically distinct and perhaps contradictory doctrines, whichall can be taken as answers to the question: How is it conceivablethat the moral sense which inspires me to pursue the general utilityand not my private interest, should be a constituent part of mynature? In my reading, the three doctrines as described by Halevyare alternative types of social situations, each of which can beregarded as a paradigmatic starting point. Hume suggested three

main alternative types of social situations: situations characterizedby natural convergence of interests (with price-mediated exchangeon markets as paradigmatic institutional solution); situations



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characterized by a fusion of interests by way of benevolence assympathetic identification (with the family as paradigmatic case);

and artificial convergence of interests (with justice, incentivemechanisms and the government as paradigmatic artificial solu-tions).

Even though it is not necessary for establishing utility as an explanatoryprinciple in the sense outlined above (probably some non-hedonisticconceptions of advantage or preference would do the job), Hume doesendorse a hedonistic conception of utility as an ultimate standard of value.This is suggested by his frequent use of the notion of pleasure and mostclearly by several passages in which he rejects unnatural monkish virtues asneither instrumentally nor intrinsically valuable. Unlike the norms of

justice and benevolence, monkish virtues according to Hume do not survivethe theoretical reflection upon themselves. As it seems conceivable thatmonkish virtues can be explained in terms of the stabilization of particularsocial arrangements under the Humean conditions of scarcity and limitedbenevolence, the rejection of the possibility of an intrinsic value of monkish

virtues must rely on some kind of hedonistic axiology. If this axiology isavailable, it is unclear why it should be impossible to use it as a guidance formore encompassing socio-economic reforms beyond the criticism of

monkish virtues and established religion, e.g. as a calculus for re-distribution. In this respect Humes oeuvre shows some ambiguity orperhaps even inconsistency, which also gave rise to the question of whetherhe was a conservative or a Whiggish reformer, as suggested by Binmore(1998: 507 8). But even if he is seen as a Whiggish reformer, this does notimply that Humes socio-economic reasoning is committed to ethicalhedonism as a first principle or axiom in a Benthamite fashion.

Let me summarize: utility is used by Hume as an explanatory principle.Utility is often used by Hume as a shorthand expression for systematic

tendency to a certain end in the context of a complex interdependentsystem. This is related to, but not entirely captured by, the commonobservation that he is a rule- rather than an act-utilitarian. This commonobservation may be found wanting because the talk of rule-utilitarianismneither expresses clearly enough the explanatory problems that botheredHume, nor does it capture his concerns with regard to non-cognitivist meta-ethics. It also tends to suggest an unsatisfactory account of the issues ofsystematic interdependence whose treatment is one of Humes outstandingachievements. He recognizes that not just single acts but also single types of

behaviour (e.g. co-operation) and sometimes also behavioural standardsand social practices are useful if and only if a certain scheme or system canbe assumed and not if regarded in isolation (see e g Hume 1777a: 202

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1976: App. III; Pt. 8). Thus the elements of justice mutually support eachother and hence may be seen as emerging in a process of co-evolution.

4. Utility and instrumental rationality: Humes asymmetricconsequentialism

The emphasis on utility as an explanatory principle is not at odds with kindsof social theories (such as theories in the Neoclassical or Hobbesiantradition), which at least some of the readers of Hume quoted above (e.g.Friedrich Hayek and Vernon Smith) would criticize as excessivelyrationalistic. In this section I try to show in which sense they are right.The answer has two parts: (i) for Hume, instrumental rationality is noindependent explanatory principle; (ii) he allows for a relatively wide rangeof possibilities concerning relevant structures of social situations, includingtheir endogenous change. Of course, keeping the structural types of socialsituations, which are deemed relevant, limited and fixed in a certain way,imposes something like an aprioristic element. (Theories considering onlyinteraction structures imposed by scarcity and rivalry are more aprioristicthan those considering also, say, interaction structures occasioned by non-rival use of resources.)

Let us start with instrumental rationality. Standard decision theorydefines acts as mappings from states of the world into consequences.Modern utilitarian economists, most notably John Harsanyi and PeterHammond, have established close links between individual instrumentalrationality (as captured by the axioms of choice theory under uncertainty)and utilitarianism. Put somewhat loosely, choice theory is conceived asforward looking and representing all that matters in the consequencespace. In analogy to individual decision theory based on first-orderpreferences, utilitarianism can be understood as a second-order (or ethical,

or social) correlate of such a consequentialist conceptualization ofindividual action.

