Race, Liberalism, and Economics

"Not an Average Human Being": How Economics Succumbed to Racial Accounts of Economic Man

"Not an Average Human Being" How Economics Succumbed to Racial Accounts of Economic Man Sandra]. Peart and David M. Levy Our earlier contribution to this volume showed how racial theorizing was used to attack the antislavery coalition of evangelicals and economists in mid-nineteenth-century Britain. Classical economists favored race-neutral accounts of human nature, and they presumed that agents are equally competent to make economic decisions. Their opponents, such as Carlyle and Ruskin, presupposed racial hierarchy and argued that some people are incapable of making sensible economic or political decisions. They concluded that systematically poor optimizers will be victimized in either market or political transactions. In this chapter, we shall show how the attacks on the doctrine of human homogeneity succeeded-how, late in the century, economists came to embrace accounts of racial heterogeneity entailing different capacities for optimization.I We attribute the demise of the classical tradition largely to the ill-understood influence of anthropologists and eugenicists2 and to a popular culture that served to disseminate racial theories visually and in print. Specifically, W. R. Greg, James Hunt, and Francis Galton all attacked the analytical postulate of homogeneity that characterized classical economics from Adam Smith3 through John Stuart MilL Greg cofounded the eugenics movement with Galton, and he persistently attacked classical political economy for its assumption that the Irishman is an "average human being," rather than an "idiomatic" and an "idiosyn123 124 RACE. LIBERALISM. AND ECONOMICS cratic" man, prone to "idleness," "ignorance," "jollity," and "drink" (quoted in full later in this chapter). By 1870, two theories of race coexisted in the scientific community and the popular press. The more devastating view of the owner of the Anthro, pological Review, James Hunt, held that there were races whose physical development arrested prematurely, dead races incapable of elevation. The second theory, which we call parametric racism, held that the inferior race differed from the superior (Anglo-Saxons) along some parameter(s). As both sorts ofracial theories entered into economics in the decades that followed , the focus moved from physical differences stressed by the anthropologists -the shape or size of the skull-to differences in economic competence . Economists argued, for instance, about whether the Irish or blacks in America were competent enough to make choices concerning labor supply or to save for their old age. We shall demonstrate how pervasively these racial accounts entered into economic thinking well into the twentieth century, in economists' characterization of choice offamily size, intertemporal decision making, and consumption of "luxuries" and intoxicants . The influence ofeugenicists on economics extended to policy. As economists came to accept racial accounts of economic behavior, they allowed that some among us are "unfit," parasites who live off of the rest of society. They endorsed an elaborate "remaking" program for inferior decision makers , and for many economists, the remaking was also to be biological. A major theme in this chapter shall be how such policies were designed to reduce the level of what they called "parasitism" in society. While eugenics is now commonly understood to have been influential, but mistaken, policy, the tension between economists who presume that agents are equally able to optimize and those who wish to improve the economic competence of various groups has never been fully resolved. Racial accounts won the day well into the twentieth century, but near the middle of the century, the classical tradition of homogeneity was revived at Chicago. Not surprisingly, given the racial characterization focused on intertemporal decision making, time preference was central in the Chicago revival. In his 1931 review of Irving Fisher's Theory of Interest, Frank Knight voiced his skepticism about the common link supposed in economists' accounts between time preference and race. Knight and, after him, George Stigler and Gary Becker questioned myopic accounts of intertemporal decision making. As the Chicago school revived the classi- "Not an Average Human Being" 125 cal doctrine of homogeneity, it also (and by no coincidence) revived the presumption of competence even in political activity. Eugenics Attacks Abstract Economic Man The eugenics influence on economics has three signatures. First, the race becomes the unit of analysis. Second, ethical concerns of the sort that underscore Adam Smith's development of the sympathetic principle vanished . Materiality is all. The third signature of eugenics is the argument that the inferior race is a race without variation, unimprovable by eugenic methods of breeding from the top of the distribution of characteristics. This is Hunt's...