Some thoughts on current events related to economics, public policy and higher education. And occasionally some gossip of local interest to those in and around Gettysburg, PA. The views expressed here may reflect those of some members of the faculty of the Department of Economics at Gettysburg College, but they do not reflect the views of the department or college as a whole.
Friday, May 28, 2010
I learn something new about John Maynard Keynes
Keynes begins his essay "The End of Laissez-Faire" in the version included in his Essays in Persuasion with the stirring passage:
Let us clear from the ground the metaphysical or general principles upon which, from time to time, laissez-faire has been founded. It is not true that individuals possess a prescriptive ‘natural liberty’ in their economic activities. There is no ‘compact’ conferring perpetual rights on those who Have or on those who Acquire. The world is not so governed from above that private and social interest always coincide. It is not so managed here below that in practice they coincide. It is not a correct deduction from the principles of economics that enlightened self-interest always operates in the public interest. Nor is it true that self-interest generally is enlightened; more often individuals acting separately to promote their own ends are too ignorant or too weak to attain even these. Experience does not show that individuals, when they make up a social unit, are always less clear-sighted than when they act separately.
I have always been disappointed that Keynes did not support this claim with logical argument, he simply stated it as fact and drew its implications for policy. Now I learn that the Essays in Persuasion version of the essay is just an excerpt from a longer essay that was published as a pamphlet by Hogarth Press in 1926. The passage above opens Part IV of the longer essay: Parts I-III provide a fascinating account of the history of laissez-faire and a more comprehensive practical and philosophical critique. I regret now having assigned the Essays in Persuasion version to my History of Thought students rather than the complete version. I also vow to track down the originals of every essay in Essays in Persuasion to see what else I've been missing lo these many years.*
* Of course I know already that Economic Consequences of the Peace and Tract on Monetary Reform are worth reading in their entirety. Over and over again!
With the recovery still shaky and the crisis in Europe threatening growth in the months to come, it makes sense to think about another (smaller) round of fiscal stimulus. Congress is considering a bill that would do some good by providing aid to states and extending unemployment benefits. One provision that is always mentioned in descriptions of various stimulus packages but never described in detail is a tax credit for research and development.
Democrats said that the safety-net aid was desperately needed and that the business tax breaks included in the measure, like a popular credit for research and development, would help spur employment.
Sounds good on paper - who could be against research, development, and employment? But what exactly is this proposal?
It turns out that the proposal is to renew a tax credit for research and development that was originally enacted in 1981 and has been renewed every year since. The tax credit provides a subsidy amounting to about 6.4 to 7.3 percent on qualified R&D expenditures, according to the GAO (2009 report here, 1996 report here). The reports do not explain what types of research has been done as a result of the credit. The reports do indicate a number of things: no one is sure how much additional spending is induced by the tax credit, with estimates ranging from near zero to two dollars per dollar spent; no one has studied the benefits to society of this spending in terms of new products created or any other metric; much of the tax credit is simply a windfall to companies that would have done the research anyway; because the terms on which companies qualify for the tax credit are so confusing, many small businesses who might qualify never apply; of the $6 billion spent on the credit in 2005 (the latest year for which data is available), over half of the money went to large corporations with revenue over $1 billion.
Every day the R&D tax credit remains expired, the well-paying jobs, economic growth and revenue to the treasury it supports are placed at risk. TechAmerica calculates $45 million and 330 jobs are at risk each day the credit remains expired. With more than 70 percent of credit dollars going to U.S. wages, the R&D tax credit is a jobs credit.
But until I see some actual analysis of the effects of the tax credit, I'm going to assume it's just a bit of corporate welfare that Congress won't make a permanent part of the tax code because renewing it annually gives them an opportunity to extort money from corporate lobbies. (Hey, I agree with the WSJ on this one - though the WSJ gives the corporations who have come out against the stimulus bill a lot more credit for virtuous behavior than they deserve.)
If the size of the stimulus package needs to be reduced to get it through Congress, the R&D tax credit would be a good thing to drop (how much do you want to bet aid to states to keep teachers and firefighters from being laid off will be reduced instead?). If we want to promote R&D spending, there are surely better ways: increase funding for the National Science Foundation and other scientific agencies or subsidize undergraduate and graduate students in the sciences for a start.
