Over a week ago, I read this screed against capitalism, found it emotionally overwrought, and insulting to the intelligence of just about any discerning reader. I wrote something about how ridiculous it was on Twitter, and then decided to move on to more interesting reading.
Now, via John Hinderaker, I see that one of the key claims made by the author of the editorial, William Deresiewicz, has been thoroughly debunked. At the bottom of the editorial, one now finds the following:
An opinion essay on May 13 about ethics and capitalism misstated the findings of a 2010 study on psychopathy in corporations. The study found that 4 percent of a sample of 203 corporate professionals met a clinical threshold for being described as psychopaths, not that 10 percent of people who work on Wall Street are clinical psychopaths. In addition, the study, in the journal Behavioral Sciences and the Law, was not based on a representative sample; the authors of the study say that the 4 percent figure cannot be generalized to the larger population of corporate managers and executives.
To say that the New York Times ought to be embarrassed is to understate matters.
But the results of a study are not all that Deresiewicz got wrong. He also managed to make Bernard Mandeville, author of The Fable of the Bees–which I look forward to reading some day before I die (there are a lot of books on my must-read list)–sound as though he was some kind of sworn enemy of capitalism. The truth is . . . well . . . quite different. As anyone who bothers to consult Wikipedia would know:
Mandeville concluded that vice, at variance with the “Christian virtues” of his time, was a necessary condition for economic prosperity. His viewpoint is more severe when juxtaposed to Adam Smith‘s. Both Smith and Mandeville believed that individuals’ collective actions bring about a public benefit. However, what sets his philosophy apart from Smith’s is his catalyst to that public benefit. Smith believed in a virtuous self-interest which results in invisible cooperation. For the most part, Smith saw no need for a guide to garner that public benefit. On the other hand, Mandeville believed it was vicious greed which led to invisible cooperation if properly channelled. Mandeville’s qualification of proper channelling further parts his philosophy from Smith’s laissez-faire attitude. Essentially, Mandeville called for politicians to ensure that the passions of man would result in a public benefit. It was his stated belief in the Fable of the Bees that “Private Vices by the dextrous Management of a skilful Politician may be turned into Publick Benefits”.
In the Fable he shows a society possessed of all the virtues “blest with content and honesty,” falling into apathy and utterly paralyzed. The absence of self-love (cf. Hobbes) is the death of progress. The so-called higher virtues are mere hypocrisy, and arise from the selfish desire to be superior to the brutes. “The moral virtues are the political offspring which flattery begot upon pride.” Similarly he arrives at the great paradox that “private vices are public benefits”.
Now, to be fair, Mandeville’s call “for politicians to ensure that the passions of man would result in a public benefit,” can potentially be read as a call for regulation. That’s fine, and surprising precisely no one, I announce to all and sundry that we will never be rid of regulations on business and capitalism. But as the above passage makes clear, Mandeville believed that “private vices are public benefits.” He believed that certain vices would bring about progress, and that a society “blest with content and honesty” would stagnate, and might even regress.
Contrast Mandeville’s actual views with those Deresiewicz attributes to Mandeville:
. . . Wall Street is capitalism in its purest form, and capitalism is predicated on bad behavior. This should hardly be news. The English writer Bernard Mandeville asserted as much nearly three centuries ago in a satirical-poem-cum-philosophical-treatise called “The Fable of the Bees.”
“Private Vices, Publick Benefits” read the book’s subtitle. A Machiavelli of the economic realm — a man who showed us as we are, not as we like to think we are — Mandeville argued that commercial society creates prosperity by harnessing our natural impulses: fraud, luxury and pride. By “pride” Mandeville meant vanity; by “luxury” he meant the desire for sensuous indulgence. These create demand, as every ad man knows. On the supply side, as we’d say, was fraud: “All Trades and Places knew some Cheat, / No Calling was without Deceit.”
In other words, Enron, BP, Goldman, Philip Morris, G.E., Merck, etc., etc. Accounting fraud, tax evasion, toxic dumping, product safety violations, bid rigging, overbilling, perjury. The Walmart bribery scandal, the News Corp. hacking scandal — just open up the business section on an average day. Shafting your workers, hurting your customers, destroying the land. Leaving the public to pick up the tab. These aren’t anomalies; this is how the system works: you get away with what you can and try to weasel out when you get caught.
From reading all of this, you could be forgiven for thinking that Mandeville was condemning capitalism. But again, Deresiewicz utterly and completely fails to note that Mandeville considered vice “a necessary condition for economic prosperity,” and believed that an honest society would be one that fell back, rather than one that progressed. This is not the same as saying that “capitalism is predicated on bad behavior.” It is the same as saying, however, that without the presences of certain “vices,” society would not advance all that much, and that greed can be properly channeled in order to bring about that advancement and prosperity Mandeville wrote about.
Obviously, I am not writing this post to extol the virtues of fraud, or to say that we ought to have more of it. I am writing it, however, because Deresiewicz sought to portray Mandeville as some kind of critic of capitalist society, when in fact, Mandeville was anything but. It is worth noting, of course, that there is nothing to suggest that Mandeville would have applauded modern corporate scandals–especially given that those scandals cannot be found to have brought about any “public benefit.” There is everything to suggest, however, that Mandeville would have thought a certain amount of greed and self-interest to indeed be good, since greed is what causes people to innovate, to be creative, and to do new and pathbreaking things. Greed can get out of hand, to be sure, but it can cause a remarkable amount of progress as well.
Milton Friedman, of course, was very good on this point:
So it’s bad enough that the New York Times allowed William Deresiewicz to get studies on psychopathy wrong. But they also allowed him to get Bernard Mandeville wrong as well. They apologized for the former mistake. When will they apologize for the latter one?