Frank Knight's ethics & John Rawl's ignorance

John Rawls was greatly influenced by Frank Knight's 'Ethics of Competition' which was published in 1923. As I will show, this was because Rawls's own University education was wholly deficient from the point of view of the Natural and Social Sciences. But this was not always the case amongst his interlocutors or indeed some of the authors he cites. Why did his ignorance persist? How on earth could anyone with even a High School education not see that Knight's essay was based on an elementary scientific blunder? Consider the following-

It is impossible to form any concept of "social efficiency" in the absence of some general measure of value.

Efficiency is the ratio of useful output to 'cost' (input). It does not require a 'general measure of value'. It needs a metric common to output and input which completely ignores everything else.  Mechanical efficiency is the ratio of power output to power input and nothing else.

What of the concept of the 'social'? Can it exist without a 'general measure of value'? Sure. What is the value of shaking hands or talking about the weather? We may do such things as part of a business transaction. But we may also do the same things purely out of habit or out of a concern to be 'sociable'. Arguably, the social is the realm where no 'general measure of value' is possible or desirable. One reason for this is that 'Knightian Uncertainty' is ubiquitous. We can try to calculate Expected Utility if all possible states of the world are known but, it is always the case that, some states of the world which we never imagined possible could cause us to completely change what we value.

To be fair, Knight was writing about Competition as being a good thing precisely because Uncertainty obtains. Though it may seem that 'wasteful competition' or 'duplication of effort' could be got rid off by putting an industry under a single planner, it is not true that efficiency typically rises as a result. The reverse is more likely.

Knight next says something we know to be foolish and which vitiates his entire argument-

Even in physics and engineering, "efficiency" is strictly a value category; there is no such thing as mechanical efficiency.

Yes there is. It is purely ordinal and is unconnected to a general measure of value.
Perhaps Rawls, who seems to have been greatly influenced by this essay, took this sentence to mean that properly instructed people, behind the veil of ignorance, could evaluate different states of the world. Not knowing if they themselves would be fortunate or unfortunate, they would choose the state of the world in which the poorest were best off.

The problem here is that though we can always construct ordinal metrics- ratios- for specific things, we can't have a 'cardinal' measure because- you guessed it- Knightian Uncertainty exists. There is a possible, but unforeseeable state of the world, where what we value would change completely.

It follows from the fundamental laws of the indestructibility of matter and of energy that whatever goes into any apparatus or process comes out in some form.

But some of it is used up in the process.

In purely mechanical terms, all efficiencies would be equal to one hundred per cent.

No. This is the upper bound. Mechanical efficiency is likely to be much less.

The efficiency of any machine means the ratio between the useful output and the total output. In simple cases the distinction between useful and useless may be so sharp and clear as to give rise to no discussion -- as in the case of the mechanical energy and the heat generated by an electric motor. But when more than one form of useful output (or costly input) is involved, the necessity arises for having a measure of usefulness, of value, before efficiency can be discussed.

This is not the case. One hundred years later we still find the notion of mechanical efficiency useful. We don't have and can't have, because of Knightian Uncertainty!, a general 'measure of usefulness, or value'. Kantorovich thought he was getting there. He was wrong.

The efficiency relations of a steam engine may be much changed when the exhaust steam is applied to heating.

This is easily captured by the ratio.

In so complicated a problem as that of social efficiency, where the elements of outlay and of return are both infinitely numerous and diverse, it is no wonder that the process of valuation has become the heart and core of the study.

Not if the thing is done at the margin. But where else could it be usefully done? We can't, and don't want to, reorder Society from top to bottom on the basis of some stupid calculations.

It must ultimately be recognized that only within rather narrow limits can human conduct be interpreted as the creation of values of such definiteness and stability that they can serve as scientific data,

Fuck 'scientific data'. Science is welcome to serve us by all means. Why should we serve it? Our 'interpretations' are our own business. They don't have to serve shite. No doubt, the 'limits' of my 'interpretations' will strike you as narrow but you should hear what I say about your big fat ass.

that life is fundamentally an exploration in the field of values itself

Nonsense! Life, au fond, is shit we do so as not to die or so as to keep at bay the desire to do so. Which tosser would explore 'the field of values' when he could explore a cake shop?

and not a mere matter of producing given values.

Or telling values to go fuck themselves coz I'm gonna binge-watch Scream Queens while waiting for the Pizza guy.

When this is clearly seen, it will be apparent why so much discussion of social efficiency has been so futile.

It was apparent that discussions by stupid shitheads would be futile regardless of what they talked about.