Abstract The noted management guru Michael E Porter identifies seven unique competitive advantages for the U.S. economy to explain the country’s pre-eminence; they range from (among others) its environment for entrepreneurship, its institutions of higher learning, its technology and innovation machine, to its commitment to competition and free markets.
In this article, I argue that there is another critical competitive advantage exclusive to the U.S. that arises from its electoral system characterised by consistently low levels of voter turnout in national elections and with disproportionately large numbers of its poorest and least educated citizens not voting. I begin by looking at reasons why the poor in America vote in far lesser proportions than their numbers, and particularly, at the various formal and informal impediments that prevent voting by the poor. I then consider the impact this would have had on America’s economy and its competitiveness.
The core idea of this paper is that when an electoral process effectively filters out significantsections of the poor, the country would find it far easier to put in place (and sustain) soundfree-market economic policies focussed on long term objectives with generous incentives for creation of wealth and with a tight leash on welfare and other entitlement programmes. I contend that America’s undeniably greater acceptance of the rigours of the free-market system is not (as is commonly believed) a product of a unique history or culture but, in truth, is closely tied to a discriminatory and exclusionary electoral system that has strong historical roots.
But the US growth rate has been lower since the 1970s than it was in the decades before, while voter turnout has fallen.
My hypothesis is that we are poised for a recovery that is qualitatively similar, though somewhat slower, than the recovery of 1983-84. The economy has probably been growing since about July 2009. The 1981-82 recession hit its trough in the third quarter of 1982; GDP started to increase around October 1982. So May 2010 is analogous to August 1983. What did the economy look like in August 1983? This graph compares payroll employment growth for the first 10 months of each of the two recoveries.
The beginning of the increase in GDP at the end of 1982 was followed by three months of declining employment, a "false alarm" increase in January 1983, two months of flat employment, and then a strong rebound. Beginning in July 2010 we had four months of declining employment, a "false alarm" increase in November 2009, three more months of flat employment, and then what looks like the beginning of a strong recovery. So we seem to be about two months behind where we were in 1983.
In May 1983, two months into the employment rebound, the consensus forecast for GDP growth over the next year was in the neighborhood of 4.5%, which news reports acknowledged was somewhat slower growth than was typical of post-war recoveries. Over the next four quarters GDP grew at an annual rate of around 8 percent. Today the consensus forecast is for growth for the next year in the neighborhood of 3.5 percent...
I'm certainly not saying we're going to have growth of 8 percent over the next year. And this is not evidence that we're going to have a strong recovery. But let's put it this way: the data we have as of today does not contradict the hypothesis that we will have a strong 1983-style recovery.
Financial headwinds you say? In spring 1983 the Baa-Aaa interest rate spread was in the neighborhood of 170 basis points; today it's around 100. So to make the case for a slower recovery you need to appeal to special threats facing the US economy today that weren't around in 1983; certainly the situation in Europe qualifies, but it's too early to say that that will sink the recovery.
David Leonhardt has some sensible comments on how to strengthen the financial reform bill. Financial reform is a rare example of legislation being improved as it passes through the Senate. As further evidence that the Senate liberals are serious about reform, the American Banker has a story headlined: Democrats Reg-Reform Conference Choices Bode Ill for Banks. Senate Democrats on the committee include Tom Harkin, Chris Dodd, Patrick Leahy, Tim Johnson, Blanche Lincoln, Chuck Schumer, and Jack Reed. Harkin, Dodd, Leahy, and maybe Schumer provide some real liberal firepower. But a bill is not expected to reach President Obama until July 4. That gives banks an awful lot of time to do some damage.
The evidence indicates that senior policymakers repeatedly designed, implemented, and maintained policies that destabilized the global financial system in the decade before the crisis. The policies incentivized financial institutions to engage in activities that generated enormous short-run profits but dramatically increased long-run fragility. Moreover, the evidence suggests that the regulatory agencies were aware of the consequences of their policies and yet chose not to modify those policies. On the whole, these policy decisions reflect neither a lack of information nor an absence of regulatory power. They represent the selection -- and most importantly the maintenance -- of policies that increased financial fragility. The crisis did not just happen to policymakers.
