Groups versus Individuals in Hume’s Political Economy (Abstract)

David Hume fits easily within the broader tradition of liberalism, running from Locke to Mill. In short, individuals have by nature certain rights that governments ought not to transgress. It would be easy, then, to assume that Hume relegates the individual to a high status in his political economy, and thus fits also into the tradition of methodological individualism that came to flourish in neoclassical economics whereby the central phenomena are precisely the product of individual preferences for goods, time or risk.

Such an assumption, however, would be a considerable distortion of Hume’s political economy, as read in his Political Discourses (1752). He is indeed interested in the question of personal identity, and arguably more than any of his predecessors, renders it into a deep philosophical problem. He also writes on national character, and the overarching project of the cultivation of virtue by a given individual. Nevertheless, when it comes to political economy, the unit of analysis for Hume is not the individual but the group. Hume assigned behavioral traits to merchants, landowners, peasants, jobbers, politicians and so forth qua groups (merchants are heroic, landowners are indolent, politicians are knaves). But within each group there were no differences to attend to. It is the action of the group as a whole that serves as the proximate cause for the movement of money, the interest rate or the flow of capital stock. This in turn fits with Hume’s diminution of free will in the formation of individual character and by his resistance to promote the role of kings as historical agents. We are much more governed by our social setting than by specific individual traits.

Groups versus Individuals in Hume’s Political Economy

“So great is the force of laws, and of particular forms of government, and so little dependence have they on the humours and tempers of men, that consequences almost as general and certain may sometimes be deduced from them, as any which the mathematical sciences afford us.” (Hume 1742 (1985), “That Politics may be Reduced to a Science”)

David Hume fits easily within the tradition of British liberalism that runs from Locke, if not Hobbes, up to Mill. While it is hard to provide a short definition of this set of ideas, it is fair to say that two resilient elements are the emphasis on individual liberty and the diminution of the state. For Locke and for Mill there exist certain individual rights that the government ought not to transgress, or to do so only if expedient under the law. Because Hume was also a spokesman for liberty (though less for rights) it would be easy to assume too that the individual is the central analytical category in his political economy, and that he thereby fits into the tradition of methodological individualism that has come to be so central to mainstream economic theory of the modern era. This assumption, however, would be misplaced. While there are individuals for Hume (he is no Durkheimian), they do not serve a pronounced role in his economic analysis and thinking. Rather, it is as members of a group, such as merchants or weavers, that economic relationships unfold and evolve. Useful here is John Davis’s category of a socially-embedded individual. In short, groups, not individuals, are the main analytical category in Hume’s political economy.

David Gauthier (1979) has argued that Hume was an implicit contractarian, but few I think it is fair to say, have been persuaded. Included in this group of skeptics is Christopher Berry (2003), who underscores Hume’s rejection of state-of-nature doctrines. Hume not only mocks the very existence of such contracts but maintains that political rule is born in violence not consent (see Hume 1985, “Of the Original Contract”). However, Hume is also no Hobbesian, precisely because the passions between the sexes generates kinship and friendship that induce civility. We have a strong “propensity to company and society” which “makes us enter deeply into each other’s sentiments, and causes like passions and inclinations to run, as it were, by contagion, through the whole club or knot of companions” (Hume 1985, 202). Humankind is more like a mob than a collection of autonomous individuals.[i]

Hume also moved away from Locke by insisting that so little of what we do is governed by reason. Our sociability derives more from instinct and appetite. Like Hume’s successor, James Dunbar, “humans are sociable long before they are rational” (see Berry 2003, 243). Moreover, when it comes to rationality, man is much more like an ape than an angel. "Man falls much more short of perfect wisdom, . . . than animals do of man" (Hume 1985, 83). Indeed, Hume was one of the first to suggest that humans and animals think alike, that we both form our beliefs through repeated trials or a process of experimental reasoning. Even our basic belief in causation is formed by custom, which in turn is but a "species of instinct." The very linchpins of habit and custom that enable us to form inductive knowledge of the world (and for Hume there is no other) are part and parcel of our lives as linguistic and social beings. As Hume observes numerous times, the regularity and uniformity of daily experiences that stem from social practices provide the raw material that in turn guide us toward the formation of trustworthy beliefs.