Perception of these obvious fundamental principles at once cuts the ground from under one of the lines of criticism of the economic order which has attracted wide attention. It is an idea sponsored especially by Dr. Thorstein Veblen and copied by others, that there is some distinction between "pecuniary" and "industrial" employments and that society ought to take the control of industry out of the hands of "financiers" and put it into the hands of "technicians."

A perfectly sensible proposition. The financiers fucked up- as became obvious just five or six years later. For 'the greatest generation', it was obvious that engineers were valuable while a lot of academic economists were utterly shite.

This notion rests on the same obvious fallacy, the idea that society has a choice between producing more goods and producing more value, and that it is the part of wisdom to prefer the former.

Society should produce more goods. It shouldn't indulge in a 'Tulip boom' such that everybody thinks they are going to be able to retire at 30 and live in a mansion with lots of butlers and footmen and cute French chambermaids. It isn't possible for a bull Market to make everybody a 'one percenter'.

It is difficult to take either part of the proposition seriously. The quantity of goods, if there is more than one kind, must so obviously be measured in value units.

The problem is that some goods and services turn out to have been bad and harmful. Suppose the Bank transfers a lot of money into my account by accident. I think I'm rich and go on a spending spree. Then I discover I have to give that money back. I am poorer not richer. Similarly, an 'investment' may turn out to be a white elephant. There is a crash when people all suddenly realise they are poor and are going to stay that way. They should never have believed 'Value' could just go up and up and up till everyone could afford to hire a butler.

The proposal of leaving it to technicians in the respective fields to say how much social productive power shall be expended in each is merely grotesque; military experts would use it all for the army and navy, the medical men could usefully employ it all, and more, for health, and so on.

So specify their endowment set and let them get on with it. The problem here is Knightian Uncertainty. The US and the UK had a sort of 'ten year rule' for the military. They assumed no war threat for a decade. This was silly. Both would have been better off with higher Naval and Military expenditure. This was the 'regret minimizing' course.

There is no more important function of a first course in economics than to make the student see that

Professors are as stupid as shit.

the whole problem of social management

like anyone was actually doing any such thing!

is a value problem;

no, it is a management problem. The clue is in the name         

that mechanical or technical efficiency is a meaningless combination of words.

The truth is, the main determinant of global material well being is mechanical efficiency. We've got to squeeze more output from input. STEM subjects are useful here. 'Value' is something we can only be sure about ex poste.

Indeed there can be no question, as the course of the argument will show, that the valid criticisms of the existing economic order relate chiefly to its value standards, and relatively much less to its efficiency in the creation of such values as it recognizes.

A valid criticism of something utile- like the plumbing or economic arrangements we have- is based on whether it is useful and, if so, how it could definitely be made better at little cost. I suppose 'Value Standards' might be important. It may be that people did not value not having to smell shit all the time till someone explained that it would be better for their health if they had proper indoor plumbing and water closets and so forth rather than just taking a dump in the chest of drawers.

We shall furthermore insist that not merely a measure of value but ideals of value are prerequisite to any intelligent criticism of social processes or results. This is not, like the proposition regarding efficiency, a self-evident truth.

Knight was wrong about efficiency. In a sense he is right about 'Standards'- but only if we ourselves are currently so degraded as to be doing the moral equivalent of taking a dump in the chest of drawers rather than shitting on the boss's desk like a normal person.

It is quite arguable that the determination or criticism of policy involves only a comparison of alternative possibilities and a choice of that which is considered preferable.

Because of Knightian Uncertainty, the regret-minimizing course alters the choice menu by adding hedges of different types. These aren't themselves exercised in relevant states of the world, but it's nice to know they are there- but this is an income effect. This means the introduction of Uncertainty has changed States of the World in the model. Hedges may be 'ontologically dysphoric' and factorized as incompossible values. But they are not 'ideals'. They are 'hedges' with 'income effects'.

It is arguable, and the contention is in fact often put forward, that values are purely relative, that it means nothing to say that anything is good or bad except in comparison with a worse or better alternative.

Values are ontologically dysphoric. They are not at home in this world. But they act like hedges and have income effects. These could be positive or very negative indeed. A hedge can be an instrument of 'financial mass destruction' as we all know. Worse, it could cause the calamity it guards against. But so long as we think of the thing as a 'mechanism' not an 'ideal' or a 'value', we can do the 'reverse game theory' that is mechanism design. Otherwise you end up with Rawls talking shite and then Sen talking shite and then Nussbaum talking shite and everything ending in toxic 'wokeness'.

It is a practical question: does the judging faculty actually work by reasoning out alternatives and deciding which is preferable, or does it not rather formulate ideals and compare actuality and potentiality with these, and with each other indirectly, by so comparing them with an ideal? No doubt both methods are used, and are useful; but we contend that in regard to the larger and higher questions, the ultimate problems of moral and social life, the formulation of ideals is a necessary step.