Since technical glitches, regulatory gaps, and insufficient regulatory power played only a partial role in fostering the crisis, reforms that rectify these conditions represent only a partial and thus incomplete step in establishing a stable financial system that promotes growth and expands economic opportunities. The entire system of financial regulation -- the system associated with evaluating, reforming, and implementing financial policies – played a key role in the crisis.
Levine focuses on regulatory failures with regard to the rating agencies, credit default swaps, over-the-counter derivatives trading, capital requirements at investment banks, and Fannie Mae and Freddie Mac. The message is that regulators had the tools they needed to prevent the financial bubble that ultimately collapsed, but chose not to use them. Giving new powers to the regulatory agencies, therefore, is not necessarily a solution to the problem. True enough, but the granting of new powers sends a powerful signal to the regulatory agencies about what is expected of them. They got a very clear signal during the Clinton and Bush years that they were expected to exercise their regulatory powers with a light touch if at all; the financial reform bill working its way toward the president's desk gives them a clear message in the other direction. Also, certain reforms in the bill (e.g. the reform of the rating agencies' relationship with securities issuers) directly correct problems that Levine highlights in his paper.
Recent movements in credit spreads (here the difference between yields on Baa and Aaa corporate bonds) tied to the Greek crisis are cause for concern:
But so far it's nothing like we saw two years ago:
The Baa-Aaa spread is important because it captures financial market participants' attitude toward risk. An increase in the spread means investors are shying away from risky securities and hoarding safe securities instead. This means that corporations face higher borrowing costs, which could reduce investment spending. It also reflects a general worsening of the psychological climate, which could mean lower spending across the board.
This is what people mean when they talk about the "headwinds" facing the economy as a result of financial stress. As I said in an earlier post, we're in a race between the forces of expansion and financial stress. Real economic expansion relieves financial stress - e.g. although Greece might still be having trouble servicing its debt if the world economy was not in recession, the other PIIGS (Portugal, Italy, Ireland, Spain) would be doing just fine. But financial stress retards economic expansion for the reasons given above. My money is still on the forces of expansion, but the increase in credit spreads has the potential to turn into something serious.
One criticism from the left is that the bill leaves too many of the specifics to the discretion of regulatory agencies and doesn't hardwire enough into law. I disagree: there are a million ways that regulations can have unintended consequences or that banks can find loopholes to circumvent them (wait, can you circumvent through a loophole)? I'd rather let the regulatory agencies that have the expertise craft specific regulations within a broad framework set by Congress. Of course that means we need to elect governments that will appoint good regulators and keep a watchful eye on what they're doing, but that's kind of unavoidable in a democracy.
Brad DeLong says, in reference to an article in the NY Times on the possibility of a strong recovery, that "There is no statistical evidence that a V-shaped recovery is coming." So it's time to update my presentation of the statistical evidence of a V-shaped recovery. In each of the graphs below date 0 is the trough (or in one case peak) of a particular economic indicator in each of the last five recessions, including the current one. Each graph shows the trajectory of the economic indicator leading up to and following the trough or peak (numbers on the horizontal axis measures months before and after peak or trough; quarters in the first graph). In all cases the indicator is normalized to zero at period 0.
You can draw your own conclusions. As for me, I see lots of "V"s. In each case the economy's performance in the current recovery is clearly superior to those following the 1991 and 2001 recessions. The recovery appears a bit weaker than but roughly comparable to the two strong recoveries following the 1975 and 1981 recessions.
Barefoot and Progressive (a Kentucky blog) has posted some interesting links to the Republican Senatorial nominee's fans in the white power "community". Here are some snippets from the reaction to Rand Paul's nomination from Stormfront.org's website (I won't link to it on the theory that every link increases its visibility, but you can get to it through Barefoot and Progressive if you want a taste of the dark side of the internet):
White Templar: (clip from article with quotes from Paul supporting Israel). Whooo hooo go Jew/Israel supporter! WHOO HOO!
Jack Boot: He must pay a price for a Senate seat. Swear fealty to Israel or be politically destroyed. That's just the way it is. Let us not condemn a man who would be our friend on most issues. Not the most important issue, I admit, but most issues.