We are by nature conservative creatures, prone to tradition and the replication of custom. As Hume reminds us, we are not like silkworms, eradicating ourselves entirely with each generation. Rather, the sequential process by which we breed means that each “new brood should conform themselves to the established constitution, and nearly follow the path which their fathers, treading in the footsteps of theirs, had marked out to them” (Hume 1985, 476-7). As a result, Hume diminishes the importance of individual actors on the historical stage. Great men–Hume cites Henry VIII and Charles I– make no “violent innovations” (ibid). Where it appears that one man brought about a revolution, closer inquiry reveals concomitant shifts in the institutions. And these are always gradual. Again and again Hume reminds us of our insignificance and impotency for genuine change, whether vis-à-vis other animals, or in the context of the stars above.[ii] He also, in a number of places, suggests that there are cyclical patterns to the long durée of history. For example, we are prone to repeat the same mistakes: “Mankind are, in all ages, caught by the same baits: The same tricks, played over and over again, still trepan them” (Hume 1985, 363).

Hume’s emphasis on deeper historical forces makes all the more sense in the context of the four-stages theory that was so prevalent among Scottish moral philosophers. The material conditions of hunting or farming are strongly determinant of cultural habits. Chris Berry argues that the appeal to the power of institutions in explaining human society is even more pronounced in John Millar and Adam Ferguson, two of Hume’s contemporaries. Edward Hundert has made much the same point for Bernard Mandeville. Humans may as individuals deliberate and act on the basis of their calculations, but they are repeatedly trumped by social forces and practices. Andy Denis has argued that Adam Smith “systematically denies the autonomy of the individual with respect to the whole of which he or she is part. For Smith, individual liberty is not the end, but the means, of sustaining social order and property” (Denis 1999, 71). While it would take considerably more effort and space to adumbrate the important similarities and differences between these thinkers on the status of the individual, the main point to note here is that Hume’s “institutionalism” in its broader sense was not unique for the time.

As Maurice Dobb recognized several decades ago, the classical economists took classes, not individuals, as their unit of analysis (Dobb 1973, Ch. 7). It would be somewhat anachronistic to ascribe economic classes to Hume, but there were certainly distinct categories of people. In one place, in reaction to Jean-François Melon’s social divisions, Hume divides the world into just two basic groups: husbandmen and manufacturers. But for most of his economic essays, Hume offers an array of groupings, peasants, landowners, artisans, statesmen, merchants, etc. The main point here is that within these groups there is little to distinguish one person from another. The similarities, whether it be the laziness of the peasants, the frugality of the merchants, or the prodigality of the landowners, much outweigh individual differences. And it is the salient trait of frugality or prodigality that plays a direct role in governing the interest rate.[iii] In short, the causation runs from the behavioral property of the group as cause to the central phenomenon of economic well-being as effect. Note too that Hume sought to disassociate the interest rate from the supply of money, and thus downplay the sense in which it is merely a price and thus subject to the fleeting whims of supply and demand. He was one of the first to link the interest rate to the profit rate, and to emphasize that the latter was very much about the behavior of merchants and the overall level of commercial development.

Another example where groups are the unit for economic analysis is Hume’s celebrated account of the real growth effects of an unanticipated injection of money (Hume 1985, “Of Money”). Merchants bring in specie from Cadiz and employ more workmen, at the same time becoming better paymasters. The weavers they employ, now confident of no longer begging for credit from their shopkeepers, and possibly better remunerated, purchase more food and drink. The farmer and gardener, stimulated by this increased demand, increase their production. The money, as it courses through this scene, thus quickens the diligence of every individual, without, as Hume emphasizes, any change in intention or expectation. The weavers, for example, “never dream of demanding higher wages.” Hume’s account is almost at a physiological level; the behavioral changes are augmentations of existing traits, and they are prompted solely by the availability of more money, not by calculation or a rational response to any new conditions. Indeed, reason would argue against such changes, since the price level will eventually catch up and no one will be the richer. The growth effect happens under an act of deception, in that the money prompts people to work more intensively thinking they are richer. “In every kingdom, into which money begins to flow in greater abundance than formerly, everything takes a new face: labour and industry gain life; the merchant becomes more enterprising, the manufacturer more diligent and skilful, and even the farmer follows his plough with greater alacrity and attention” (Hume 1985, 286-7). Hume’s account is couched entirely at the level of groups, or representative individuals. I would hesitate to say there are emergent properties. But there is no sense in which any given member of that group acts differently than another and in that respect the causal path emanates from the group as a whole.[iv]