Lots of 'formulation of ideals' was going on when Knight wrote this. But all those ideals were for shit.

There is a place; and a vital place, for an "absolute" science of ethics

thinks nobody at all, nowadays. We know that Emeritus Professor of Ethics means senile tosser whose big idea is we should all cut our throats to ameliorate working conditions for Sweeney Todd.

Its dicta will not be really absolute, for they never cut loose entirely from the real world and its possibilities of growth and transformation, and they will always grow and change.

yet remain stupid shite

But at least they are not "merely" relative; they must be beyond the immediately attainable, and will often lie in the field of the actually impossible, patterns to be approached rather than objectives to be achieved. We contend not merely that such ideals are real to individuals,

ontologically dysphoric hedges can be real to individuals. I want to go to Heaven to kiss granny and taste her cooking again and this might keep me on the straight and narrow. But hedges are still 'mechanisms'. There is scope for improvement in them on the basis of efficiency considerations. But ideals are incompossible and gassing on about them is gonna turn you into a senile antagonomic gobshite demanding we all cut our own throats because otherwise our hair will grow so long it will get entangled in the stars.

but that they are a part of our culture and are sufficiently uniform and objective to form a useful standard of comparison for a given country at a given time.

If Knightian uncertainty obtains, 'sufficiently uniform and objective' ideals will fuck up a Society faster than if it takes a regret-minimizing course and hedges its ethical bets. Back in the Twenties, everybody was agreed that miscegenation was a bad thing- coz it happens if you listen to Jazz, right? Purity of Race was the way to go.

Normal common sense

says judge not unless you are getting paid a lot of money to do so. If you get called for Jury Service, wear a tin foil hat and babble about aliens and anal probes.

does judge in terms of ideals, of absolute ethics in the sense indicated, and not merely in terms of the best that can be done; else it would be linguistically equivalent to call a situation hopeless and to call it ideal, which is clearly not in accordance with usage. In what follows we shall appeal to what we submit to be the common-sense ideals of absolute ethics in modern Christendom.

This was an essentially contested matter.

... Even if the competitive system is better than any available substitute, a clear view of its shortcomings in comparison with conceivable ideals must be of the highest value in making it better than it is.

Why? A thing which exists is not ideal. It is real. Compare it with other real things of the same sort by all means. Why compare it to an ideal? We don't say Usain Bolt is a terrible runner because he can't match Superman or the Flash.

An examination of the competitive economic order from the standpoint of its ethical standards will fall naturally into three parts.

No it will halt immediately once it is realized that a competitive economic order  can and does serve any type of 'ethical standard' provided it can pay. 

In the first place, the contention already put forward, that wants are not ultimate data or to be identified with values, does not mean that they are not real and important.

Because they are 'ultimate date' and are identified with values- as in I value having nice things to eat and won't listen to worthless pi-jaw about Values unless a good dinner is provided.

We can never get entirely away even from physical needs, requirements for life, for health and for comfort, small as such motives really bulk in civilized behaviour. Moreover, at any given time and place the existing stage of culture sets minimum requirements which are imperative in character.

Screw the 'existing stage of culture'. A lot of it has to do with 'preference falsification'. People pretend they enjoy artsy fartsy stuff. But they don't really. 

It is true within limits that the purpose of economic activity is to satisfy wants,

Those are the limits to any 'truth' that Economics can uncover. 

and the fact raises a group of questions for consideration in an appraisal of any system of economic organization. We must inquire first into its value standards,

How will we do so? People lie about what they value. Indeed, Evolution has made sure we don't know why we value what we value. Otherwise our species would have figured out a way to masturbate itself to death before it ever climbed down from the trees. 

in the economic or quasi-mechanical sense, its manner of dealing with wants as they exist, its mechanism for comparing and equating and perhaps selecting among the various wants of the various persons and classes of persons which make up the society.

'The economic order' is just a figure of speech. It doesn't actually exist. It has no peculiar manner of 'comparing' and 'equating'. Don't treat a metaphor as a concrete fact about the world. You will end up with a meta-metaphor- i.e. nonsense- which you alone will believe actually exists. 

It is hardly necessary to remark that the questions which wants and whose wants are to be satisfied are in fact closely bound up together.

By what? Your saying they are- simply as a figure of speech. This isn't anything real.

The system's answer to this two-fold question constitutes its social economic value scale;

Whereas its answer to the question, 'Why did you stop fucking my wife?', constitutes the provocation for your beating the shit out of it. Just to be clear, she is not a fat ho-bag with bad breath. She has a water retention problem. Also her halitosis is bound to clear right up after we have enough money for her to get her tusks fixed.

and very different social value scales may be formed from the same set of individual wants by different methods of selection, equation, and combination.