Northern Confederacy: If I was running, I would blather on and on about how Israel has a right to defend itself blah blah blah. Hell, I'd 'swear allegiance' to them with my hand on a stack of Torahs, if that's what it took. Then I would stab them in the back every chance I got, all the while smiling about how I 'love the Jewish people'. They have gotten so predictable that as long as you SAY the right things you can ALMOST do anything you want, short of donning a swastika arm-band. We are in a war, ladies and gentleman. The advantages of force and power are NOT on our side. There are no rules when you are in a war like this. This is for ALL the marbles. Throw 'honor' out the window when it comes to your dealings with the enemy. You can be guarenteed he has.
J.S. Bach: You really need to get a grip. I'll assume you live in a remote Montana cabin and have limited access to our Jew controlled media. Anyone who challenges the Zionists at this point is a suicidel maniac. They own the media. It would be like telling your landord you demand $1 a month rent....or else. Rand Paul is making inroads that can be expanded upon later down the road.
Wooden Music Box: Yeah, but you get an audit of the Federal reserve and you sink a stake into the American jewry heart. At that point, Israel almost becomes meaningless. Without Jews here maneuvering and manipulating the currency, and buying politicians, Israel does not have much of a chance of survival. Defeat of the Fed, and also bring transparency and integrity to the American financial system, and Israel suffocates and dies.
WhiteRights: The biggest primary victory in 2010 is yet to come. That will come on August 26th when the despicable traitor, John Amnesty McCain will face his political Judgment Day. McCain is running against a real conservative who has been endorsed by the Minutemen. A Rasmussen poll on April 16th showed McCain only 5 percent ahead of his primary rival J.D. Hayworth. Hopefully the primary in Arizona isn’t stolen by hacked Diebold machines and other vote thievery as was the Republican presidential primary in 2008. It’s long overdue that McCain is thrown on the trash heap of history. If McCain can go from a presidential candidate to an out of work old man in just two years, that will be an incredible demonstration of the power of the Tea Party movement and solid proof that things can be changed in America. The Tea Party by the way is just the beginning. The real revolution is building up in the wake of the Tea Party movement, and it will be radical beyond a liberal’s worst nightmare.
While they're asking him about his stance on civil rights legislation, the media ought to ask Rand Paul why he thinks he's so popular among the anti-semites.
The New York Times learns the wrong lesson from Joe Sestak's victory and Blanche Lincoln's failure to win the Arkansas Democratic primary outright:
The outcomes of both contests, along with a Democratic primary in Arkansas that pushed Senator Blanche Lincoln into a runoff election in June, illustrated anew the serious threats both parties face from candidates who are able to portray themselves as outsiders and eager to shake up the system... The results were sobering for both parties, amounting to a rejection of candidates selected and backed by leaders in Washington who found themselves out of step with their electorates. Republicans and Democrats alike are now left to learn the lessons from the frustration being expressed by voters, and to unify behind nominees who face daunting general election campaigns.
The anti-incumbent mood is clearly dominant in the Republican primaries. But the dynamic of these Democratic primaries is not anti-incumbency - it's that Democrats want our representatives in Congress to push back harder against Republicans than they have done to date. Democrats don't trust Specter and they punished Lincoln for holding up health reform.
It's also clear that Obama was not prepared to go to the mat for Specter. He had promised his support when Specter switched parties, but was not going to do more than the bare minimum that was expected of him. Robocalls, but no trip to Pennsylvania. It'll be interesting to see what positions Specter takes for the rest of this session. For thirty-odd years he's been a finely calibrated voting machine, first triangulating between the demands of the Pennsylvania electorate and first the Republican, then the Democratic Party. He has developed fence-sitting and vote-trading to an art form. Now he is free to vote his conscience. His challenge is going to be remembering what that is.
Robert Shiller writes that a failure of confidence - as a result of the crisis in Europe, the Gulf oil spill or something else - could push the economy into another recession as a self-fulfilling prophecy. Shiller's argument draws from the logic of his book Animal Spirits (written with George Akerlof). Much as I respect Shiller and Akerlof, I found the book - and Shiller's argument in this piece - profoundly unconvincing. Animal Spirits' argument consisted of nothing but a sequence of "post hoc ergo propter hoc" fallacies. Repeatedly the authors point to evidence that confidence was falling during such-and-such a crisis and interpret it as support for the proposition that the decline in confidence caused the crisis. Not convincing at all.