In this section I will show that despite this isomorphism betweenconsequentialist practical reasoning on the individual and the social level,instrumental rationality (in contrast to utility) is not an explanatoryprinciple for Hume. This may sound surprising, especially when weremember Humes contribution to the clarification of the concept ofinstrumental reason. If one thinks of utilitarianism in the axiomatic way, it ishard to avoid the conclusion that utilitarianism somehow entails instru-

mental rationality at the individual level.8

Put another way, a utilitarian is inno good position to reject the meaningfulness of the demands ofinstrumental rationality at the individual level Certainly this axiomatic



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linkage does not trivially extend to utility and instrumental rationality asexplanatory principles. Understanding why this is not the case is important

for grasping the specific character of Humes utilitarianism. His views oninstrumental rationality are useful to see the differences between Humeand some versions of neoclassical economics or Hobbesian positions, bothof which endorse, like Hume, a broadly hedonistic psychology. As willbecome clear in this section, instrumental rationality does play a certainrole in Humes logic of explanation by supporting important distinctions.But this role is markedly different from that in neoclassical economics

where instrumental rationality is an engine of truth because it allows foreconomizing on empirical investigations with regard to motivationalpatterns (see the above quotation from Lange 1945).

The most often quoted and analysed passages of the whole Humeanoeuvre perhaps refer to instrumental rationality. In these famous passages,Hume makes use of provocative and seemingly paradoxical examples toemphasize that instrumental rationality is primarily a formal concept andneeds to be kept separate from substantial theories of the good,psychological theories about goals and motives etc. Hume famouslydeclares that reason is, and ought to be, the slave of passions, and that(as the dramatic climax of a number of choices that all are or seem to bebased on enormous distortions in the relative valuation of alternatives)

Tis not contrary to reason for me to chuse my total ruin, to prevent the least uneasi-ness of an Indian, or person wholly unknown to me. Tis as little contrary to reason toprefer even my own acknowledged lesser good to my greater, and have a more ardentaffection for the former than the latter.

(Hume 1739 40: II.iii.3)

A few short remarks concerning the context, the scope and the status ofthese passages are in order. As far as the status is concerned, they arestrictly definitional and aim at clarity as far as the role and scope of

reason in practical matters is concerned: passions/affections may neverproperly be called unreasonable: In short, a passion must be accom-panyd by some false judgement, in order to its being unreasonable; andeven then tis not the passion, properly speaking, which is unreasonable,but the judgment. (Hume 1739 40: II.iii.3). The scope of these passagesincludes both forms of understanding, judgments from demonstration(logical truths applying to the relationship between ideas; e.g. demands ofconsistency) and contingent judgements from empirical observation(applying to the relationships between objects in the real world).

Neither of the two types of reasoning, which could be called analyticaland synthetic respectively, and neither of the two types of knowledgegained by them is apt to move us or to oppose the motivational force of

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some passion. The passages appear in the context of Book II (Of thePassions) of the Treatise where Hume wants to show that neither of the

two forms of understanding are motives for action or forces that mayoppose passions as motives of the will.How does Humes approach relate to more rationalistic views using the

concept of instrumental rationality? While implying no methodologicalcommitment, this account of instrumental rationality may be considered asan informal version of individual rationality as a kind of formal coherenceamong preferences and choices as captured by the axiomatic systemsproposed by Frank Ramsey or Leonard Savage (which is now commonamong economists). In the following, I compare Humes way of usinginstrumental reason in social theory with Hobbes and neoclassicaleconomics. According to Hume, reason imposes formal requirements onus, which are embedded in a complex texture of motivating forces andmediating mechanisms. What reason requires (correcting distortions ofimagination, myopic perspectives, or partiality) in an abstract sense is onething. The extent to which these requirements actually contribute to thehuman faculty of reflective correction of errors is a quite different thing,depending on emotional and cognitive mechanisms and their biases andon empirical circumstances triggering some of these biases. Reason directsour judgements by imposing demands of consistency and correct

calculation; it may show us objects of and means to our desires. This isnot so far from the Hobbesian view: For the thoughts are to the desires asscouts and spies, to range abroad and find the way to the things desired.(Hobbes 1651: VIII, 35) Now Hobbess theory of politico-economicinstitutions is commonly viewed as more rationalistic than Humes. Thequestion is: What makes the differences between Hobbes and Hume?