Margaret Schabas has argued that Hume treated money as akin to a natural force such as the subtle fluid of electricity (Schabas 2001). This gives it an autonomy that again transcends any individual or perhaps national effort at control. Money flows willy nilly from one commercial center to another, and if legal restrictions are imposed, illegal ones will spring into being to fulfill the greater pull of supply and demand. While Hume recognizes that money stems from barter and is replete with convention, it has acquired the same sort of standing as an “institutional fact” in the sense articulated by John Searle.[v] Certainly, Hume grasps that money operates at a level that overrides individual interventions, and possibly even those of nation states. It would be highly foreign to impose on Hume’s account of money anything like Keynes’s theory of the demand for money. Again it is not that Hume ignores jobbers, investors, or other kinds of speculators (he implicitly refers to arbitrage as gold crossed north over the Pyrenees), but rather that they act as groups, and the traits that matter in the causal accounts are at the group level. When domestic labor becomes too costly, manufacturers move on mass like a flock of birds, almost “flying” to other countries where wages are lower, till they “are again banished by the same causes” (Hume 1985, 283-4).

Hume was not anomalous for his time. Many eighteenth-century moral philosophers located the regularities of human action, at least among types of persons, in the group rather than in the individual. Bernard Mandeville served to show that “the individual’s point of view, while instinctive in naturally self-regarding creatures, in fact tends often to conceal the social significance of his actions” (Hundert 1994, 179). People are deceived into thinking they act only as individuals, when in fact they are entirely the products of their social milieu. As David Carrithers (1995, 235) has observed for thinkers such as Adam Ferguson, “individuals qua individuals, . . . are not the building blocks of society. Rather, families, clans, and socioeconomic groupings of various sorts deriving from the earliest division of labor began to take center stage as the focal point of the ‘sociological’ analysis emerging in the Enlightenment.” Smith’s Wealth of Nations is full of similar remarks that confirm this preoccupation with groups. “Masters are always and everywhere in a sort of tacit, but constant and uniform combination, not to raise the wages of labour above its natural rate” or “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices” (Smith 1976, I:84; 145).

With the advent of neoclassical economics, we find a pronounced shift toward a conception of the economy that stems from the deliberation of economic agents. As Jevons declared in 1871: "the theory presumes to investigate the condition of the mind, and bases upon this investigation the whole of Economics" (Jevons 1957, 14-15). Insofar as prices were construed as the direct product of a Benthamite calculus of pleasure and pain, and insofar as prices were conceived as the simultaneous clearing of production and distribution, the entire economy emanates from individual choice. As Philip Henry Wicksteed observed in an entry for the Palgrave’s Dictionary of Political Economy (1896), “the economist must from first to last realise that he is dealing with psychological phenomena, and must be guided throughout by psychological considerations” (Wicksteed 1933, 767). There was, to be sure, much human agency in the classical theory, but it did not stem from what we would now call rational choice. Human nature was infused with certain passions and propensities--to better our condition, or to truck, barter and trade, for example--but the rest unfolded with unwitting regularity against a backdrop of an orderly world. It is not by accident that Smith wrote on the history of astronomy, or compared the activities of the market to gravitational attraction.

In neoclassical economics, by contrast, economic laws emerge precisely because of the distinct calculations of different minds, different preference sets for goods and services, and different attitudes to risk and to time. Given the number of variables and range of preferences, no two persons are the same, and hence groups of individuals rarely figure in theoretical analysis. It is the very diversity of persons, particularly our mental stock of beliefs, desires and intentions, that justifies the existence of economic activities.[vi] Indeed, we are so unique that no two of us use the same means to define or measure our utility. The inscrutability of each mind precludes interpersonal comparisons of utility.

So deeply entrenched is our commitment to individuals as the unit of analysis in economics that it is hard to accept that this played a much lesser role in the early modern period. And certainly there are efforts to probe into the mind of a single person, as Smith does with his image of the impartial spectator. But again, that spectator makes us more than one; it joins us to a group, a collective mind of moral beings.[vii] Other prominent Enlightenment philosophers–-think of Rousseau’s general will or Kant’s categorical imperative–-shared this propensity toward the collective rather than the individual.

One of the ways in which individuals do not figure prominently, if at all, in Hume’s economic theory, is that there is virtually no deliberation. As Annette Baier has discerned, it would be foreign to impose marginal utility analysis on Hume (Baier 1991, 204-5). People are not calculating, nor even weighing costs and benefits. Their actions are much more governed by instinct and passion. There is room for the refinement of our sentiments and inclinations. Hume recognizes that over time we learn to become more virtuous, partly because virtue brings pleasure and partly because it brings esteem. The social virtues, such as promise-keeping or honesty also serve our own commercial interests insofar as they increase the stock of social trust. But we do so in a way that is determined by forces that much exceed our individual souls. If salient character traits evolve for Hume (chastity or gallantry for example), they do so over several generations if not centuries (see Baier 1991, 188).