Or by just making shit up. 

The more distinctly ethical aspect of this issue is of course the old problem of social justice, relating to the system's treatment of the wants of persons and classes;

I agree that the system's treatment of the wants of persons and classes is very important. It should smile nicely and makes chit-chat to put persons and classes at ease. It must NOT try to rub their genitals. I don't care what you Preppies get up to at Andover & Groton. Treat people and classes in a polite and friendly manner but NO TOUCHING THEIR GENITALS.

but that is by no means separable from the question of ranking different wants of the same person.

Coz there are people who are wandering around the streets weeping bitterly because the Economic Order- and even the Social Order, which, let's face it, is a bit of a slut- hasn't come round to rank their wants for ages and ages. 

A second inquiry under the same head, of a more mechanical sort but still distinctly a problem of values, deals with the efficiency of the system in using its available resources in creating the values which it recognizes, that is, in producing the largest quantity of "goods" as measured by the standard which it sets up.

This is something an Enterprise might actually pay for. It belongs to 'the economic' as opposed to the 'fucked in the head' order. 

Another question, ethically more fundamental than these but inseparable from them,

Coz they all went to Yale together and have set up a menage a trois

and one which must be considered in the first section of the inquiry, follows directly from recognizing the provisional character of wants and the obvious fact that the wants which an economic system operates to gratify are largely produced by the workings of the system itself.

Because the 'economic system' just means guys buying and selling stuff to satisfy their own wants. Knight pretends that people are subject to something real which does stuff to them.

One may as well say 'the communicative needs Language operates to gratify are largely produced by the workings of Language itself' or 'the cosmic needs Gravity operates to gratify are largely produced by the workings of Gravity itself'. You can sound wise on any subject simply by using this formula- 'The Academo-Immunological needs which COVID operates to gratify are largely produced by the virus itself.'

In organizing its value scale, the economic order does far more than select and compare wants for exchangeable goods and services:

it goes back in time and fucks your Mother. Then it says 'Luke, I am your father'. 

its activity extends to the formation and radical transformation, if not to the outright creation, of the wants themselves;

OMG! It's true! The Economic Order is my Daddy! Wait, does this mean I can or can't slip Leia the sausage?

they as well as the means of their gratification are largely products of the system.

Fuck you System! I had the hots for Leia real bad! Fuck you very much indeed!

An examination of the ethics of the economic system must consider

that it fucked my Mom and then cockblocked me with Leia. I'm gonna blow up its death-star and then like maybe get high with Chewbacca? Who knows where that might lead? 

the question of the kind of wants which it tends to generate or nourish as well as its treatment of wants as they exist at any given time.

What kind of Jedi Knight are you Frank? Don't you get that the System is always Evil? What people want to see is death-stars being blown up. Have you never heard of Bataille's Solar Anus? Crack a book sometime!

The second of the three main standpoints to be considered corresponds to an aspect of economic life which is rapidly securing more adequate recognition among economists, the fact that the motive of business is to such a large extent that of emulation as such.

Fair point. Economics should have embraced Tardean mimetics. Gotten a jump on cellular automata theory. But that means telling the 'economic order' to fuck off coz it don't really exist.

Industry and trade is a competitive game, in which men engage in part from the same motives as in other games or sports.

But non-competitive mimetic activities are a gross substitute for this. What matters is what is being imitated. Win or lose, we want to be doing what the smart guys are doing. Cows and sheep feel the same way. 

This is not a matter of want-satisfaction in any direct or economic sense; the "rewards" of successful participation in the game are not wanted for any satisfying power dependent on any quality which they possess as things, but simply as insignia of success in the game, like the ribbons, medals, and the like which are conferred in other sorts of contests. Our second main task will therefore be to raise the question, what kind of game is business? Is there anything to be said about games from an ethical point of view, any basis for judging them or ranking them as games, and if so, is business a relatively good, bad, or indifferent game?

Business is about staying in business. It is a good idea to emulate those who look like they may go the distance.
Game Theory did come into existence some twenty years after Knight wrote this, but though relevant for Oligopoly it can't be said to have caused any 'paradigm shift'. Okay there was incentive compatibility in mechanism design and incomplete contracts and so on- but again it's not something businessmen really needed to learn. It was an unthought known.

The third division of the paper will deal briefly with the more fundamental aspects of the problem of values from the standpoint of absolute ethics. Economic activity is a large part of life, and perhaps tends to grow in relative magnitude. The issue as to the influence of the economic system on character can be treated only superficially, but should at least be raised. Emphasis will be placed on the particular phase of competitive emulation as a motive and of success in a contest as an ethical value. The competitive economic order must be partly responsible for making emulation and rivalry the outstanding quality in the character of the Western peoples who have adopted and developed it.

