Tag: Hans Ritschl

Forces and Forms

Yesterday’s post was about the two forces which influence how we use our time and resources. Sometimes what we do is heavily weighted by social implications, such as activities within a household or religious community. Sometimes what we do is almost entirely transactional like filling up a tank of gas– no thought is given to the vendor as price and convenience is the primary focus. These impulses or desires to satisfy the self or the group are always in play to various degrees.

What’s interesting is that groups of shared interest also act under the forces of the self or the community. Remember during the onset of the pandemic when everyone was trying to get their hands on the N95 masks? The weakness in the notion of an ubiquitous public became apparent when states started bidding against each other for imported masks, driving up prices. Each state formed a private bidding entity before the outcry of the on-line audience demanded the form change from individual states to the entire US. That the delineation of who was treated like community within the bounds, and who was treated like a private entity on the outside, shift from the state boundaries to country boundaries.

For decades the best known book written about cooperative behavior in groups was The Logic of Collective Action, Public Goods and the Theory of Groups by Mancur Olson. Buried deep in the book the author quotes quite a long section by Hans Ritschl, a German economist. This section best explains the two forces:

In the free market economy the economic self-interest of the individual reigns supreme and the almost sole factor governing relations is the profit motive, in which the classical theory of the free market economy was appropriately and securely anchored. This is not changed by the fact that more economic units, such as those of associations, cooperatives or charities, may have inner structures where we find motivations other than self-interest. Internally, love or sacrifice, solidarity or generosity may be determining: but irrespective of their inner structures and the motives embodied therein, the market relations of economic units with each other are always governed by self-interest.

In the exchange society, then, self-interest alone regulates the relations of the members; by contrast, the state economy is characterized by communal spirit within the community. Egotism is replaced by the spirit of sacrifice, loyalty and communal spirit… This understanding of the fundamental power of the communal spirit leads to a meaningful explanation of coercion in the state economy. Coercion is a means of assuring the full effectiveness of the communal spirit, which is not equally developed in all members of the community.

The objective collective needs tend to prevail. Even the party stalwart who moves into responsible government office undergoes factual compulsion and spiritual change which makes a statesman out of a party leader… There is not a single German statesman of the last twelve years… who escaped compliance with this law.

It’s curious that Mancur Olson takes the time to promote the ideas of a man whose work is not available in English on Amazon today. But in the following paragraph, Olson makes one thing perfectly clear:

Ritschl’s argument is exactly the opposite of the approach in this book. He assumes a curious dichotomy in the human psyche such that self-interest rules supreme in all transactions among individuals, whereas self-sacrifice knows no bounds in the individual’s relation ship to the state and to the many types of private associations. The organizations supported by this self-sacrifice are nonetheless selfish in all dealings with other organizations.

page 101 of the 1971 printing

Whereas I think the mask example bares evidence of the selfish behavior of the states. There’s the chronic complaint that the FBI won’t go the dance with local law enforcement. The CDC has been critized recently of having maintained too tight a reign on COVID research at the expense of the goal to protect lives from the virus.

The duality I speak of in this blog is about form. An individual or a group can behave as an economic unit both in a communitarian way from within and a private enterprise when competing with other groups on the exterior.

Combining forces

I got the title wrong on the post from yesterday. Dawkins describes how it is possible to obey to biological urges towards selfishness while simultaneously using the faculty of reason to weigh the benefits of cooperation. He observes that our human ability to conceptualize how better outcomes occur through advancing the group interest plays us against short term selfishness. It is long-term selfish.

What Richard Dawkins describes isn’t the duality I refer to, but the human characteristics which set the stage for duality. Despite the ever present desire to declare: ‘it’s mine!’ our conscience, our capability to withdraw and look back on ourselves, our recording of history leads us to understand the benefits of responding to altruistic inclinations.

This supports the idea that economic actions can be motivated by dual forces captured in one transaction.

Consider the factors which motivate a choice of professions, of career paths, a considerable monetary decision over a lifetime. If one chooses an employer closer to home for lesser pay, than there is a blending of the benefits brought to bare on the family over income. Or, say, one decides to be an overseas war correspondent due to a strong belief in the necessity for transparency. Society yes, family no. If one considers where people volunteer their time, the choice is between forgoing monetary income in support of a group benefit: firefighter, rotary member, church relief services.

Everyday resource commitments are made in a blended fashion between monetary flows and altruistic featherings.

The duality I speak of in this blog is of a transformative nature. It’s described by Hans Ritschl, a German economist from the early part of the 20th century. More on his insights tomorrow.