Did J S Mill really claim that violations of free trade have nothing to do with liberty?

‘Again, trade is a social act. Whoever undertakes to sell any description of goods to the public, does what affects the interests of other persons, and of society in general; and thus his conduct, in principle, comes within the jurisdiction of society’ … . The ‘so-called doctrine of Free Trade … rests on grounds different from, though equally solid with, the principle of liberty … . Restrictions on trade, or on production for purposes of trade, are indeed restraints; and all restraints qua restraint, is an evil: but the restraints in question affect only that part of conduct which society is competent to restrain, and are wrong solely because they do not really produce the results which it is desired to produce by them.’ J S Mill, ‘On Liberty’, 1859, Ch. 5

This passage has puzzled me since I was a young man. It seems to me that individual liberty is obviously violated when governments intervene in trade. If a government imposes a tax on a good for the purposes of assisting the producers of a close substitute, this must be just as much an infringement of the liberty of consumers as when it imposes a sin tax on a good to discourage consumers from purchasing that good.

However, it is now clearer to me what Mill was trying to say. The first key to the puzzle is that Mill refers to ‘the principle of individual liberty’ rather than just ‘individual liberty’. What Mill means by the principle of individual liberty is explained a couple of paragraphs earlier as the maxim ‘that the individual is not accountable to society for his actions, in so far as these concern the interests of no person but himself’. According to that view, the individual should be accountable to society for ‘actions that are prejudicial to the interests of others’.

Friedrich Hayek and others have noted that the distinction that Mill sought to make between actions that affect the acting person and actions that affect others is not very useful because there is hardly any action that may not conceivably affect others in some way. According to Hayek the relevant issue is whether it is reasonable for the affected persons to expect legal protection from the action concerned (‘Constitution of Liberty’, 1960, p 145).

Now, in the paragraph immediately prior to his discussion of international trade, Mill acknowledges that damage to the interests of others does not necessarily justify the interference of society. In this context he discussed the views of society toward various forms of contest in which people who succeed benefit ‘from the loss of others’. He notes: ‘society admits no right, either legal or moral, in the disappointed competitors to immunity from this kind of suffering’.

The second key to the puzzle is that in the passage quoted above Mill suggests that all restraints are evil. If Mill is referring to coercion, as seems likely, then it seems to me that at this point he is close to recognizing the merits of the definition of liberty that Hayek later adopted. Hayek defined liberty as ‘a state in which coercion of some by others is reduced as much as possible in society’ (‘Constitution of Liberty’, p 11). This definition meets Mill’s desire to acknowledge that restraints are necessary to protect citizens from force and fraud, and may be appropriate under some other circumstances where individual conduct adversely affects the interests of others.

Mill seems to have been attempting to establish that the attitude of society toward individual conduct should depend on where it lies on a spectrum. At one end of the spectrum, where conduct affects only the individual actor, other people have no right to intervene. At the other end, force and fraud should obviously be illegal. At other points on the spectrum the effects of individual conduct on the welfare of society are ‘open to discussion’. (Mill uses these words are used in the introductory paragraphs of Ch. IV.)

In asserting that the ‘doctrine’ of free trade rests on equally solid ground to ‘the principle of liberty’ Mill is clearly implying that in our discussion of trade there should be a strong presumption that free trade enhances the general welfare of society. It follows that he must believe that government intervention in trade is generally an unwarranted form of coercion. That seems to me to be just another way of saying that such intervention is generally an unwarranted interference with individual liberty.

Should I be writing about the US peace index or the royal wedding?

I ran into Jim this morning. It must be over a year since I have seen him. He asked me what I was doing these days. I told him that I was writing a book about how we need to be in control of our own lives in order to be truly happy. But Jim wasn’t particularly interested in my book. He was more interested in giving me gratuitous advice on how to become a successful blogger.


Some readers might remember Jim as a cranky old fool who asks awkward questions and urges me to take up unpopular causes on my blog. I can refer to him as a cranky old fool now because he told me that he stopped reading my blog a few months ago. ‘It’s too boring’, he says. ‘Why don’t you blog about contemporary events like the royal wedding instead of carrying on with all that philosophical stuff?’

I told Jim that today I was proposing to write about something that has a great deal of contemporary relevance - the US Peace Index (USPI) that was released a few weeks ago by an organisation called Vision of Humanity. I explained that this index compares the peacefulness of each of the states in the US. It defines peace as the absence of violence and ranks the states using a range of indicators including homicide rates, violent crimes, percentage of the population in jail, number of police officers and availability of small arms.