The difference is not to be found in the way in which Hume must rejectall attempts to make abstract rationality the stand-alone basis of normativeand institutional phenomena in the real social world. Such a stand-alone

view probably is implied by some neoclassical versions of the economic manreferred to above and is clearly at odds with Humes epistemology. But it isalso at odds with Hobbess view, who (contrary to some excessivelyrationalist game-theoretic reconstructions) emphasized passions as drivingforces as well as myopic distortions in decision making. The difference ofHumes theory and Hobbess more rationalistic system is related toHobbess more narrow and static account of society and of motivationalforces, which make it plausible for Hobbes to focus on the logic of aparticular social situation of anomic rivalry, which became paradigmatic for

a whole tradition of theories. Hence, Hobbes can unambiguously derivegood human institutions as the unique embodiment of the demands ofreason the structure of which is determined by the logic of the particular



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conflict-intensive type of coordination problem that is the central focus ofthis theory. For Hume, the demands of reason could not possibly be the

basis of a unique characterization of human institutions, which functionallyrespond to the demands of the human condition. He believed that humannature has some more or less constant elements (see Coase 1994: 110), butthe historically relevant pattern of motivational forces and environmentalconditions is endogenous to the process of the development of humaninstitutions. In addition, this process and the sub-mechanisms related to ithave their own logic, which is not at all captured by the logic of oneparticular type of social coordination.

Hence Humes limitation of the role of reason can be understood as acombination of a negative and a positive claim. The negative claim is thatreason never produces a motive and hence never moves anything. Thepositive claim is that instrumental reason as a practical guidance for actioncannot be thought of operating in abstraction from cognitive, emotionaland social mechanisms, but in the context of those mechanisms, andfurthermore in the context of social situations and social mechanisms/processes. What reason requires (e.g., correcting distortions of imagina-tion/impartiality; see Hume 1739 40: III.iii.1) in an abstract sense is onething. The extent to which these requirements are practically met inconcrete choice situations is a quite different thing, and a question lending

itself to further theoretical investigation, as it generally depends on:

(a) empirical circumstances (e.g. experiences that these distortionslead to disadvantageously inconsistent judgements as our position

vis-a-vis the world changes over time), and(b) the relative strength of calm passions, which may correct our

violent propension to prefer the contiguous (Hume 1739 40:III.ii.7).

This view is the basis for seemingly contradictory statements by Hume.Intrinsic ends cannot be irrational, but, nonetheless, we are in a position tostate that humans so often act in contradiction to their known interest(Hume 1739 40: III.ii.7). Reason is, and ought to be, the slave of passions,but reason requires such an impartial conduct. Despite these well-definedrequirements, tis seldom we can bring ourselves to it, and that ourpassions do not readily follow the determination of our judgement (Hume1739 40: III.iii.1). Things are even more complicated as he seems tosuggest that there are two kinds of corrective tasks, which both may be

relevant in the broader context of decision processes. We shoulddistinguish between a belief-correcting function of reason properly speak-ing where reason is counteracting the distortions of imagination in order

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to prevent continual contradictions, and arrive at a more stable judgementof things, and a sentiment-correcting function of (as Hume puts it on

several occasions) reason improperly speaking, which properly should becalled the calm passions.9

The point is not that the fact that humans are endowed with reason playsno role whatsoever when it comes to the task of explaining the kind ofsocio-economic arrangements that may be expected to prevail in thegeneral course of things. Humes naturalism is not a biologistic reduction-ism. The point is rather that reason needs to be distinguished from patternsof motivational force as the latter are the causal forces relevant forexplaining the structure of socio-economic arrangements. Hume (1777a:235) summarizes the role of reason as follows: But though reason, whenfully assisted and improved, be sufficient to instruct us in the pernicious oruseful tendency of qualities or actions; it is not alone sufficient to produceany moral blame or approbation. Utility is only a tendency to a certain end;and were the end totally indifferent to us, we should feel the sameindifference towards the means. That is, reason has an important, iflimited, role: it allows us to grasp the logic of social situations andcoordination problems including the general pattern of useful actions incertain types of cases. Hence the world would be different if humans werenot endowed with reason. In this spirit, Hume (1777a: 161) suggests the

following quasi-evolutionary argument for a limited role of reason: doesnature [. . .] embrace such complicated and artificial objects, and create arational creature, without trusting anything to the operation of his reason?Nonetheless, socio-economic phenomena such as the state cannot beexplained as requirements of reason exclusively based on the logic of someparadigmatic social situation. Analysing the logic of individual decisionsand the logic of social situations (a la Hobbes) is important, but it is notenough for socio-economic theory, which must not, in general, uncriticallyrely on two kinds of abstractions: from the logic of social mechanisms and

processes and from actual behavioural tendencies on the individual level. According to Hume, such abstractions may be used under certainconditions, as will be explained in the penultimate section.