Around this time, Ibn Saud was bringing the Hejaz under his control. Emulation and rivalry were not unheard of in his part of the world. He had 22 wives- which was important to secure loyalty from tribal chiefs- and 45 sons. He had a thousand grandchildren. The wealth they inherited was incalculable- 1.4 trillion dollars is one number tossed about.

One would be hard put to find a single person in the Twentieth Century who was more successful, that too after adverse initial conditions in a harsh and unforgiving environment, than this decidedly non-Western, non-'Capitalist', hero. His primary allegiance was to a pure reformist type of Islam. But he had all the manly qualities of the ancient peoples of that region. It appears that his descendants are transitioning the Kingdom he bequeathed them into a global financial and educational center. Yet, though they may have advanced economic and financial skills, I believe they put their Religion first.

The modern idea of enjoyment as well as of achievement has come to consist chiefly in keeping up with or getting ahead of other people in a rivalry for things about whose significance, beyond furnishing objectives for the competition itself, little question is asked. It is surely one function of ethical discussion to keep the world reminded that this is not the only possible conception of value and to point out its contrast with the religious ideals to which the Western world has continued to render lip-service -- a contrast resulting in fundamental dualism in our thought and culture.

With hindsight, Knight was probably wrong to worry that Capitalist 'materialism' would warp the values of his people. Alcohol may have been a problem. Drugs would become a problem. But one can be very religious while still off your head on booze or pills. 

Throughout the discussion it will be necessary to keep in mind the close inter-connection among these several aspects of the economic system. Economic activity is at the same time a means of want- satisfaction, an agency for want- and character-formation, a field of creative self expression, and a competitive sport.

Sadly, the same was true of Politics and Prostitution and farting noisily or entering a useless branch of Academia. 

While men are "playing the game" of business,

or pretending to be Economists or Sociologists or Philosophers 

they are also moulding their own and other personalities,

in so far as they are as stupid as shit. What they are not doing is creating a Civilization. Either that already obtains or business is not a game you can enter. It is something which serious people are drawing up and enforcing the rules for. Whether or not they will succeed depends on whether or not they can defeat invading hordes. Knight pretends that a Civilization is something you can just order off an a la carte menu.  

and creating a civilization whose worthiness to endure cannot be a matter of indifference. I Discussion of the merits of free competition, or laissez-faire, takes on an especial interest in view of the contrast between the enticing plausibility of the case for the "obvious and simple system of natural liberty," and the notoriously disappointing character of the results which it has tended to bring about in practice.

But such discussion had and have no merit whatsoever. Why not talk about Star Signs or who would win in a fight between Spiderman and Dracula instead?  

 In the later eighteenth and early nineteenth centuries, under the influence of the "classical economists," of the Manchester liberals, of the political pressure of the rising bourgeoisie and the general force of circumstances, rapid progress was made toward the establishment of individual liberty in economic affairs.

Nonsense! First there was the liberty, then there some shitheads talked about it.  

But long before complete individualism was closely approached its consequences were recognized to be intolerable, and there set in that counter-movement toward social interference and control which has been going on at an accelerating pace ever since.

Bollocks! Liberties- Hohfeldian Rights- were contested if it was worthwhile to do so. There were political combinations which might pay a couple of shitheads to write pamphlets and some parents might send their kids to Colleges where one or two shitheads could talk this shite in between getting their students to stop masturbating so incessantly, but that was all that happened. Then Labour began its rise. The question was whether they could grab cool stuff off the rich without cutting their own throats. The answer was- not really. So everybody lost interest in this particular debate. That was the end of not History but its history as stupid cunts talking Whig or Hegelian or Marxian shite. 

The argument for individualism, as developed by its advocates from Adam Smith down, may be

ignored completely. Countries which are determined to get richer allow this to happen at the margin till that margin becomes the mean while the production possibility frontier shifts outward. Economists may say specific economists were associated with this but others may speak of 'National Spirit' or something of that sort. 

What is not true is that 'optimality' will be attained because of- you guessed it, Knightian Uncertainty. 

summarized in a sentence as follows: a freely competitive organization of society tends to place every productive resource in that position in the productive system where it can make the greatest possible addition to the total social dividend as measured in price terms, and tends to reward every participant in production by giving it the increase in the social dividend which its co-operation makes possible. In the writer's opinion such a proposition is entirely sound; but it is not a statement of a sound ethical social ideal, the specification for a utopia.

This is not sound. What is a 'productive resource'? We don't know but deny that our own asshole is one. We should not be forced to prostitute ourselves to boost the social dividend.  