Jim said: ‘Well, that might be interesting to people in America, but I don’t see how that is of interest to anyone in Australia - unless perhaps they are thinking taking their family to Disneyland’. He added: ‘I wouldn’t go for a holiday in America myself, even though it has become cheaper over the last few months. The place is too violent for me’.

I tried to explain that the USPI showed that there were large differences between the peacefulness of different states in the US and that the most peaceful states in the north-east of the US are actually as peaceful as Canada and some of the European countries. The words Jim used in his response are not printable here. Let me just say that he used some forceful words to suggest that nothing I could say would alter the fact that by comparison with other developed countries the US has an appalling record in terms of homicide rates and incarceration rates.

It was obviously time for a change of subject, so I asked Jim what he thought I should be writing about the royal wedding. Jim said: ‘Well, you should be underlining the significance of the occasion. It isn’t every day that the future king of Australia is married’.

I told Jim there was no way I was going to write that sort of nonsense. I told him that in my view the concept of an hereditary head of state was indefensible in any case. Sometimes we strike it lucky, as in the case of Queen Elizabeth, but the chances of fate giving us a really good head of state must be fairly remote - even allowing for the possibility that we might be selecting from a superior gene pool and that there could be some advantage in training people for the job from birth. Then I suggested that it was just laughable that an independent country like Australia should still have the monarch of another country as its head of state.

I had expected that Jim was going to respond to the effect that ‘if it ain’t broke don’t fix it’. I was geared up to give some reasons why the system is broken and does need fixing to ensure that we continue to have a head of state who is respected by the Australian people.

Well, Jim didn’t respond as I had expected. He just said: ‘So I guess you won’t be watching the wedding on TV then will you?’

I just mumbled and walked off. The truth is that I will be watching the wedding on TV. This is closest I can get to observing a medieval pageant complete with a golden coach and an Archbishop wearing a funny hat. You don’t have to be a monarchist to enjoy a spectacle like this. By the way, I am glad that Will and Kate are getting married!

Why can't we have a realistic basis for optimism?

In his book, ‘Flourish’, Martin Seligman writes:

‘I am all for realism when there is a knowable reality out there that is not influenced by your expectations. When your expectations influence reality, realism sucks’ (p 236-7).

I have been thinking about the sentiments in that paragraph at various times over the last couple of days. My initial reaction was that it was wise as well as well written. The problem I now have with the passage is that in the context in which it is written it seems to imply that a realistic frame of mind is inconsistent with optimism. It seems to me that if we are realistic about the right things this can provide us with a stronger basis for optimism. (As an aside, the grammar check in Microsoft Word doesn’t agree with me that the passage was well written. It calls the second sentence a fragment and suggests that it be re-written. Robots have a tendency to be pedantic!)

I will give an example to explain why I think a realistic frame of mind can be optimistic and then consider the broad context in which the paragraph was written. A prime example of expectations influencing reality is in relation to our own behaviour e.g. in playing a sport. If you decide to be realistic about how you will respond to a given situation in future you might think that the most likely outcome is that you will perform in much the same way as you have in similar situations in the past. That might make tend to make you pessimistic about your prospects for improvement. Yet, when you think about it more deeply, a realistic frame of mind could enable you to make use of your inside knowledge of your own potential and your intentions in developing your expectations of your future performance. Your inside knowledge might thus provide you with a realistic basis for more optimistic expectations.

The context in which Seligman’s paragraph appears is in a discussion of the influence of expectations on capital markets and individual health outcomes. The evidence that he presents that expectations can influence individual health outcomes seems to me to be fairly strong. It may be worse that useless, however, for well-meaning people to use this knowledge to tell pessimists not to be so pessimistic. In my view if we want to help people we should give them plausible reasons for hope. My view on this are not be worth much, but Marty Seligman certainly doesn’t support happiness police urging people to fake positive emotion.

I can claim some professional knowledge about the effects of expectations on capital markets. Seligman’s comments on this topic were prompted by a claim by Barbara Ehrenreich that positive thinking destroyed the economy. According to her view, motivational gurus and executive coaches espousing positive thinking – using scientific props provided by academics like Martin Seligman – caused the recent global financial crisis and subsequent recession by infecting CEOs with viral optimism about economic prospects. Seligman responds that it is vacuous to suggest that the meltdown was caused by excessive optimism. Optimism causes markets to go up. Pessimism causes them to go down.