5. Humes basic programme and the scope of general principles

It is time now to fit together the bits and pieces of Humes theory providedso far and give a rough overall sketch of his system. And it is time to give

some examples showing how Hume combined motivational forces, analysisof the logic of social situation and of mechanisms/processes in hisexplanation of socio economic phenomena This and parts of the next



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section are devoted to these tasks. The programme and the pivotalelements of Humes system are to be found in a fully-fledged form in the

Treatise of Human Nature: human social life must be seen as a part of naturein a wider sense. We are in need of a de-mystifying account even of the mostintricate aspects of human agency and social life that does not rely onmetaphysical postulates. This applies particularly to phenomena such asmorality, which used to be derived from super-natural powers.

Confronting the principles of human agency with an adequate accountof external conditions allows for limited generalizations regarding humanbehaviour and its pattern in particular environmental, social andinstitutional contexts. This rules out simple utilitarian or contract-basedexplanations of the normative infrastructure of modern civil society. Undergiven institutional constraints, we may yet expect general and certainpredictions as any which the mathematical sciences afford us, as Hume(1993: 14) declares in the essay That Politics may be Reduced to a Science.Humes analysis of human nature as well as the descriptions ofenvironmental conditions as expounded in the Treatiseoffer conceptualiza-tions that summarize the logic of a variety of social situations, which areparadigmatic in economics (price-mediated scarcity, public goods-pro-blems; see Hume 1739 40: III.ii.7). Hume emphasizes the role of scarcityin imposing its logic upon socio-economic institutions in general, making it

clear that his explanation of justice as an artificial virtue as well as the roleof private property and of the government hinges upon scarcity and wouldfail under conditions of abundance as well as under conditions ofubiquitous absolute poverty. Understanding the role of scarcity, he alsodid not fail to grasp the function of the price system as a mechanism ofresource allocation, as is shown not only in his economic essays but also in

various passages in the History of England (Hume 1754 61).For Hume, human agency is by no means completely determined by the

immutable elements of human nature. Such a view would be at odds with

the empiricist and sceptical stance of his epistemological position. Inparticular, the psychological pattern of economic motivation is endogenous

with regard to social mechanisms and historical processes, such as theprocess of economic growth, the rise of commerce and civil society. Humesinterest in history was motivated by the observation that macro-processesprovide fertile ground for the application of experimental moral sciencebecause they are likely to be driven by increasingly robust and stablepatterns of motifs, which tend to be fostered and stabilized by theinstitutional patterns emerging in this process. In addition, he remarked

that the effects of pure chance and whimsical idiosyncrasy tend to beeliminated in the context of such macro-processes due to the law of largenumbers Hume (1993: 5) summarizes the reason for this in a general rule

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put in italics: What depends on a few persons is, in a great measure, to be ascribedto chance, or secret and unknown causes: what arises from a great number, may often

be accounted for by determinate and known causes. According to Hume, thesceptic, the world is still too young to allow for many general truths inhuman affairs, but in the History of England (Hume 1654 61) he managedto show the systematic interrelations between social and economic changesin the formative period of modern society, or more precisely, how changesin the historical environment affected the way in which human passionsoperated and thereby stimulated economic growth.

This fits well within his more general project of a natural history ofthe evolution of the network of social ties, which is the main task ofempirical moral science. Hume endorses an optimistic view concerningthe potential of the commercial society and economic growth topromote human values. In addition to the increasing opportunities forconsumption experiences and leisure, he emphasizes the enlargement ofthe scope for entrepreneurial activity. Moreover, growing economicinterdependence brings more people into contact with each other andthereby provides enlarged opportunities for social moral learning.Economic growth and the growth of knowledge go hand in hand.Ethical learning, the growth of scientific knowledge and the growingawareness of economic interdependence all foster the understanding of

the advantages of political institutions built on individual liberty andstability of possession. In this context, his arguments in defence of themanifold advantageous effects of luxury deserve to be mentioned as aparticularly crisp attempt to model some of the benign interrelationshipsbetween economics, politics and ethics (Essays Of Refinement in the

Arts and Of Commerce, Hume 1993: 154 76).Humes ethical-political optimism notwithstanding, his view of socio-

economic processes does not take the form of the Panglossian viewaccording to which whatever is, is best. His distance to this view is

profoundly related to his fundamental concern that valuation andmotivation are two entirely different things. This tenet informs thetranslation of his general theory of agency into psychological micro-foundations for social and economic theory. Hume gives self-interest its duebut also provides us with a stock of non ad-hoc arguments, which allow us togo beyond self-interest. In particular, his accounts of the motivationalpatterns referring to social or professional classes (landowners, priests)make immediately clear why motivational patterns are not necessarilybenign or welfare enhancing. These generalizations are derived from

confronting human nature with the specific circumstances under whichcertain classes of individuals live. Consider the following paradigmaticpassage from the essay Of Interest:



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There is no craving or demand of the human mind more constant and insatiable thanthat for exercise and employment; and this desire seems the foundation of most of ourpassions and pursuits. Deprive a man of all business and serious occupation, he runs

restless from one amusement to another [. . .]. Give him a more harmless way of em-ploying his mind or body, he is satisfied and feels no longer that insatiable thirst afterpleasure. But if the employment you give him be lucrative, especially if the profit beattached to every particular exertion of industry, he has gain so often in his eye, thathe acquires, by degree, a passion for it, and knows no such pleasure as that of seeingthe daily increase of his fortune. And this is the reason why trade increases frugality,and why, among merchants, there is the same overplus of misers above prodigals, asamong the possessors of land there is the contrary.

(Hume 1993: 182 3)

I only comment on three of the aspects under which this passage is ofinterest: First, this passage leads us into Humes economic psychologypresenting in a nutshell his pluralistic theory of economic motivation,

within which three independent types of motifs play a role:

(1) the craving for exercise and employment(2) the desire for pleasure, amusement and leisure (which is more

specific than and kept distinct from consumption necessary for barebiological subsistence) and

(3) the desire for wealth accumulation.

Second, it shows how the idea of endogeneity of preferences is givensubstance when it is combined with a pluralistic psychology of motivationand a suitable account of class-related patterns, and how it may become akey to the explanation of socio-economic changes in history. Third, the wayin which the idle and prodigal landowner is modelled suggests thatunderstanding some historically found patterns of motivation in no sensedoes entail their justification. For Hume, the structure of the good isaccounted for by some concept of utility, but this structure does not

immediately translate into the corresponding psychological mechanisms,and much less into social structures, mechanisms or institutions that havethe tendency to promote the good.

6. Consequentialism, motives and mechanisms

Aristotelian social theory is built on a very close and immediate relationshipbetween individual character (including a descriptively rich account of

human virtues and vices, psychological tendencies, etc.) and socialinstitutions. The institutions of the polis were seen as depending on anddeveloping individual virtues Modern social theory is motivated by the

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insight that such an immediate relationship between the properties ofindividuals and institutions is no longer plausible under circumstances

relevant for dynamic individualist market societies. Individual motives andpsychological dispositions may be complex, heterogeneous and subject tochange. Now the task of social theory is to explain or predict outcomepatterns that are to some extent stable or typical. If such patterns are to beexplained in terms of, say, the beliefs, goals, actions, etc. of individuals, it isnecessary to find a method to deal with this problem of motivationalcomplexity.

In normative theory, Kant and Hume may be seen as the culmination of amodern analysis of a specific normative sphere in which motifs andcharacter play a secondary role (see Schneewind 1990, 1998): the sphere of

justice. This development can be seen as answer to those problems raised bymodern societies. The Humean framework (like the Kantian one)distinguishes sharply between normative demands, actual internal motivat-ing forces and external constraints. This, in turn, provides the ground for akind of strategy in socio-economic theory, which is typical for economics:combining a parsimonious account of agency/motivation with a preciseaccount of the environment: of external constraints and social mechan-isms. And this is what I wish to argue in the following. Humeanutilitarianism provides a basis for the insight that complex motivational

patterns at the level of the individuals need not necessarily be made explicitand used in the explanation of complex institutional phenomena. Asmentioned above, Hume recognized the explanatory potential of patternsof constraints, game structures and processes. This enabled him to see thespecific merits of parsimonious (abstract, non-specific) accounts ofmotivation without abandoning the quest for psychological realismaltogether. Seen in this way, utilitarianism is not at odds with aiming atan empirically well-based account of mental mechanisms, of cognitive andemotional processes and of (what he called) virtues mediating the forces of

the passions, which ultimately drive decisions. But trying to make sense ofmental/psychological phenomena does not imply that they always must bea key explanans in social theory. Humes utilitarianism is a framework forgiving psychology its due without yielding to problematic forms ofpsychologism.

First, the quest for motivational realism clearly is not at odds with the useof counterfactual thought experiments. Hume sometimes introducesthought experiments based on counterfactual assumptions (for instance,unbounded generosity and a land of cockaigne, which render justice

superfluous, as he argues) to show that certain theories fail (such as thetheory of justice as the unique set of rational requirements) and his ownexplanation hinges upon certain assumptions Second simplified motiva



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tional assumptions are also introduced on more constructive grounds, i.e.not related to thought experiments with a critical purpose, but somewhat

similar to the use of unrealistic models in economics. In his essay On theIndependence of Parliament, Hume demonstrates why certain assump-tions (in this case that every man is to be held a knave) are useful in thecontext of a specific problem despite the fact that they are not true ingeneral. They may be rendered suitable by the context of a particularconfiguration of circumstances or due to the properties of a certain type ofsocial mechanism.

