Part 2 of 4 in series "'Good Markets' book interviews"

Economist Lans Bovenberg recognizes the passion for his field that (historical) economist Luigino Bruni displays in his book The Wound and the Blessing; Economics, Relationships and Happiness (2012) – and shares his vision that the market is an important social infrastructure for human co-operation. A book interview.

The Wound and the Blessing seems to be a strange title for a book about economics and market transactions. Why has Bruni chosen this title?

“For many people outside economics, like many sociologists and philosophers, the assumption is simply that the market is bad. But let us first and foremost also count the blessings it brings. For Bruni – and also for me – the market is a beautiful social mechanism that we need to cherish. It has enormous added value for our society, for which we should be grateful. That added value, the beauty of the market, is something that Bruni describes very well. One of its benefits is that it lets many different flowers blossom.

However, he also sees that the market needs support from other institutions. And that the market alone is not enough to let people lead flourishing lives. He furthermore realizes that sometimes things go wrong in the market, as the recent economic crisis has made painfully clear. The market is a human effort, made up of many human relationships. And that means it is inevitable that occasionally we hurt, injure, each other in that market.”

What kind of economist is Bruni? And how was this book received by colleagues?

“He has a very broad intellectual scope, knows a lot about history and philosophy, which allows him to take a wider perspective on the discipline than most economists. But he is first and foremost an economist, one who has worked with companies and who has gotten his hands dirty doing empirical work. That is why I so much appreciate his work. I don’t like people who think they can criticize economics from the outside. Despite his broad outlook Bruni is in the end a mainstream economist, just like me. In his work I can taste a love for our profession that I recognize.

The book builds on recent developments in the field of economics. In the last 20 to 25 years a change has taken place in the conceptualization of mankind in economics, which originally depicted people as fully rational and selfish. Furthermore economists are increasingly interested in all human behavior, so also in relationships which were traditionally regarded as being outside its scope, such as the parent-child relationship, love relationships. In order to do good research on these new topics, economists have gradually imported more and more insights and methods from other fields. Economists have, for example, started to investigate happiness together with psychologists.

The Wound and the Blessing starts from the work of respected fellow economists who have looked beyond the boundaries of their discipline, but do not stop there. Bruni does justice to what economics has achieved, but also identifies where we need to look further.”


“That you are willing to hand out gifts in your private life, while in the market you will only give something away if you get something of equal value in return. According to Bruni that is an incorrect interpretation of Adam Smith.”


Bruni is apparently connected with a movement that promotes an ‘economy of communion‘, he also edited a book about this topic. It concerns, so I understand, social companies set up and managed by local communities. Is that the direction economics should be taking?

That movement is indeed partly inspired by his ideas. I’m more of a mainstream economist and I do not consider this model to be a solution for our entire economy. So it does not play a role in my own work. I mainly consider this ‘economy of communion’ to be an experimental space. Bruni also believes in diversity, and realizes that self-interest is unavoidably part of economic life. In the end he wants to reform the center of our economy and not only create niche solutions. If you really understand how the market works, the ‘economy of communion’ is already there and does not just consist of this type of business.

In The Wound and the Blessing “gratuitousness” is an important concept. What does he mean by that and how does that fit in with the economic discourse?

“It refers to a gift to others, something for which you do not necessarily expect something back, as opposed to reciprocity, “quid quo pro.” You may think there is no place for gifts in a market economy. The essence of his book is, however, that there are no purely selfish motivations in any sector, not even in the market.

That is also his criticism of Adam Smith, one of the founders of modern economic science. Smith tried to make a distinction between things that belongs to the private domain, such as family life, and things that belong to the market domain. That is why people nowadays think that participating in the market means that you only consider your own interests. That you are willing to hand out gifts in your private life, while in the market you will only give something away if you get something of equal value in return. According to Bruni that is an incorrect interpretation of Adam Smith.

Of course one has to understand other people to be economically successful. An entrepreneur that does not understand what his customers want, will not succeed. But it goes deeper than that. The economy is much more than just earning money. Driving forces to work are also meeting people, friendly contact, contributing to society, meaningfulness, respect.”