What does 'free competition' mean? We don't know. Mummy and Daddy may be said to compete to make baby laugh. But they could also be said to cooperate towards that end. It may be that Mummy is planning to leave Daddy. Maybe what looked like cooperation was actually competition. Mummy wanted the kids to think of Daddy as the bad guy so they'd want to stay with her- in which case Daddy gets stuck with paying for the kids without gaining the benefit of their love and affection. These things can't be known in advance. Knightian Uncertainty is ubiquitous. 

But this also means that general discussion about an 'economic order' is shit. Some 'minute particular' can be usefully changed. But talk of the General Good is a waste of time. 

Discussion of the issue between individual freedom and socialization, however, has largely centred around the truth of the proposition as a statement of the tendencies of competition, rather than around its ethical significance if true.

Why? Because the proposition is asserts that the Utilitarianism system of Ethics is correct and secondly Free Markets can deliver the outcome it values. 

Those who do not like the actual tendencies of the system as they appear to work out when it is tried -- and that is virtually everybody -- attack the scientific analysis.

The problem is that their own scientific analysis will have like lacunae.  

We propose to argue in the first place that the conditions of life do not admit of an approximation to individualism of the sort necessarily assumed by the theory,

or any other theory! These are all fairy stories! You may as well debate whether Spiderman can beat up Dracula! 

and secondly that there are in the conditions of actual life no ethical implications of the kind commonly taken for granted as involved in individualism in so far as it is possible of realization.

In which case Economics and Ethics have absolutely nothing to say to each other.  

The careful statement of the meaning of individualism falls within the province of the economic theorist rather than that of the ethical critic.

But economics has no theory of 'individualism'. It is concerned with 'agents'. It doesn't care whether those agents are collectives or coalitions or whether they act in their own interests or do so on behalf of some other entity.  

It is an accident of the way in which economic science has developed, and especially of the peculiar relation between science and practice in this field, that so little serious effort has been made to state with rigour and exactitude the assumptions involved in the notion of perfect competition, the premises of pure economics.

A hundred years later, we are no farther along.  

Literary writers on economics have been interested in administrative problems, for which the results of any exact treatment of principles are too abstract to be of direct application, and have not generally been trained to use or appreciate rigorous methods. The mathematical economists have commonly been mathematicians first and economists afterward, disposed to oversimplify the data and underestimate the divergence between their premises and the facts of life. In consequence they have not been successful in getting their presentation into such a form that it could be understood, and its relation to real problems recognized, by practical economists. The critical reader of general economic literature must be struck by the absence of any attempt accurately to define that competition which is the principal subject under discussion.

Competition was understood as the opposite of a restraint on trade. This would be Edgeworth's contract curve or what would later be called the 'core' of the game. The problem with trying to be more precise about this is- you guessed it!- Knightian Uncertainty. We don't the 'characteristic function' of the game. Indeed, the concept is useless. We don't know if we are pawns or rooks or Queens and there isn't a chessboard and...actually we aren't playing chess at all though we may feel we have been used as a pawn or that it is now safe to come out as a great big Queen or whatever. 

A clear formulation of the postulates of theoretical individualism will bring out the contrast with practical laissez-faire, and will go far to discredit the latter as a policy.

How? Practical laissez faire is based on the notion that it is silly to spend money to interfere with a guy who is trying to make money honestly. True, he may be a fool. But fools smarten up very fast when they lose their own money. Anyway, we are welcome to issue 'public signals' quite cheaply rather than be a dick and enforce laws. 

This has nothing to do with the 'postulates of theoretical individualism'. If it does, let lawyers argue about it.  

In the present paper the attempt to state the presuppositions of a competitive system cannot be carried beyond a bare outline; it will be developed with reference to our special purpose of showing that in the conditions of real life no possible social order based upon a laissez-faire policy can justify the familiar ethical conclusions of apologetic economics. 

But apologetic economics is shite some bunch of assholes paid for. Publicize this fact rather than bother controverting that stupidity. 

In the first place, an individualistic competitive system must be made up of freely contracting individuals.

As opposed to what unfreely contracting collectives? A Contract isn't a Contract unless it is freely entered into and individuals bound by it are clearly specified. Any sort of 'economic order' must contain individuals as opposed to abstractions. 

As a matter of fact, a rather small fraction of the population of any modern nation enter into contracts on their own responsibility. Our "individualism" is really "familism"; all minors, the aged, and numerous persons in other classes, including for, practical purposes the majority of adult women, have their status-determining bargains made for them by other persons.

So what? Club goods exist and it makes sense for people to club together to get them.  

The family is still the unit in production and consumption.

But families exist under any sort of economic order- or none at all.  

It is hardly necessary to point out that all arguments for free contract are nullified or actually reversed whenever one person contracts on behalf of another.