Ehrenreich is presumably suggesting that the bubble wouldn’t have burst if we didn’t have a bubble in the first place. Well, economists are still arguing about whether we did have an asset price bubble, and I don’t think many of those who think we had a bubble would lay the blame on positive psychology. In looking for the cause of the crisis we need to look for reasons why normally prudent financial institutions took on extraordinary risks. I don’t think it is necessary to look any further than the policies that central banks had pursued in the past that encouraged major financial institutions to believe that they were too big to be allowed to fail. The financial crisis occurred when the Fed decided to break with that policy and let one of the big gamblers go to the wall.

Seligman goes on to discuss asset pricing and the views of George Soros about reflexive reality. In my view he manages to make those views more comprehendible than Soros does. (My difficulty in understanding Soros was evident in this post.) According to Seligman, reality is reflexive if it ‘is influenced and sometimes even determined by expectations and perceptions’.

Economists have known for a long time that the market price of an asset is determined largely by expectations about future earnings from that asset and associated risks (reflected in discount rates). So, wealth can be considered to be a form of reflexive reality because it depends on expectations. As well as expectations about future earnings, the expectations that influence market prices at any time may include expectations that investors form about the optimism or pessimism of other investors – i.e. whether they are too optimistic or too pessimistic and how long they are likely to remain in that state.

From the perspective of the individual investor, however, the expectations of other investors are part of external reality that can be speculated about on the basis of their market behaviour, even though it isn’t knowable with any certainty. Her views about the expectations of other investors may influence her decisions to buy and sell, but her actions will have a negligible effect on market outcomes (unless she is a major player in the markets). Thus, even though asset values are determined by the combined expectations of investors, it doesn’t make sense for an individual investor to view her own expectations as influencing reality.

It seems to me that in personal investment, as in other aspects of life, it is good to have a realistic basis for optimism about the strategy one adopts. For example, consider the following advice that Warren Buffett offered retail investors. His basic message is optimistic: ‘Stocks are the things to own over time. Productivity will increase and stocks will increase with it’. Then he provides some realistic advice about how to avoid buying and selling at the wrong time and how to avoid paying high fees. This leads to even more realism: ‘Be greedy when others are fearful, and fearful when others are greedy, but don’t think you can outsmart the market’. He ends up combining realism with optimism: ‘If a cross-section of American industry is going to do well over time, then why try to pick the little beauties and think you can do better? Very few people should be active investors’. (Comments by Warren Buffett in Spring 2008, quoted in Alice Schroeder, ‘The Snowball’, 2008, p 825.)

It is good to be optimistic, but even better to have a realistic basis for optimism.

………

My preceding post was also about Martin Seligman’s book, ‘Flourish’.

Is PERMA the be all and end all of human flourishing?

I have a high opinion of Martin Seligman. He has dedicated much of his working life to developing a scientific understanding of the factors that enable individuals to thrive. His focus is on developing effective interventions that people can apply to themselves. He is not afraid of writing for the popular market and becoming known as an author of self-help books, but I think history will remember him for his contributions to scientific research.

Seligman’s latest book, ‘Flourish’ combines a practical focus on helping people to live better lives with the story of his contribution to the development of positive psychology, his views on what it means to flourish and a most informative discussion of relevant research findings. The best review of the book I have found so far is by Christine Duvivier.

The purpose of this post is to focus on what I see as a shortcoming in ‘Flourish’, namely the central idea that well-being theory has only five elements: positive emotion, engagement, relationships, meaning and accomplishment – i.e. PERMA. Why these five elements and none other?

Seligman arrives at PERMA by asking one of the questions that Aristotle asked, without apparently recognizing that Aristotle also asked this question. Seligman actually seeks to distance himself from Aristotle because he no longer likes the idea that happiness is the be all and end all of everything.

The question that Seligman seems to have borrowed from Aristotle is: What is the good that we choose for its own sake rather than because it makes a contribution to something else that we value? Aristotle’s answer was happiness. Aristotle also asked another question: What is the good that when isolated makes life desirable and lacking in nothing? I think he meant: What is it that makes life meaningful? Again, Aristotle’s answer is happiness. But, what Aristotle meant by happiness was more than just positive feelings, emotional well-being or life satisfaction. According to Aristotle, happiness is flourishing. Flourishing is the good that we choose for its own sake.