“What annoys me is that all of a sudden everybody seems to know how the crisis could have been prevented. Yes, it is a big and painful wound, but that is part of life.”


It seems clear that people have such motives, but should they be of concern to economists?

“Yes, I think so. Do you know the experiment known as the “ultimatum game“? A subject may distribute 100 Euros between himself and another subject. That other subject may decide to accept or reject the offer – but in the latter case both subjects will not get anything. Traditional economic theory predicts that any offer is accepted, even if the second person only receives one euro, or even just a cent. That would be economically rational, it is better to get something than nothing at all. But that is not what happens. By far most subjects reject the offer if the distribution deviates too much from an equal distribution. Respect is extremely important for people, so this experiment shows.

We are now sitting in a Starbucks for this interview. Here “gifts” are also continuously given and received between customers and employees. If you look at it from the outside and take all motivations and benefits into account, there may be some reciprocity in the end. But as a person, from inside, you do not continuously consider whether or not every smile is rewarded. That is also the problem of the ‘stopwatch mentality’ which is nowadays so dominant in our health care system, where employees have to account for every minute that they spend. The gift of freedom is lacking in the exchange between care organization and healthcare workers.

Economics is about what we value, what we find valuable and important. So it should also be concerned with these things.”

But is some degree of control not needed? Look at what has happened in the banking sector; the huge wounds that can result if we let people do whatever they fancy in that market place.

“It is a complicated question how we could do things different, better, in the banking sector. What annoys me is that all of a sudden everybody seems to know how the crisis could have been prevented. Yes, it is a big and painful wound, but that is part of life. Unfortunately we do not understand the world completely. And it is not possible to prevent all bad things from happening by regulation. We cannot completely shape the world as we want it to be.

There is a reason why it is being said that if you want to bring heaven on earth, you will instead create hell. To a certain extent we must accept wounds; otherwise we will lose the blessings of a life that originates from trust. We are inclined to think that we can prevent all suffering. As a result, we lose unnecessary freedom and trust. That is also the message of Bruni. Hence the book’s title: The wound and the Blessing.”

Does religion play a role here? Bruni is a Catholic and you also have a Christian background.

“It is a major cultural problem of our time that we can no longer handle mistakes, suffering. We have a hard time dealing with imbalances because we no longer see the big picture, no longer believe in it. That is why we live in a moralizing society.

Of course accepting wounds is extremely difficult. To be honest, by nature I am also someone with a huge inclination to get things under control, I prefer to think things through and master them.

Bruni seems to be more relaxed, he has faith that you can let things run their course. To some degree we have to do that, people need space to be able to flourish, with all the risks that this creates. Hope is giving space. Even though we know that sometimes things will go wrong.”

Within our research project you are working on a sub project that develops new teaching materials for economics education. What impact will The Wound and the Blessing have on that work?

“Bruni’s book fits well with the starting point of our research project. We share a positive attitude towards the market, the vision that it is an important social infrastructure for human co-operation. Like Bruni I am convinced that in economics there is a role for all human motivations: self-interest, reciprocity, unconditional gift. In my new teaching materials I would like to pay particular attention to this. There is more than just the ‘homo economicus.’

In the world of economics traditionally a strict distinction is made between two forms of interaction between people: transactions and relationships. Transactions are one-time and anonymous, based on selfishness and reciprocity. And relationships are long-lasting, a matter of exchanging ‘gifts’ without keeping a balance. The reflection on the tenability of that distinction may become an important building block in my teaching materials.”

 


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Series "'Good Markets' book interviews":

Which books – classics or recently published – should you read to acquire a deep understanding of markets and morality? In this series of interviews researchers from the project ‘What Good Markets are Good for’ make their personal recommendation.


Articles in this series:
  1. The Market Requires Social Structures, Not Radical Individualism
  2. Inevitable that We Occasionally Hurt Each Other in the Market
  3. The Psychological Mechanisms behind the Workings of the Invisible Hand
  4. Why GDP Gradually Became Dominant in Economics

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