Sen - The passions and the interests : political arguments for capitalism before its triumph

THE PASSIONS
AND THE
INTERESTS

Emblem No. 27 Repress the Passions! in Peter Iselburg, Emblemata Politica, Nuremberg, 1617.

THE PASSIONS
AND THE
INTERESTS

Political Arguments for Capitalism before Its Triumph

ALBERT O. HIRSCHMAN

Foreword by Amartya Sen
With a new afterword by Jeremy Adelman

PRINCETON UNIVERSITY PRESS
PRINCETON AND OXFORD

Copyright 1977 by Princeton University Press
Foreword by Amartya Sen

copyright 1997 by Princeton University Press
Afterword by Jeremy Adelman

copyright 2013 by Princeton University Press

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All Rights Reserved

First printing, 1977
Twentieth anniversary printing, 1997
First Princeton Classics edition, 2013

Library of Congress Control Number 2013944234
ISBN 978-0-691-16025-2

British Library Cataloging-in-Publication Data is available

Printed on acid-free paper.

This book has been composed in Baskerville.

Printed in the United States of America

10 9 8 7 6 5 4 3 2 1

Et il est heureux pour les hommes dtre dans une situation o, pendant que leurs passions leur inspirent la pense dtre mchants, ils ont pourtant intrt de ne pas ltre.

Montesquieu, De lesprit des lois

CONTENTS

FOREWORD

A LBERT HIRSCHMAN is one of the great intellectuals of our time. His writings have transformed our understanding of economic development, social institutions, human behavior, and the nature and implications of our identities, loyalties, and commitments. To describe this book as one of Hirschmans finest contributions is therefore a very strong claim. It is more so because this is a bookindeed a slim monographon the history of economic thought, a subject that receives little attention and even less respect these days, and that has almost disappeared from the economics curriculum at most of the major universities around the world. The Passions and the Interests does not have the policy urgency that a contribution to public decisions may enjoy (as Hirschmans The Strategy of Economic Development eminently does), nor the compulsive immediacy that the exigencies of practical reason generate (as Exit, Voice, and Loyalty superbly portrayed). What then is so special about this book?

INNOCUOUS INTERESTS AND HARMFUL PASSIONS

The answer lies not only in the recognition that Hirschman makes us see the ideological foundations of capitalism in a fresh way, but also in the remarkable fact that this freshness is derived from ideas that are more than two-hundred-years old. The basic hypothesisthe articulation and development of which Hirschman investigatesmakes the case for capitalism rest on the belief that it would activate some benign human proclivities at the expense of some malignant ones. This way of seeing the issue cannot but appear very distant today, and it is, therefore, particularly remarkable that this thesis was so powerfully (and within its own logic, so cogently) developed and defended by the early champions of motivated capitalism. The success of capitalism in the contemporary world has been so total and so well recognized, and the identification of its virtues and vices are by now so standard, that it is hard to grasp that the system received its early intellectual defense from ideas that are very far removed from the way the issues are seen today.

The basic idea is one of compelling simplicity. To use an analogy (in a classic Hollywood form), consider a situation in which you are being chased by murderous bigots who passionately dislike something about youthe color of your skin, the look of your nose, the nature of your faith, or whatever. As they zero in on you, you throw some money around as you flee, and each of them gets down to the serious business of individually collecting the notes. As you escape, you may be impressed by your own good luck that the thugs have such benign self-interest, but the universalizing theorist would also note that this is only an examplea crude exampleof the general phenomenon of violent passion being subdued by innocuous interest in acquiring wealth. The applause is for capitalism as seen by its pioneering defenders, studied in this penetrating monograph.

CONTRAST WITH INFORMATIONAL ECONOMY AND INCENTIVES

The behavioral foundations of capitalism do, of course, continue to engage attention, and the pursuit of self-interest still occupies a central position in theories about the workings and successes of capitalism. But in these recent theories, interests are given a rather differentand much more positiverole in promoting efficient allocation of resources through informational economy as well as the smooth working of incentives, rather than the negative role of blocking harmful passions.

Montesquieus argument, in a passage that inspired Hirschman to undertake this historical inquiry (as he records in his new Preface), related to his belief that even though passions may prompt people to be wicked, they have nevertheless an interest in not being so. James Steuart eulogized interests as the most effectual bridle against the folly of despotism. This points in a different direction from the motivational analysis in contemporary theories of the market economy and unrestrained capitalism.

CONTEMPORARY CONNECTIONS

The interest in this work does not, however, lie only in the historical illumination it provides. There are many connections with the concerns of today. Given the terrible impact of nasty passions in the contemporary world, it is certainly important to ask whether capitalism and the acquisitive instinct can be harnessed to disengage people from their damaging behavior. Not only did Montesquieu, Steuart, and some of their contemporaries see self-interest as a great savior; several later writers (often unaware of the previous literature) also considered self-interest a great way of escaping the impact of evil passions.

As Hirschman points out, even Keynes noted that it was better that a man should tyrannize over his bank balance than over his fellow-citizens, expressing the hope that the former might serve as an alternative to the latter. Hirschman may be just a little bit unfair to Keynes when he notes that after the story that has been told, it is almost painful to see Keynes resort, in his characteristically low-key defense of capitalism, to the identical argument that was used by Dr. Johnson and other eighteenth-century figures. The argument surely remains of interest, despite its lack of novelty (as we now know from Hirschman), and Keyness possible ignorance of the earlier literature does not undermine the relevance of his inquiry.

If the proposed connection were to work, it would certainly provide a substantive justification for capitalism that is altogether different from what comes via General Equilibrium Theory and related structures, with their emphasis on given preferences and the insulation of economic concerns from other motivations. Hirschman has, in fact, beautifully pursued this line of reasoning further in his Rival Views of Market Society. It is of course difficult to see that the promotion of profit making and marketization can be a general method of suppressing fundamentalist abuse and harmful passions (for example, it is unlikely that any immediate solution to the problems in Bosnia or Rwanda or Burundi can be found through encouraging economic self-interest), but there is a possible connection here that cannot be altogether dismissed, especially in the long run.