Sen and Commons on Markets and Freedom

Abstract

Amartya Sen's enlarged conception of freedom has augmented the scope of economic analysis but it also has had the surprising effect of being more supportive of the free market than conventional welfare economics. It is argued here that a comparison of Sen's position with that of the American institutionalist, J R Commons, highlights some problems with Sen's approach and points to possible ways in which they might be addressed.

Keywords:

• Freedom
• institutions
• market
• transaction
• collective
• Commons
• Sen

JEL Classifications :

• B2
• B3
• B4
• D02

Notes

I am grateful to referees of this journal for their comments on an earlier draft of the paper.

Sen is well aware that the market is embedded in a wider social system and that its workings can be influenced by the configuration of forces in this wider system. Nonetheless, he often treats the market in an abstract manner as something to be supplemented but not interfered with.

Circumstances in which an exchange might be regarded as ‘involuntary’ include those in which there is a single buyer or a single seller. However, in his critique of Milton Friedman's Capitalism and Freedom, C.B. Macpherson (1968) argued that the presence of many buyers and sellers was not sufficient of itself to ensure that coercion is absent. Capitalist economies are characterised by the existence of a labour force without sufficient capital of its own and, therefore, without a choice as to whether to put its labour on the market or not. This issue has also been discussed by G.A. Cohen (1982).

Interestingly, Hayek was to say something similar himself in his 1978 essay on liberalism in which he argues that the realisation of human ends depends on the availability of the required means. Consequently, any economic control which gives power over the means also gives power over the ends. According to Hayek, there can be no freedom of the press if the instruments of printing are under the control of government, no freedom of assembly if the needed rooms are so controlled (Hayek 1978: 149).

Here positive freedom is taken to refer to a situation where the individual has power to achieve valued outcomes and negative freedom is taken to refer to the absence of interference. This is in line with Sen (2002: 501–31). It should be noted however, that the terms positive and negative freedom have a variety of interpretations. The most influential discussion is Berlin (1969) but see Dimova-Cooke (2003) for a more recent alternative perspective and Franco (1999) for an exposition of Hegel's philosophy of freedom.

Hegel explicitly criticised the common notion of freedom as freedom of choice or being able to do as one pleases. The freedom here consisted only in the form of choosing it being found in the final analysis ‘that the same external sort of circumstances in which the content given to the will is grounded must also be invoked to explain the fact that the will decides in favour of just this and not that’ (Hegel 1991: §145). See also Franco (1999: Chapter 5).

For further discussion of the issue, see Prendergast (1998: 99–100) and also Groenewegen (1990, 1995).

As Sen (2002a: 510) has noted, the representation of freedom in terms of the opportunity set has a number of limitations.

‘Well Being, Agency and Freedom: The Dewey Lectures 1984’ published in Sen (1985). Dewey was an important influence on Commons.

Here reference is made to the Oxford India edition published in 1987.

As Gibbard (1985: 25) has noted, any system of property rights restricts liberty, and ‘there seems to be no way to identify restrictions on exchange as additional restrictions on actions.’

In an extended discussion of Common's Institutional Economics, A.B. Wolfe characterised Common's values as an enlightened liberalism tinctured with a radicalism that could easily carry him into revisionist socialism (Wolfe 1936: 205).

Commons’ declared intention was one of complementing rather than replacing orthodox economics but, as Gonce (1976: 787) has pointed out with reference to the work from Legal Foundations onwards, Commons may have professed one intention while seeming to practice another.

Collective action in Commons covers both collective definition and enforcement of the customs and laws within which individuals interact and organised concerted co-operation in going concerns such as corporations, trade unions, political parties and the state.

The concept of a going concern is an entity animated by a common purpose and governed by common rules of its own making. In general these rules prescribe the boundaries within which members of going concerns must operate as they seek to promote their own interests and those of the concern. There is extensive discussion of the concept in Legal Foundations of Capitalism. Grunchy (1947) has a useful summary of the concept.

Hodgson (2003) has argued that there are deficiencies in Commons’ theorisation of the processes by means of which social customs play a role in moulding the individual. He suggests that these deficiencies were due to insufficient engagement with the pragmatist philosophy and the instinct-habit psychology.

See, for example, the UNDP's Human Development Reports from 1990 onwards.

For a more detailed discussion of the nature of Commons’ collectivism and a defence against critics see Lawson (1996).