Rubbish! There may be 'agent principal hazard' but, equally, there may be remorse attached to individual contracting decisions.  

2. Moreover, the freest individual, the unencumbered male in the prime of life, is in no real sense an ultimate unit or social datum. He is in large measure a product of the economic system, which is a fundamental part of the cultural environment that has formed his desires and needs, given him whatever marketable productive capacities he has, and which largely controls his opportunities.

So what? At the margin, he or she is moving between jurisdictions. Competition is at the margin.  

Social organization through free contract implies that the contracting units know what they want and are guided by their desires, that is, that they are "perfectly rational," which would be equivalent to saying that they are accurate mechanisms of desire-satisfaction.

It is enough that the Condorcet Jury theorem apply- i.e. for large enough numbers individual idiosyncrasy cancels out.  

In fact, human activity is largely impulsive, a relatively unthinking and undetermined response to stimulus and suggestion. Moreover, there is truth in the allegation that unregulated competition places a premium on deceit and corruption.

But despotism may have more of it. What matters is if there is a mechanism to punish deceit and malfeasance.  

In any case, where the family is the social unit, the inheritance of wealth, culture, educational advantages, and economic opportunities tend toward the progressive increase of inequality, with bad results for personality at both ends of the scale.

So long as there is a scale, this may be the case. However, competition would tend to ameliorate the problem. You stop being a dick if this means non-dicks displace you.  

It is plainly contrary to fact to treat the individual as a datum, and it must be conceded that the lines along which a competitive economic order tends to form character are often far from being ethically ideal.

But 'ethical ideals' are shit precisely because ideals don't have to compete with each other. They just need to be mouthed by shitheads.  

3. It is universally recognized that effective competition calls for "fluidity," the perfect divisibility and mobility of all goods and services entering into exchange.

Very true. If you are running a race, you have to detach your legs and set them off down the track. The expression 'lend a hand' arises out of the fact that when called upon to do so, people detach their hand and give it to the party in need. All this is universally recognised. However, the truth is goods and services don't have to be 'perfectly divisible' at all.  

The limited extent to which this assumption fits the facts of life sets limits to the "tendency" of actual competition, which in many cases nullify the principle. Here, as in the case of other assumptions, it is illegitimate to draw practical conclusions from a "tendency," however real, without taking account of contradictory tendencies also, and getting the facts as to their relative strength. One of the dangers of reasoning from simplified premises is the likelihood that the abstract factors may be overlooked in drawing conclusions and formulating policies based thereon. 

The danger of talking bollocks is that you talk bollocks.  

One of the most important prerequisites to perfect competition is complete knowledge on the part of every competing individual of the exchange opportunities open to him. A "perfect market" would involve perfect, instantaneous, and costless intercommunication among all the traders. This condition is really approximated quite closely in the case of a few commodities dealt in on the organized exchanges; but the market for most consumption goods is very crude in its workings. As regards the productive services, abstract pecuniary capital does indeed flow through a highly developed market; but the market for labour, land, and real capital, and their uses, leaves wide margins for "bargaining power" and accidental aberrations. Both the organization of production and the distribution of the product diverge correspondingly from the theoretically ideal results. 

So, Econ is shite. We get it. But what has that to do with the 'Ethics of Competition'?  

Competition further requires that every actual or potential buyer of every saleable good or service shall know accurately its properties and powers to satisfy his wants.

No. It is sufficient that there is some mechanism to ensure merchantability in the majority of instances.  

In the case of productive goods this means knowledge of their technical significance. In an industrial civilisation as complex as that of the modern world it is clear that the divergences from this "tendency" must often be more important than the tendency. Indirect knowledge is available to offset direct ignorance in many subtle ways, and yet no individual can know enough to act very closely according to the ideal of perfect intelligence. Moreover, perfect competition does not stop at requiring knowledge of things as they are; the competitor must foresee them as they will be, often a very considerable distance in the future, and the limitations of foreknowledge are of course more sweeping than those of knowledge.

The point about decentralized decision making is that it is a regret-minimizing way of tackling Knightian Uncertainty. Lots of people are exploring the unknown fitness landscape. There are mimetic effects with respect to those that succeed in finding unexpected states of the world.  

6. The results of intelligent action are the purposes to which it is directed, and will be ethically ideal only if these ends are true values.

No. An intelligent action may be for the purpose of proving something which seems intuitively true- e.g. an item in Hilbert's program. But finding out that the thing can't be proved, though not the purpose of the exercise, is an even more fruitful result.  

The 'ethically ideal' action is itself a function of the theory of ethics which one holds. Such theories are not univocal or observationally equivalent. Still, we may say 'such and such action of such and such a person seems to me to be, or to have been, ethically ideal'. However, even if there is consensus about this the assertion may be discovered, at a later point, to have been wrong.

