Chapter 10. Some Normative Reflections

Table of Contents

Economics as a Secular Religion
The Need for Intellectual Humility
Final Thoughts

Man’s fate will forever elude the attempts of his intellect to understand it…The quest for the laws which will explain the riddle of human behaviour leads us not towards the truth but towards the illusion of certainty, which is our curse.

— Grant Gilmore[1]

The love of money is the root of all evils…Warn those who are rich in the world’s goods that they are not to look down on other people; and not to set their hopes on money…Tell them they are to do good, and to be rich in good works, to be generous and willing to share—this is the way they can save up a good capital sum for the future if they want to make sure of the only life that is real.

— St Paul[2]


This book has—like Gilmore above—been highly critical of the ‘abstract impersonal values, the universal solutions and the logical imperatives’ being relied on by contemporary governments and international economic organisations to formulate economic policy.[3] Human knowledge narratives—including economic theories—like human laws, should not be seen as mystical absolutes but as tentative and imperfect social constructs, open to challenge and change. In particular, economic and social theories and laws—like the classical law of contract—cannot be understood independently of their social and historical contexts, and of the traditions of thought of which they form part.[4] Therefore, the rise and the subsequent fall of the doctrine of freedom of contract—recounted in the previous chapter—has much to do with the rise and the subsequent disintegration of the nineteenth-century concept of explanation in the natural and social disciplines. That doctrine and the associated forms of explanation lie at the heart of economic fundamentalism.

Nineteenth and twentieth-century social theory—in the tradition of Descartes, Hobbes and Locke—sought to find general laws of society modelled on the natural sciences, just as Spencer, Marx and numerous others sought to find general laws of history and social progress. Classical contract law in its fully mature state—as exemplified in Langdell’s casebook of contract law towards the end of the nineteenth century—was an abstraction from which all the particularities of person and subject had been removed.[5] Indeed, for theorists such as Langdell (1826–1906), law was a science and his casebook was an attempt to select and classify all the important contract cases ever decided, and to determine what he thought to be the small number of logically consistent and self-contained principles and doctrines that lay beneath those cases. For classical contract law, there was only one true, universal and unchanging rule of law—what Gilmore[6] calls a ‘mystical absolute’ or a ‘logician’s dream of heaven’. This view of contract law had a close intellectual and historical relationship with laissez-faire economics and with the free market of classical and neoclassical economic theory.

This ‘positive’ tendency of the social disciplines and of law had its origins in the Enlightenment project, enjoyed a renaissance in the 1920s and 1930s and persists in economics to this day. Elsewhere, as such authorities as Horwitz, Toulmin, Rorty and Lyotard tell us, belief in the possibility of general laws capable of making explanatory or predictive statements in the social disciplines has plummeted: ‘The result has been a dramatic turn towards highly specific “thick description” in which narrative and stories purport to substitute for traditional general theories.’[7]

We should therefore be wary of the seductions of grand theories, sacred rules and idealisations that have a problematic connection to the ‘reality’ they purport to describe.

In Chapters 5, 6 and 7, the privileged epistemological status of scientific reasoning was seriously challenged along with the separation between fact and value as the basis of value-free social disciplines. This challenge has been associated with a growing understanding of the contingency of the categories and frames of reference employed in the social disciplines, along with a growing awareness that knowledge is itself constructed socially. There has also been a growing understanding of the world as complex, multi-factored and interdependent. This, in turn, has led to a loss of faith in the single-factor chains of causation that were embedded in most nineteenth-century explanatory theories.[8]