A particularly important class of the specific mechanisms just mentionedare, of course, economic mechanisms, in particular competitive andevolutionary mechanisms. In economics, simplified or unrealistic accountsof human agency (the economic man) are suggested with variousmethodological justifications:

(a) economic man as an useful approximation to reality;(b) economic man as an ideal type (along the lines of Carl Menger);

and(c) economic man as an as if-construct (as proposed by Armen

Alchian, Milton Friedman and others).

(a) and (b) are likely to be unattractive for a Humean for reasons thatcannot be dealt with here in detail. Rational self-interest of human beingsplays a certain role for Humes social theory, but the qualified way in whichit does is badly accounted for by the term approximation. The ideal type-methodology is unacceptable for Hume because it invokes too strongaprioristic elements. The as if-interpretation of modelling assumptionscomes closer to the way Hume used unrealistic assumption such as holdingeverybody a knave. Let me explain. First, as-if explicitly emphasizes thatdescriptive adequacy of modelling assumptions is insignificant. It is not

important whether the assumption under consideration can be made senseof as an idealization or as an abstractive approximation of humanbehaviour in general. Second, and more importantly, it has the potential toput simplifying assumptions about motifs into context with regard to themechanisms that play a role in the explanatory task under consideration.For instance, it may be argued that, in contexts including certain forms ofeconomics competition, instrumental rationality plus self-interest is alegitimate behavioural as if-assumption (see Alchian 1950). It may belegitimate even though something like Humes more complicated view of

decision processes and particularly his theory of distortions in imaginationand passions is empirically found to be correct. One could call this theforce of social situations and mechanisms with regard to which Hume

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commented as follows: So great is the force of laws, and of particularforms of government, and so little dependence have they on the humours

and tempers of men, that consequences almost as general and certain maysometimes be deduced from them, as any which the mathematical sciencesafford us. (Hume 1993: 14).

Why may an unrealistic model of human agency be legitimate accordingto this view? Because, if some social mechanism such as a politicalmechanism or economic competition is effective, the social outcomes maybe shown to be predictable on the basis of the homo oeconomicusassumptionor the assumption that everybody is a knave. Perhaps it could even beshown that the same applies for a much wider range of individual decisionroutines or of automatic quasi-behaviour based on very primitive rules forpattern-recognition and so forth. It is another question (not to be pursuedhere) whether and why this should disturb the practitioner of models thus

justified by their predictive success. This does not matter so much for thepoint made here. The important question is: What may make the use ofstrongly simplified assumptions concerning agency legitimate? One ofHumes achievements is that he identified particular social mechanisms (orprocesses), and not just a loosely defined sphere of society as the businesssphere, as the necessary supporting condition for suchlike simplifications.

While Hume certainly was no forerunner of theories based on homo

oeconomicus as an ideal type or as a behavioural approximation, he perhapswas the first who made the arguments that can support something like as ifexplicit. He saw that social mechanisms such as competition may rendersimplifications admissible. For instance, he explicitly ponders the questionof whether a reduced version of what he thinks is an adequate model ofthe human agent (for instance, an agent reduced to self-interest) may besufficient to explain some particular social phenomena (Hume 1739 40:III.ii.3). But he most likely would have rejected privileginghomo oeconomicusin the context of the as if-methodology as this implies privileging an

excessively rationalistic model of agency. Be that as it may, the way in whichHume discusses the use of simplified accounts of agency (related to thelogic of social mechanisms and strategic structures) is an importantexample for the contribution of his sceptical utilitarianism to thefoundations of socio-economic theorizing.

Experimental economists who are sceptical about the explanatory scopeof rationality find the Humean theory attractive. Like Hume, they often areinterested in socio-psychological mechanisms such as sympathy andreciprocity, which, along with other mental mechanisms, are crucial in

the explanation of the evolution of fairness, justice and artificial humaninstitutions, such as stable private property, contracts and the government.In these respects Hume may be taken to foreshadow ideas favoured by



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modern experimental economists: mental models, different motivationaland communicative mechanisms such as reciprocity, sympathy, etc. But it

would be one-sided to see Hume as a precursor of a psychological turn ineconomics. Despite his undeniable quest for psychological realism, theuse of simplified models of agency plays a role in the development ofHumes theory and particularly of its systematic, unified character. He

writes:

Among the [circumstances incommodious to the requisite conjunction of humans,R.S.] we may justly esteem our selfishness to be the most considerable. I am sensible,that [. . .] the representations of this quality have been carried much too far; and thatthe descriptions, which certain philosophers delight so much to form of mankind inthis particular, are as wide of nature as any account of monsters, which we meet with

in fables and romances. So far from thinking, that men have no affection for any thingbeyond themselves, I am of the opinion, that tho it be rare to meet with one, who lovesany single person better than himself; yet tis as rare to meet with one, in whom all thekind affections, taken together, do not overbalance all the selfish.