Under individualism this means that the wants of individuals must be ideal, as well as their knowledge perfect.

But what we want is a fact about our biology or socio-economic position. A fact qua fact can't be said to be ideal. All we can say is that we think it is closer or farther than the ideal we espouse. 

What is 'perfect knowledge'? It seems to me that the neighbor's cat has as much knowledge as it needs to live a safe and contented life. If knowledge is costly to acquire, the 'perfect' state of knowledge for a particular being must have an economic, not ideal, aspect. 

We have commented enough on the fact that the social order largely forms as well as gratifies the wants of its members,

Which social order 'formed' the want- the need- for things like gender reassignment surgery? It is only now, for scientific reasons, that we understand that this is a 'natural' want- not the result of brainwashing by a misogynistic, homophobic, society. Yet, who can deny that most societies, till recently, were obscenely misogynistic and homophobic? Sad to say, this type of bigotry is still plentiful- even in the 'safe spaces' of academia. 

and the natural consequence that it must be judged ethically rather by the wants which it generates, the type of character which it forms in its people, than by its efficiency in satisfying wants as they exist at any given time.

Ethical judging is what condemned homosexuals as 'deviants' who, at best, had been given too many or too few cuddles by Mummy or Daddy or whatever. There were respected Doctors and Priests and so forth who had 'ethical' ways of treating this terrible disease- which wasn't a disease and is actually a source of great benefit to Society.  

7. Another sweeping limitation to the actual workings of free competition arises from the fact that men do not have free access to such imperfect markets as exist.

Black men certainly didn't. Almost all American women didn't. But that's the sort of problem which a Democratic  polity can tackle without gassing on about ethics. Why? Because tackling such problems makes everybody better off.  

No error is more egregious than that of confounding freedom with free competition, as is not infrequently done.

Nonsense! A far more egregious error arises from thinking ethics aint shitting higher than one's arsehole so as to create a public nuisance or work a great mischief upon the common weal.  

As elementary theory itself shows, the numbers of any economic group can always make more by combining than they can by competing. Under freedom all that would stand in the way of a universal drift toward monopoly is the fortunate limitations of human nature, which prevent the necessary organization from being feasible or make its costs larger than the monopoly gains which it might secure. But universal monopoly is self- contradictory, and against any such tendency social action is the only recourse. The workings of competition educate men progressively for monopoly, which is being achieved not merely by the "capitalist" producers of more and more commodities, but by labour in many fields, and in many branches of agriculture, while the producers of even the fundamental crops are already aspiring to the goal.[Note 5]

All that matters is elasticity. If Demand and Supply are elastic- which happens when they have a closest possible substitute at almost the same price- then monopoly is allocatively efficient. Society should work to increase elasticity- i.e. give everybody more options- but this is the regret-minimizing strategy writ large.  

8. The individualistic competitive organization of want-satisfying activity presupposes that wants and the means of satisfying them are individual, that is, that wants attach to things and services which gratify the wants of the person consuming them without affecting other persons. As a matter of fact, what is desired is more largely a matter of human relations than goods and services as such; we want things because other people have them, or cannot have them, as the case may be.

So, Knight is talking of mimetic effects which, however, are ubitquitous in every sphere of life. The point he is making applies equally to Linguistics as it does to Economics. If it is ethical to monkey with the economy, then Orwell's Big Brother enforcing 'newspeak' represents an ethical ideal. 

Then, too, the appurtenances of civilized life

are a 'Club good'. But this is purely an economic, not an ethical, phenomena though no doubt different people competing for the position of Secretary of the Club may say differently. But that is 'cheap talk'.  

can be furnished to an individual only by providing them for the community, and we want to live in a civilized community as well as to live in a civilized way ourselves. With rare exceptions exchanges or contrasts between individuals affect for good and for ill persons not represented in the bargain itself, and for these the bargain is not "free." Social action is necessary to promote the exchanges which diffuse benefits on others for which the parties cannot collect payment in the market, and to suppress those which diffuse evils for which the contracting parties do not have to pay. A typical illustration is the improvement or use of property in ways which add value to or subtract value from neighbouring property. In a developed social order hardly any "free exchange" between individuals is devoid of either good or bad results for outsiders.

But any resulting problem can be dealt with by tort law or else Coasian solutions may be applied. 

To be fair, Knight was writing before Coase entered the fray. We must be charitable to Knight- we know so much more. But Rawls's reliance on Knight was foolish. His colleagues, some of whom were economists, should have educated him a little. But they too were ignoring 'Knightian Uncertainty'. It was a case of the blind leading the bland. The result was a foolish academo-bureaucratic availability cascade now presided over by the likes of Amartya Sen.