This critique also points to the collapse of the philosophical dualisms that have characterised all forms of theoretical debate since the Enlightenment. The representative schemes of our language cannot sustain these efforts to formulate categories that are mutually exclusive and final. This insight led, for example, to Dewey’s refusal to accept a deep chasm between ‘principled’ and ‘results-oriented’ ethics and jurisprudence, and to neo-pragmatism’s rejection of the choice between deontological and utilitarian moral theory.[9] These developments have tended to undermine the hope of finding rational ethical foundations for our social, political and economic arrangements and, with it, the special right of philosophers and other theorists to preach about those arrangements. For Dewey, James and Peirce, truth ‘was not to be found in the abstract logic of ideas, but in their practical consequences. There were no absolute or a priori truths, only workable and unworkable hypotheses.’[10] The very idea that human reason could discover immutable metaphysical principles that could explain the true nature of reality was an illusion. This, of course, undermines faith in all forms of dogmatism—and dogmatic explanatory schemes—including absolute property rights, absolute human rights, absolute markets and absolute rules more generally.

Among American legal theorists of the progressive and realist schools, the challenge to nineteenth-century legal orthodoxy—with its scientific pretensions rooted in natural rights, individualism and absolute property rights—involved a fundamental re-examination of the idea of a rule of law independent of politics and the idea of a ‘self-regulating, competitive market economy presided over by a neutral, impartial, and decentralised “night-watchman” state…Classical legal thought and contract law was neither neutral, nor necessary, but was instead a historically contingent and socially created system of thought.’[11]

This attack questioned the dichotomy between the State and the market, between ends and means, between procedure and substance and between public and private law. The last dichotomy was a central feature of classical contract thought, with its will theory of contract. Over time, it came to be recognised that the institution of contract was itself subordinate to social and political goals. The market, property rights and the law more generally were social creations—products of social and political struggle. Importantly, there was no privileged category of economic relations that could be regarded as voluntary.[12] Rather, property was a delegation of coercive state power to individuals, while the market was an organised form of coercion of the weak by the strong. The Lockean idea of natural property rights helped to disguise the coercive nature of these institutions. Since there was no such thing as a completely voluntary market, there could be no completely normatively neutral market because rules were needed to regulate that coercion. Of particular relevance to this book are the rules that regulate the coercive enforcement of contracts by the State.

These developments in American legal thought—influenced by American pragmatism—and the claim that truth was not to be found in the abstract logic of ideas, but in their practical consequences, also called into question the claim that legal reasoning could imitate geometrical forms of argument. Such deductive reasoning suppressed the moral or political choices that were inevitable between possible inferences in long chains of reasoning. Likewise, deductive reasoning—by assuming contradictory postulates—could produce radically different ethical systems. In any event, such forms of reasoning have themselves come under sustained attack. Mathematicians and geometers had come to understand that geometries were formal logical systems based on arbitrary assumptions whose only essential attributes were self-consistency, with no necessary connection to reality. Similarly, it was possible to invent different logics such as the different non-Euclidean geometries. Consequently, there are no universal laws of logic attributable to the universe or to human reason; they are merely human conventions, valued only for their usefulness. Similarly, mathematics was simply a humanly devised tool with no connection to any metaphysical or theological absolutes. All logical and mathematical reasoning is purely tautological—the elaboration of implications contained in the definition used, according to problematic, socially created, formal systems of thought. This critique of logic and mathematics undercuts all pretensions to a priori and absolute knowledge. There was no such thing as abstract reason and impartial legal or any other theory. Moral beliefs and social preferences were prior to reason, and we needed to be conscious of the philosophical assumptions underlying our actions.

Within the American legal profession, objective contract theory—and legal theory more generally—has been recognised as ‘Euclidean’, proceeding deductively from what are claimed to be ‘self-evident truths’ about the judicial process. Many of the a priori assumptions of traditional legal theory are, however, themselves subject to significant attack. For Jerome Frank, the legal profession manipulated abstract concepts to construct a façade of certainty and absolute rationality over a confused legal process.[13] Such positivist legal theory—and positivist social science—suppresses political and moral discourse by appropriating the prestige associated with the natural sciences and conferring a privileged position on the status quo and on the professional expert—be it a judge or social scientist—with a capacity for judgement based on claimed technical expertise, neutrality and impartiality. It is also reflected in the increasing professionalisation and credentialism of political, social and academic discourse and the need for such professionals to justify their prestige and influence. Such ‘scholasticisms’ were merely escapes and delusions. In practice, judges shared and implemented their personal standards, the moral standards of the legal profession or the moral standards of those members of society they admired, with the reasons given for judgements being rationalisations that manipulated the language of precedents to produce the desired result. All of this should sound familiar to critics of economic fundamentalism.