(Hume 1739 40: III.ii.2)

Hume then goes on arguing that:

The same self-love, therefore, which render men so incommodious to each other, tak-ing a new and more convenient direction, produces the rules of justice, and is the firstmotive of their observance.

(Hume 1739 40: III.ii.8)

Moreover:

Tis no less certain, that tis impossible for men to consult their interest in so effectual amanner, as by an universal and inflexible observance of the rules of justice, by whichalone they can preserve society. Since therefore men are so sincerely attached to theirinterest, and their interest is so much concerned in the observance of justice, and thisinterest is so certain and avowed; it may be asked, how any disorder can ever arise insociety [. . .].10

(Hume 1739 40: III.ii.7)

I conclude that even with regard to the emergence of the most basicinstitutions such as private property or the government, he believes that thebest explanations do not employ the whole set of mechanisms andmotivational forces that he introduces. (see also Hume 1739 40: III.ii.3).

7. Concluding remarks

Some of Humes concerns with regard to the importance of cognitive andemotive mechanisms and of a realistic account of individual decisionprocesses can be re phrased in the following way Valuation and motivation

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are two different things. Axiological structures, the structures of the good,do not simply and immediately translate themselves into the correspond-

ing psychological mechanisms, and much less into social structures,mechanisms or institutions that have the tendency to promote the good.Even though humans seek pleasure, pleasure does not have unmediatedmotivational force. Rather, the motivational force of the good/pleasure issubject to various kinds of distortions at various levels. This is important,because it prepares the stage for the rejection of two kinds of socialtheories, which Hume clearly wishes or would wish to reject: technocraticutilitarianism and rationalist contractarianism. These social theories implythat the force of the good translates itself rather directly into suitableinstitutional patterns, either by way of contract or by way of a rationalbenevolent institution of theory-based planning. This hardly can be rightfor someone who is sceptical about the claims of reason and themotivational force of the good.

On these grounds, contractarian or utilitarian accounts of socialinstitutions (which invite the idea of a comprehensive re-design of the

whole institutional pattern by a rational and benevolent utilitarianplanner) have to be rejected. Both theories, according to a Humean

view, suffer from a naive short-cut of motivation, causation, reason andthe good that are supposed to work together in a straightforward way in

bringing about institutional patterns, thus failing to provide an adequateaccount of the conditions of successful development of institutions andleaving little room for good explanations of failures in institutionbuilding. A clear consequence of this approach to social theory is thatdeliberate socio-economic reform is something that should be regarded

with great caution, given the complexity of mechanisms that have to betaken into account. Naive rationalism in reform politics, therefore, isbound to fail or to produce unplanned effects, the desirability of which isquestionable. Humes theory certainly offers no calculus for comprehen-

sive rational reform of institutions along Benthamite lines. Hume doesnot teach that humans do or ought to or could solve all moral problemsor tensions by appeal to one single principle. His position can be used tounderpin a moderate conservatism in politics. Many statements by Humesuggest that his political preferences are not too badly summarized by thatlabel. Notice yet that the sharp distinction between evaluation andmotivational mechanisms rules out not only rationalistic reform politics,but also any What is, is best-presumption. Moreover, notice that Humesemphasis that it is not possible to change human motivation does not rule

out the possibility of rational reform tout court. According to him,normative and institutional constraints are subject to change, at least inprinciple



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Men are not able radically to cure, either in themselves or in others, the narrowness ofsoul, which makes them prefer the present to the remote. They cannot change theirnatures. All they can do is to change their situation, and render the observance of jus-

tice in the immediate interest [. . .].(Hume 1739 40, III, 537)

Notes

* While remaining responsible for any shortcomings, I am indebted to Marco Guidi forcritical comments to a previous version.

1 See Hume (1777a: 256, App. III): The case is not the same with the social virtues ofjustice and fidelity. They are highly useful, or indeed absolutely necessary to the well-

being of mankind: but the benefit resulting from them is not the consequence of everyindividual single act, but arises from the whole scheme or system concurred in by thewhole, or the greater part of society.