Robert Lucas warned us to "beware of economists bearing free parameters," and "confidence" is the mother of all free parameters. There's certainly a logical argument to be made that changes in confidence can result in confirming movements in the real economy ("sun-spot equilibria"), but I doubt the actual economy is that fragile. A collapse in confidence is unlikely to cause a recession unless it confirms trends already in place in the real economy. The crisis of 2008 occurred in an economy already in recession. By contrast, the LTCM crisis of 1998 and the stock market crash of 1987 did not lead to recession because the economic fundamentals were strong. The 1937 recession, cited by Shiller as evidence for his argument, occurred not only because of a drop in confidence, but because of a contraction in fiscal and monetary policy.
That's not to say that Europe couldn't plunge the US back into recession. But if it does it will be because of the effect it has on bank balance sheets and lending, not because of its effect on "confidence."
Europe's attempts to stem the Greek debt crisis haven't calmed interbank lending markets. The TED spread (LIBOR minus Treasury bill rate) has poked up above 30 - well below the crisis levels of 2008-09, but troubling nevertheless.
The NY Times assesses the danger this poses for the European and US banking systems. But the article's focus on the dangers of public debt is misguided:
The European rescue plan, totaling 750 billion euros, is intended to head off the risk of default but would vastly increase borrowing. That could hamstring Europe’s nascent recovery.
Indeed, it was too much debt that caused the problem in the first place: a new report by the International Monetary Fund warns that “high levels of public indebtedness could weigh on economic growth for years.”
The world’s budget deficit as a percentage of gross domestic product now stands at 6 percent, up from just 0.3 percent before the financial crisis. If public debt is not lowered back to precrisis levels, the I.M.F. report said, growth in advanced economies could decline by half a percentage point annually...
After borrowing trillions to stimulate their economies and ease credit concerns during the last wave of fear in late 2008 and early 2009, governments cannot borrow trillions more without risking higher inflation and shoving aside other borrowers like individuals and companies. Short-term interest rates, already near zero in the United States, cannot be lowered any further. And vital steps like raising taxes or cutting spending increases could snuff out the beginnings of a recovery in northern Europe and worsen the pain in recession-battered economies like Spain, where unemployment recently passed 20 percent.
With the exception of wartime, “the public finances in the majority of advanced industrial countries are in a worse state today than at any time since the industrial revolution,” Willem Buiter, Citigroup’s top economist, wrote in a recent report.
“Restoring fiscal balance will be a drag on growth for years to come.”
Though excessive public debt in Greece and possibly Portugal, Spain, and some other countries, is clearly the root cause of the problem, the high levels of debt in the US, Germany, France, UK and other large economies have little to do with it. As Paul Krugman notes, according to the IMF report cited in the article the reason debt has exploded in these countries is a decline in tax revenues due to the recession, not excessive government spending. (The report also makes the specious claim that the financial crisis has caused a permanent reduction in potential GDP.) Attacking deficits now would be the height of insanity: we need continued fiscal stimulus to maintain the recovery and put us in a position where we can begin to restore fiscal balance in a few years.
Near term, the ECB needs to learn a lesson from the Federal Reserve's success in the US and begin a program of quantitative easing focused on purchases of sovereign debt. Fears that this would be wildly inflationary are crazy - at any rate, Europe could use a dose of higher than normal inflation at this point in time to ease the adjustment of countries like Greece.
Keynes' commencement address to the graduates of Gettysburg College
From his essay, "My Early Beliefs," 1938. It's especially poignant in light of Brad DeLong's series "liveblogging" from May 1940.
