Tomas Sedlacek, Economics of Good and Evil
Abridged and edited for readability
The Worst of all the Multitude did something for the common Good.
As argued in the chapter about the Old Testament, ethics has disappeared from mainstream economic thought. For economists, there was no need to talk about ethics—it sufficed to rely on the invisible hand of the market; it would automatically transform private vices (such as selfishness) into general welfare (such as growth in efficiency). Once again, we have a historic irony: As we will soon see, the idea of the invisible hand of the market is, in reality, born of moral inquiry. An unusual reversal has taken place. Adam Smith, Malthus, J. S. Mill, John Locke—the great fathers of classical liberal economics—were foremost moral philosophers. A century later, economics had become a mathematized and allocative science, full of graphs, equations, and tables, with no room for ethics.
How could this happen? We must search Bernard Mandeville for an important part of the answer. The theory of the market’s invisible hand left a deep mark on the morality of economics: It postulated that private ethics do not matter; anything that happens, be it moral or amoral, contributes to the general welfare. At the moment when the principle of the invisible hand is trivialized, ethics becomes irrelevant. The originally universal notion of the relationship between ethics and economics, which we encountered in the Old Testament, was turned on its head. Together with Mandeville, the argument began that the more vices there were, the more material well-being there could be. It’s a certain historical irony that Adam Smith sharply and completely clearly distanced himself from the idea of the market’s invisible hand as Bernard Mandeville presented it.
The attention of economists today is starting to return once again to ethics, and the internalization of norms is becoming an attractive field. It is beginning to be generally recognized that economics does better in an ethical environment where the actors abide by the rules of the game. Under various labels (quality of business environment, corporate governance, transparency, surveys of informal institutions, etc.), respected global institutions are starting to pay attention to research on the influence of ethics on the economy. Attention is going back to the beginning, to the Hebrew notion that more ethics is better for the economy. This is a notion with which Adam Smith would have agreed. And the provocative poet Bernard Mandeville figured in that beginning.
Great ideas are very rarely encountered without accompanying controversy. Bernard Mandeville’s stories provoked a fierce scandal at the time. Among those greatly offended, as we will see, was Adam Smith himself—the same Adam Smith whom economists generally consider to be an upholder of Bernard Mandeville’s ideas.
Mandeville originally made a living by translating and writing fairy tales. He gained his renown through a single work that met with public acceptance, The Fable of the Bees: or, Private Vices, Publick Benefits. His fable in verse was first published in 1714, but it only provoked a scandal in reedition in 1723. He suddenly found himself at the center of one of the most heated debates of the eighteenth century. The number of Mandeville’s critics grew quickly; joined by such distinguished figures as George Berkeley, Francis Hutcheson, Archibald Campbell, and John Denis. Adam Smith branded Mandeville’s teaching “in almost every respect erroneous.” The English theologian John Wesley likened Mandeville to Machiavelli in his depravity. Mandeville’s ideas were banned in courts, and in France his book was burned in the streets by executioners. Many considered him to be the Antichrist, and even David Hume and Jean-Jacques Rousseau joined his opponents.
The poem starts with a description of a prospering society whose characteristics correspond to the social system in England at the time. Here, vice thrives under the mask of an apparently peaceful society. There is no trade without fraud, no authority without bribery and corruption:
Thus every Part was full of Vice, Yet the whole Mass a Paradice;
But the bees complain, and believe they would live better in a just and honest society. The god of the bees, Jove, hears their request and transforms the bees into honest and virtuous creatures.
The Bar was silent from that Day; For now the willing Debtors pay, Ev’n what’s by Creditors forgot, Who quitted them, that had it not. Those, that were in the Wrong, stood mute, And drops the patch’d vexatious Suit.
But this is what happens: Instead of the beehive prospering and the bees living better, the exact opposite occurs. Many bees lose their jobs because only a handful of blacksmiths can earn a living in a society where neither bars on windows nor ironwork on doors is necessary. Judges, lawyers, and defenders lose their jobs, and bureaucrats overseeing the enforcement of the law cease to be necessary. Because luxury and gluttony disappear, ordinary people—farmers, servants, shoemakers, and dressmakers—suffer due to decreased demand for goods. The bee nation becomes peace-loving, so it stops arming itself as well. The fable comes to an inglorious end. The beehive dies out and only a small part survive, because the other bees were not needed and could not support themselves. In the end, another swarm drives them from the hive, and the bees find shelter in the remains of a fallen tree.