It seems to me that Seligman is saying the same thing when he says that the elements that comprise well-being (PERMA) are the goods that we choose for their own sake. Seligman’s formulation cuts out happiness as an intermediate step, but what Aristotle meant by happiness (which in any case is probably a poor translation of the word he used) doesn’t have much to do with the smiley face stuff that Seligman is seeking to distance himself from. Seligman’s main problem with the ‘h’ word is that it appears to be inextricably bound up with being in a cheerful mood - critics of his use of the concept ‘authentic happiness’ claimed that he was attempting to redefine happiness by dragging the desiderata of engagement and meaning into the concept. He also has a problem with life satisfaction because mood determines more than 70 percent of how much life satisfaction an individual reports. (I don’t see this as a devastating criticism, however, because most of the time it would be fairly safe to assume that mood variations wash out in calculating averages over large numbers of respondents.)

Seligman makes the strong point that well-being is more than just feeling good: it is a combination of feeling good as well as actually having meaning, good relations and accomplishment in your life. He also makes the point that public policy aimed only at subjective well-being is vulnerable to the ‘Brave New World’ caricature in which governments promote happiness by encouraging people to use ‘soma’ (p 26). In my view, even though there is no immediate risk that governments will go that far, there is a real danger in some parts of the world that they could order people to take more leisure on the grounds that they think that will make them happier.

Aristotle’s identification of flourishing as the good we choose for its own sake, takes us to the question of how we can flourish. His answer was that it is ‘only when we develop our truly human capacities sufficiently that we have lives blessed with happiness’. Now, this obviously poses the further question of what it means to develop our truly human capacities. What it means for a human to flourish has a lot of things in common with what it means for a sheep or some other animal to flourish, but it also has distinguishing characteristics. I think we should also be open to the possibility that what it means for one individual to flourish will differ from what it means for another individual to flourish. Indeed, Martin Seligman recognizes this in his emphasis on the differences in signature strengths that people display.

At this point it might be helpful to go back to look at the question that Seligman has borrowed from Aristotle to see precisely how he framed it to obtain the answer he obtains. Seligman suggests that well-being theory ‘is essentially a theory of uncoerced choice, and its five elements comprise what free people will choose for their own sake’. I applaud the idea that well-being is about what free people choose. It seems to me that idea has the desirable quality of recognizing truly human capacities for individual self-direction. We couldn’t say that the well-being of a sheep is about what an individual sheep would freely choose because it will instinctively stay with the mob. Humans are also social animals but, as Seligman recognizes, individual human flourishing sometimes involves opposing the mob. (At one point in this book Seligman tells the story of a true hero, Chief Warrant Officer Hugh Thompson, who threatened to open fire on Lieutenant William Calley and his men if they didn’t stop their massacre of civilians at My Lai in 1968.)

I agree with Seligman that the five elements he has identified are elements that individual humans choose for their own sake. One of these elements ‘meaning’ is actually something that sheep would not aspire to have. My problem is that an important element is missing.

The important missing element that is integral to our individual flourishing and sought for its own sake is control over our own lives. I find it interesting that Dan Gilbert, another famous psychologist, has argued that our passion for control of our own lives is sought as an end in itself rather than for the quality of the future it buys us. Gilbert suggests that ‘human beings come into the world with a passion for control, they go out of the world in the same way, and research suggests that if they lose their ability to control things at any point they become unhappy, helpless, hopeless and depressed’ (‘Stumbling on Happiness’, p 22). I leave it for readers to guess the name of the psychologist, with initials M.E.P.S, whose research Gilbert refers to in support of that research finding.

However, we do don't need a psychologist to tell us that our desire to have control over our own lives is integral to our flourishing as adult human beings. It must be obvious to everyone that an adult human is the kind of creature that cannot be said to be fully flourishing if important personal decisions are taken out of her control so she does not bear responsibility for them. Moreover, there is evidence – discussed in my last post – that the feelings we have of control over our own lives is not just a personality trait or a feeling of mastery of some elements of our lives, but it reflect our level of satisfaction with the amount of freedom we have in our lives. The countries in which a high proportion of people feel a great deal of control over their lives also tend to have a high proportion of people who are satisfied with the amount of freedom in their lives.

That is the end of my outburst. I hope it doesn’t put anyone off reading ‘Flourish’. In some respects this seems to me to be a better book than ‘Authentic Happiness’ which was itself a very good book. I look forward to reading Martin Seligman’s next book, which I think has the potential to be even better than this one.

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Postscript:
My next post: 'Why can't we have a realistic basis for optimism?' is also about 'Flourish'.