I can visualise very clearly the scene of my meeting with D. H. Lawrence in 1914…My memory is that he was morose from the outset and said very little, apart from indefinite expressions of irritable dissent, all the morning… We sat round the fireplace with the sofa drawn across. Lawrence sat on the right-hand side in rather a crouching position with his head down. Bertie stood up by the fireplace, as I think I did, too, from time to time. I came away feeling that the party had been a failure and that we had failed to establish contact, but with no other particular impression. You know the sort of situation when two familiar friends talk at a visitor. I had never seen him before, and I never saw him again. Many years later he recorded in a letter, which is printed in his published correspondence, that I was the only member of Bloomsbury who had supported him by subscribing for Lady Chatterley…
Bertie gave him what must have been, I think, his first glimpse of Cambridge. It overwhelmed, attracted and repulsed him – which was the other emotional disturbance. It was obviously a civilisation, and not less obviously uncomfortable and unattainable for him – very repulsive and very attractive. Now Bunny had come into his life quite independently, neither through Ottoline nor from Cambridge and Bloomsbury; he was evidently very fond of Bunny; and when he saw him being seduced by Cambridge, he was yet more jealous, just as he was jealous of Ottoline's new leanings that way. And jealousy apart, it is impossible to imagine moods more antagonistic than those of Lawrence and of pre-war Cambridge.
But when all that has been said, was there something true and right in what Lawrence felt? There generally was. His reactions were incomplete and unfair, but they were not usually baseless… So Bunny's memoir has thrown my mind back to reflections about our mental history in the dozen years before the war; and if it will not shock the club too much, I should like in this contribution to its proceedings to introduce for once, mental or spiritual, instead of sexual, adventures, to try and recall the principal impacts on one's virgin mind and to wonder how it has all turned out, and whether one still holds by that youthful religion.
I went up to Cambridge at Michaelmas 1902, and Moore's Principia Ethica came out at the end of my first year. I have never heard of the present generation having read it. But, of course, its effect on us, and the talk which preceded and followed it, dominated, and perhaps still dominate, everything else. We were at an age when our beliefs influenced our behaviour, a characteristic of the young which it is easy for the mIddle-aged to forget, and the habits of feeling formed then still persist in a recognisable degree…
It was only for us, those who were active in 1903, that Moore completely ousted McTaggart, Dickinson, Russell. The influence was not only overwhelming; but it was the extreme opposite of what Strachey used to call funeste; it was exciting, exhilarating, the beginning of a renaissance, the opening of a new heaven on a new earth, we were the forerunners of a new dispensation, we were not afraid of anything…
Now what we got from Moore was by no means entirely what he offered us. He had one foot on the threshold of the new heaven, but the other foot in Sidgwick and the Benthamite calculus and the general rules of correct behaviour. There was one chapter in the Principia of which we took not the slightest notice. We accepted Moore's religion, so to speak, and discarded his morals. Indeed, in our opinion, one of the greatest advantages of his religion, was that it made morals unnecessary – meaning by 'religion' one's attitude towards oneself and the ultimate and by 'morals' one's attitude towards the outside world and the intermediate. To the consequences of having a religion and no morals I return later…
Even if the new members of the Club know what the religion was (do they?), it will not do any of us any harm to try and recall the crude outlines. Nothing mattered except states of mind, our own and other people’s of course, but chiefly our own. These states of mind were not associated with action or achievement or with consequences. They consisted in timeless, passionate states of contemplation and communion, largely unattached to ‘before’ and ‘after’. Their value dependend, in accordance with the principle of organic unity, on the state of affairs as a whole which could not be usefully analysed into parts… The appropriate subjects of passionate contemplation and communion were a beloved person, beauty and truth, and one’s prime objects in life were love, the creation and enjoyment of aesthetic experience and the pursuit of knowledge.
