20.3. All You Need Is Numbers

Not many are shy about drawing the practical conclusions for business. According to Michael Jensen, a Harvard Business School professor, and Perry Fagan, a consultant, if you want to maximize the standard of living, then you will ignore the idea that "stakeholders such as employees, customers, suppliers, even whole communities . . . have a legitimate claim on and a say in the operations of a firm." You will grant only that

the state must eliminate all externalities and managers should make all decisions so as to increase the total value of the firm. All else is chimera. (1996, p. 97)

(Externalities are, briefly, any social costs or benefits of a product or service not reflected in its market price.)

Jensen and Fagan make it clear that when they talk about increasing the "total value of the firm," they are talking about the numerical bottom line. Their "value" is a value abstracted to nothingness, pure quantity that is not the quantity of anything in particular. So a $100 profit on the sale of cocaine constitutes the same "value" in their sense as a $100 profit on the sale of penicillin. To distinguish the two would require us to consider, for example, the welfare of the cocaine and penicillin users. But, unfortunately, these are mere stakeholders. Worrying about their interests, one can only assume, would lead businesses into a quagmire. As Jensen and Fagan put it:

Stakeholder theory . . . provides no guidance whatsoever for making decisions. This is, perhaps, its main danger. It turns managers loose to exercise the whims and idiosyncrasies of their own personal prejudices. More importantly, it leaves no objective way for others to measure how well or poorly they are doing.

So much for human values. They're just not measurable enough. To act on any basis other than mere whim, we need unproblematic calculation rather than significant choice. Values, in Jensen and Fagan's view, must be mathematically indifferent to starkly opposite qualities and meanings, or else they are nothing more than personal prejudices. There is a stunning sense of helplessness here in the presence of the human intention to fashion effective instruments for pursuing what we deem worthwhile.

What makes it so easy to ignore the anti-human logic of the number-crunching-is-all-you-need style of thought is the slippery nature of that little word "value." We all too easily read real value into the word when in fact the context allows only a numerical value. This slipperiness gives Jensen and Fagan's words a feeling of social substance when they say:

Value maximization provides a simple rule to guide expenditure: spend an additional $1 on resources to improve quality for customers, for example, so long as they value the increment in quality at more than $1. Far from giving a license to ignore its various constituencies, value maximization gives firms a clear criterion for making trade-offs between them.

But for all that talk about quality and customer value, we're still in the same ballgame. What customers value is again assessed purely numerically by the buck spent and buck earned and therefore leaves the cocaine indistinguishable from the penicillin. It doesn't ask whether a product or service is good or bad for a neighborhood, good or bad for the customer's health, good or bad for those who produce it.

Again, please don't misunderstand me. I am not preparing a brief for legislating people's morals or outlawing selfishness. But I am saying that the moral qualities of our actions in business as elsewhere have everything to do with the kind of society we live in, for good or ill. And if this is true, how can an economics that willfully turns its face from this reality claim to tell us anything about the welfare of society?

The objection about legislating morals is extremely worrisome. The objector seems to assume that we have only two alternatives to consider: the free individual running wild, or else government coercion. What's missing odd in a society so obsessed with its freedoms is any awareness that if we've entered an era of unprecedented individual freedom, we've also entered an era of unprecedented individual responsibility for shaping society and holding it together.

We seem eager to cultivate our freedoms, and equally eager to point out the very real limitations of government in the economic realm, but not eager at all to grant that, well then, an awful lot must be up to us. And the Invisible Hand provides the perfect excuse for disavowing responsibility: the mechanisms of the market will take care of everything despite our worst intentions.

The fact is that the evolution of the free, wide-awake human being and of modern political forms have combined to require that we lay bare the elements of social health and commit ourselves to them out of our own free choice. To say that our society can only survive on this basis is the very opposite of assuming, as our objector assumed, that we can be coerced toward social responsibility. It has not yet occurred to the objector that between libertinism and straitjacket and presupposed by the free market there stands the free and responsible human being: free only because responsible, and responsible only because free.

So I am not trying to trash the market. In a critical sense the market is never wrong no more than a valid equation or proposition of logic is ever wrong. It's just that, understood as a mathematical abstraction, the market does not give us a single certainty about human welfare and the assumption that it does inevitably leads us away from human welfare.



Devices of the Soul. Battling for Our Selves in an Age of Machines
Devices of the Soul: Battling for Our Selves in an Age of Machines
ISBN: 0596526806
EAN: 2147483647
Year: 2007
Pages: 122
Authors: Steve Talbott

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