2 Referred to as Hume 1739 40 in the following.3 Martin Hollis (1994: 73) observes that a careful reading of Hume finds that

imagination is involved in the association of ideas and the expectations arouse byconstant conjunctions [. . .]. But it is not altogether easy to integrate these activeelements with the rest of Humes science of mind, where associations occurpassively in the main [. . .]. In addition to the active elements stressed by Hollis,one should mention the role of reflexivity in Hume, which does not only provide thebasis for a kind of moderate internalism in his theory of normativity (as argued by

Pauer-Studer 2004) but, in my view, is also a key to the reconstruction of hismoderate views in epistemology. A profoundly reflective stance comes to the fore inpassages such as the Appendix to the Treatise of Human Nature where Humediscusses problems of inductivism in the context of personal identity. More directlyrelated to the explanation of social phenomena, in the Essays Hume (1777b) talksof general principles, if just and sound, must always prevail in the general course ofthings (Essay Of commerce). This suggests the existence of explanatory usefulgeneral principles, which survive critical reflection (if just and sound). Themoderate position is also visible in his diagnoses concerning the current state of theart of reasoning in the moral-political sciences, which is still imperfect, implyingthat some kind of progress is to be expected in this area. This implies the existence

of standards and criteria against which degrees of progress can be assessed. Noticemoreover that in that in this passage Hume attributes the unsatisfactory state ofaffairs in social theory to the as yet immature state of active faculties of the mind(the art of reasoning), the second reason being insufficient statistical evidence(Essay Of Civil Liberty).

4 Quoted from Mitchell (1918: 45).5 It should not be taken for granted that Hume is a mere social theorist. For a different

view, see, e.g., Pauer-Studer (2005). For Humes problems with normativity, seeSchneewind (1990).

6 These contributions are discussed in most textbooks on the history of economicanalysis; for a general overview of these contributions see Rotwein (1987).

7 For Humes influence on Plant, see Coase (1994: 182, fn. 5).8 As it is put by A. Sen, Paretianism is a weaker form of welfarism as compared toutilitarianism.

Richard Sturn


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9 This is my interpretation of some seemingly contradictory passages in Hume. In thisview there is little difference with regard to the role of reason in Hume (1739) ascompared to Hume (1777a). Notice that Selby Bigge, in his Editors Introduction to

Humes Enquiries (1777a: xxviii), suggests that Hume attributes to reason a moreimportant role in his Enquiries (as he puts it, Hume is more tolerant to the claimsof reason in the Enquiriesthan in the Treatise).

10 For the relation between the roles of public utility, imagination and private interest inthe explanation of rules of justice see the lengthy footnote in Hume 1739 40, III: 504.

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and London: The MIT Press.Coase, R.H. (1994). Essays on Economics and Economists. Chicago: University of Chicago

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Clarendon Press.Halevy, E. (1928). The Growth of Philosophical Radicalism. London: Faber and Gwyer.Hardin, R. (1988). Morality within the Limits of Reason. Chicago and London: The

University of Chicago Press.Hayek, F.A. (1960). The Constitution of Liberty. London and New York: Routledge.

Hobbes, T. (1651). Leviathan. R. Tuck (ed.). 1991. Cambridge: Cambridge UniversityPress.

Hollis, M. (1994). The Philosophy of Social Science. An Introduction. Cambridge: CambridgeUniversity Press.

Hume, D. (1739 40). A Treatise of Human Nature. 1992. Buffalo, NY: Prometheus Books. (1754 61). The History of England; from the Invasion of Julius Caesar to The Revolution of

1688. Edition by W. B. Todd. 6 vols. 1983. Indianapolis, IN: Liberty Classics. (1777a). Enquiries. Reprinted from the posthumous edition of 1777 and edited with

introduction by L.A. Selby-Bigge. 3rd edition with text revised and note by P.H.Nidditch. 1975. Oxford: Clarendon Press.

(1777b). Essays, Moral, Political, and Literary. Revised edition by E. F. Miller. 1987.

Indianapolis, IN: Liberty Fund. (1976). Dialogues Concerning Natural Religion. J.V. Price (ed.). Oxford: Clarendon

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Abstract

Whereas in philosophy David Hume was long regarded as a negativethinker to be criticized rather than read, many thinkers interested in socialand economic theory from Adam Smith onwards found key concepts,

distinctions and problems as developed by Hume useful and inspiring. Thisapplies not only to his seminal contrib

sturn, richard (2004), the sceptic as an economist’s philosopher? humean utility as a positive...

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