How did we know what states of mind were good? This was a matter of direct inspection, of direct unanalysable intuition about which it was useless and impossible to argue… In practice, victory was with those who could speak with the greatest appearance of clear, undoubting conviction and could best use the accents of infallibility. Moore at this time was a master of this method – greeting one's remarks with a gasp of incredulity – Do you really think that, an expression of face as if to hear such a thing said reduced him to a state of wonder verging on imbecility, with his mouth wide open and wagging his head in the negative so violently that his hair shook. Oh! he would say, goggling at you as if either you or he must be mad; and no reply was possible. Strachey's methods were different: grim silence as if such a dreadful observation was beyond comment and the less said about it the better, but almost as effective for disposing of what he called death-packets. Woolf was fairly good at indicating a negative, but he was better at producing the effect that was useless to argue with him than at crushing you. Dickinson knew how to shrug his shoulders and retreat unconvinced, but it was retreat all the same. As for Sheppard and me we could only turn like worms, but worms who could eventually be goaded into voluble claims that worms have at least the right to turn…
I have called this faith a religion, and some sort of relation of neo-platonism it surely was. But we should have been very angry at the time with such a suggestion. We regarded all this as entirely rational and scientific in character. Like any other branch of science, it was nothing more than the application of logic and rational analysis to the material presented as sense-data. Our apprehension of good was exactly the same as our apprehension of green, and we purported to handle it with the same logical and analytIcal technique which was appropriate to the latter. Indeed we combined a dogmatic treatment as to the nature of experience with a method of handling it which was extravagantly scholastic…
Thus we were brought up – with Plato's absorption in the good in itself, with a scholasticism which outdid St. Thomas, in calvinistic withdrawal from the pleasures and successes of Vanity Fair, and oppressed with all the sorrows of Werther. It did not prevent us from laughing most of the tIme and we enjoyed supreme self-confidence, superiority and contempt towards all the rest of the unconverted world. But it was hardly a state of mind which a grown-up person in his senses could sustain literally. When MacCarthy came down for a week-end, he would smile affectionately, persuade moore to sing his German Lieder at the piano, to hear which we all agreed was a very good state of mind indeed, or incite Bob Trevy to deliver a broken oration which was a frantic travesty of the whole method, the charm of it lying in the impossibility of deciding whether Bob himself meant it, half at least, seriously or not.
It seems to me looking back, that this religion of ours was a very good one to grow up under. It remains nearer the truth than any other that I know… It was a purer, sweeter air by far than Freud cum Marx. It is still my religion under the surface. I read again last week Moore's famous chapter on 'The Ideal'. Itis remarkable how wholly oblivious he managed to be of the qualities of the life of action and also of the pattern of life as a whole. He was existing in a timeless ecstasy. His way of translating his own particular emotions of the moment into the language of generalised abstraction is a charming and beautiful comedy… The New Testament is a handbook for politicians compared with the unworldliness of Moore’s chapter on ‘The Ideal’…
I am still a long way off from D. H. Lawrence and what he might have been justified in meaning when he said that we were 'done for'. And even now I am not quite ready to approach that theme. First of all I must explain the other facet of our faith. So far it has been a question of our attitude to ourselves and one another. What was our understanding of the outside world and our relation to it?
It was an important object of Moore's book to distinguish between goodness as an attribute of states of mind and rightness as an attribute of actions… We were living in the specious present, nor had begun to play the game of consequences. We existed in the world of Plato's Dialogues; we had not reached the Republic, let alone the Laws.
This brought us one big advantage. As we had thrown hedonism out of the window and, discarding Moore's so highly problematical calculus, lived entirely in present experience, since social action as an end in itself and not merely as a lugubrious duty had dropped out of our Ideal, and not only social action but the life of action generally, power, politics, success, wealth, ambition, with the economic motive and the economic criterion }ess prominent in our philosophy than With St Francis of Assisi, who at least made collections for the birds, it follows that we were amongst the first of our generation, perhaps alone amongst our generation, to escape from the Benthamite tradition. In practice, of course, at least so far as I was concerned, the outside world was not forgotten or forsworn. But I am recalling what our Ideal was in those early days when the life of passionate contemplation and communion was supposed to oust all other purposes whatever. It can be no part of this memoir for me to try to explain why it was such a big advantage for us to have escaped from the Benthamite tradition. But I do now regard that as the worm which has been gnawing at the insides of modern civilisation and is responsible for its present moral decay. We used to regard the Christians as the enemy, because they appeared as the representatives of tradition, convention and hocus-pocus. In truth it was the Benthamlte calculus, based on an over-valuation of the economic criterion, which was destroying the quality of the popular Ideal.
Moreover, it was this escape from Bentham, joined with the unsurpassable individualism of our philosophy, which has served to protect the whole lot of us from the final reductio ad absurdum of Benthamism known as Marxism. We have completely failed, indeed, to provide a substitute for these economic bogus-faiths capable of protecting or satisfying our successors. But we ourselves have remained – am I not right in saying all of us? – altogether immune from the virus, as safe in the citadel of our ultimate faith as the Pope of Rome in his.