The rejection of the possibility of demonstrating the truth of ethical propositions has left such moral ideas without a convincing theoretical basis. This does not in itself undermine the fundamental significance of such ideas for the stability of society. Paradoxically, the declining faith in the expertise, neutrality and impartiality of experts has led—in the United States in particular—to a reinvigorated emphasis on proceduralism within political theorising and the law. It is, however, a proceduralism that, imitating the alleged neutrality of the market, is biased in favour of the existing distribution of wealth, power and privilege, and which refuses to look at substantial outcomes of legal and market processes. Indeed, the market system is proceduralism writ large. In the case of the equitable doctrine of unconscionability within Australia, it has been seen that, while there has been a steady increase in concern about procedural unconscionability, there has been a considerable reluctance to extend the doctrine formally to cover substantive issues.

More broadly, with such theories as Rawls’ ‘Theory of Justice’ and Habermas’s ideal speech conditions, there has been a major theoretical effort to revive social-contract theory and procedural accounts of justice. These reflect a desire to accommodate the positivist claim that values were incapable of objective determination—a claim that assumed a privileged epistemological status for scientific knowledge. Hart and Sacks therefore make the claim that:

These institutionalised procedures and [the] constitutive arrangements establishing them are obviously more fundamental than the substantive arrangements in the structure of society…The principle of institutional settlement expresses the judgment that decisions which are duly arrived at as [a] result of duly established procedures of this kind ought to be accepted as binding upon the whole of society unless and until they are duly changed.[14]

We see a similar attempt in the use of economic concepts to model politics. Consensus theorists attempted to achieve the same accommodation with the positivists by trying to locate social and political norms in widely shared customs and conventions. The extent to which there are such widely shared norms—or even underlying shared norms—remains, however, problematic. It could simply be that values conflicting with the interests of the economic and political elites are suppressed. Others have sought to return to a natural-law tradition or to some form of Aristotelianism. The attempt to find a rational, ethical foundation for our social, political and legal systems remains hotly contested. As our discussion in Chapter 7 indicates, it is ever likely to remain so. This general lack of agreement has, however, the effect of undermining the credibility of our moral and philosophical theorists and of this form of theorising.

Joseph Hutchison sees dangers in four intellectual ‘cults’, which infect such attempts at theorising: a cult of scepticism holding that all beliefs, with the possible exception of scientific discoveries, are simply matters of opinion; a cult maintaining that only the present is meaningful; a scientism that assumes that empirical knowledge is the answer to all human problems; and, finally, an anti-intellectualism that downgrades the intellect and raises the human will to a position of primacy.[15] Consistent with the account given by Rorty and Toulmin, the first three cults flow directly from the Enlightenment project. The radical scepticism of the Enlightenment has, however, undermined its own project: there is nothing of which we can be absolutely certain, and there is no way of avoiding belief as the ground of our moral values or anything else. As for the fourth cult, this seems to be a well-justified reaction to the arrogance and dogmatism of past intellectual optimism and pretension.

The total social environment could be too complex—and the human mind too limited—for us to understand fully the scope and operation of our social activities, a view with echoes in Hayek,[16] Habermas[17] and Arthur.[18] Abstract ethical theories are simply a historical, cultural phenomenon, the progressive invention of humans striving to deal with the uncertainties of day-to-day life, the mystery of human existence and to give themselves some purpose. They can do so only from within a paradigm—or, as MacIntyre would prefer, from within a tradition.[19] As such, they are only a limited part of a much broader human conversation.