This is what we gained. But we set on one side, not only that part of Moore's fifth chapter on 'Ethics in relation to Conduct' which dealt with the obligation so to act as to produce by causal connection the most probable maximum of eventual good through the whole procession of future ages (a discussion which was indeed riddled with fallacies), but also the part which discussed the duty of the individual to obey general rules. We entirely repudiated a personal liabiljty on us to obey general rules. We claimed the right to judge every individual case on its merits, and the wIsdom, experience and self-control to do so successfully. This was a very important part of our faith, violently and aggressively held, and for the outer world it was our most obvious and dangerous characteristic. We repudiated entirely customary morals, conventions and traditionaI wisdom. We were, that is to say, in the strict sense of the term, immoralists. The consequences of being found out had, of course, to be considered for what they were worth. But we recognised no moral obligation on us, no inner sanction, to conform or to obey. Before heaven we claimed to be our own judge in our own case…
I am not now concerned, however, with the fact that this aspect of our code was shocking. It would have been not less so, even if we had been perfectly right. What matters a great deal more is the fact that it was flimsily based, as I now think, on an a priori view of what human nature is like, both other people's and our own, which was disastrously mistaken.
I have said that we were amongst the first to escape from Benthamism. But of another eighteenth-century heresy we were the unrepentant heirs and last upholders. We were among the last of the Utopians, or meliorists as they are sometimes called, who belIeve in a continuing moral progress by virtue of which the human race already consists of reliable, rational, decent people, influenced by truth and objective standards, who can be safely released from the outward restraints of convention and traditional standards and inflexible rules of conduct, and left, from now onwards, to their own sensible devices, pure motives and reliable intuitions of the good. The view that human nature is reasonable had in 1903 quite a long history behind it. It underlay the ethics of self-interest – rational self-interest as it was called – just as much as the universal ethics of Kant or Bentham which aimed at the general good; and it was because self-interest was rational that the egoistic and altruistic systems were supposed to work out in practice to the same conclusions.
In short, we repudiated all versions of the doctrine of original sin, of there being insane and irrational springs of wickedness in most men. We were not aware that civilisation was a thin and precarious crust erected by the personaly and the will of a very few, and only maintained by rules and conventions skilfully put across and guilefully preserved. We had no respect for traditional wisdom or the restraints of custom. We lacked reverence, as Lawrence observed and as Ludwig with justice also used to say – for everything and everyone. It did not occur to us to respect the extraordinary accomplishment of our predecessors in the ordering of life (as it now seems to me to have been) or the elaborate framework which they had devised to protect this order… As cause and consequence of our general state of mind we completely misunderstood human nature, including our own…
It seems to me that Moore’s chapter on ‘The Ideal’ left out altogether some whole categories of valuable emotion. The attribution of rationality to human nature, instead of enriching it, now seems to me to have impoverished it. It ignored certain powerful and valuable springs of feeling. Some of the spontaneous, irrational outbursts of human nature can have a sort of value from which our schematism was cut off. Even some of the feelings associated with wickedness can have value. And in addition to the values arising out of spontaneous, volcanic and even wicked impulses, there are many objects of valuable contemplation and communion beyond those we knew of – those concerned with the order and pattern of life amongst communities and the emotions which they can inspire…
And as the years wore on towards 1914the thinness and superficiality, as we as the falsity, of our view of man's heart became, as it now seems to me, more obvious; and there was, too, some falling away from the purity of the original doctrine… I fancy we used in old days to get round the rich variety of experience by expanding illegitimately the field of aesthetic appreciation… classifying as aesthetic experience what is really human experience and somehow sterilising it by this mis-classification.
If, therefore, I altogether ignore our merits – our charm, our intelligence, our unworldliness, our affection I can see us as water-spiders gracefully skimming, as light and reasonable as air, the surface of the stream without any contact at all with the eddies and currents underneath. And if Iimagine us as coming under the observation of Lawrence's ignorant, jealous, irritable, hostile eyes, what a combination of qualities we offered to arouse his passionate distaste; this thin rationalism skipping on the crust of the lava, ignoring both the reality and the value of the vulgar passions, joined to libertinism and comprehensive irreverence, too clever by half for such an earthy character as Bunny, seducing with its intellectual chic such a portent as Ottoline, a regular skin-poison. All this was very unfair to poor, silly, well-meaning us. But that is why I say that there may have been just a grain of truth when Lawrence said in 1914 that we were 'done for'.
