History and context of journalism; Lecture 3/Seminar Paper.

In 1789 a revolutionary book was published which changed moral and political thinking – an introduction to the principles of morals and legislation, written by Bentham which founded utilitarianism.

Bentham had strong views on the English legal system and thought it to be ‘cumbrous, artificial and incoherent’ and that should be recreated from the ground up in the light of sound principles of jurisprudence.

He based his own ideas on utility on Hume’s ‘treatise of human nature’ – utility was the test and measure of all virtue and the sole origin of justice. After reading an essay of John Priestley’s, he interpreted utility to mean the happiness of the greatest number of citizens and was the standard by which the affairs of a state should be judges –the true goal of legislation was the greatest happiness to the greatest number. Bentham’s book outlines the purposes and limits of punishment, along with the principle of utility.

Economics is considered a science which analyses the production, consumption and distribution of products and services, and could be considered to be biased around the ideas of utilitarianism in that economic theories and systems aim to give the greatest happiness to the greatest number.

Adam smith was one of the first economists, during the enlightenment and wrote the book ‘The Wealth of Nations’ this questioned why one country was richer than another.  He believed that a wealthy nation needs to be free – free trade and individuals. Our morality leads us to be pleasure seeking and selfish individuals, but our free will adds to the wealth of a nation. Our will drives the hidden hand of the market which drives production through competition. Smith’s views on morality link to Bentham’s idea of utilitarianism and our constant drive for pleasure, even if it means causing someone else pain.

David Ricardo believed in the spirit of values of things and believed that raw materials have no real value. It’s once we apply conscious effort to it then becomes valuable. This is a rejection of Smith’s ideas as he believes value is created through trade – hence his emphasis on the hidden hand of the market.

Thomas Malthus like Smith and Ricardo, Malthus believed that we are selfish beings and that this caused an economic problem of its own;  our recourses are limited and eventually we will all starve to death because of our wants, as well as our constant fear of poverty and starvation.

Karl Marx believes that the only source of value comes from labour and that wages will keep decreasing because of the constant growth in population. For Marx the idea of profit and capitalism had fundamental flaws; eventually we won’t be able to afford to buy what is being produced because the labour force will not be earning enough money – they will be exploited - which would lead to an economic bust. In some ways, Marx’s theory came true in the great depression and as wages dropped, unemployment did also and the price of products rose.

A solution to this, though it has its downfalls, was suggested by John Keynes who used his criticisms of classic economics to form his modern principles.

‘The General Theory of Employment’ was written by Keynes to find a solution to the problem of mass unemployment during depression; it was clear from the slump in the economy that capitalism was failing and he believed that the only way to correct mistakes of previous economists was to make institutional changes to restore the economy. Keynes strongly believed that the faults which lead to such dramatic depressions had ‘narrow’ and ‘technical’ causes, arguing that the solution would also be narrow and technical and emphasised that there was no need for state socialism – despite many at the time believing this was the answer. But a shock to many economists who believed strongly in a self-regulating free market, Keynes suggested that a range of less intrusive government policies could revive the market.

Paul Krugman highlighted four main conclusions of Keynes’ ‘The General Theory of Employment.’

-          The first, economies can and often suffer from an overall lack of demand, which leads to involuntary unemployment.

-          The second, the economy’s automatic tendency to correct shortfalls in demand, if it exists at all, operates slowly and painfully.

-          The third, government policies to increase demand, by contrast, can reduce unemployment quickly.

-          And the fourth, sometimes increasing the money supply won’t be enough to persuade the private sector to spend more, and government spending must step into breach.

The purpose of Keynes theory was to make the above points thinkable, but this proved difficult because they stepped away from the previous theory of the economy and involved the intervention of the state.

The first book of The General Theory of employment outlines Keynes’ manifesto, taking conventional views of the relationship of wages and employment and outlines the mistakes in its structure. This led him to the conclusion that cutting wages made no sense as a method of reducing unemployment – book five emphasises this idea; his theory suggested that solving the problem was easy.

Keynes had a huge struggle in turning people’s thoughts away from classical economics, in this case Say’s law, which suggest that products pay for products because income must be spent and that booms and busts are natural and inevitable. Controversially, Keynes called the ‘law’ a tautology because people can save the money rather than spend it on goods and service.

Many economists before Keynes chose to explain the workings of the economy, when discussing business cycle, rather than provide answers the important questions like how to increase employment – Gottfried Haberler’s book is an example of this, as it explains why booms are followed by busts. Keynes analyses the reasons for the economy staying depressed, rather than explaining how it got there.

Among modern macroeconomists there is a divide in opinion of whether or not the ideas of Keynes have been left behind for better or for worse.  Krugman argues that this is because they have misunderstood or have not read The General Theory of Employment and because of John Hick’s review of the book, suggesting Keynes failed to give monetary policy. The theory doesn’t dismiss it, it is discussed and is similar to modern theory.

Keynes’ skepticism about adding money to restore full employment was not a demonstration of his own ignorance – instead it was an observation determined by the state of the economy at the time; that interest rates were so low that little that could be done by increasing the money.

The biggest criticism of Keynes’ theory of employment is that he mistook the episode of the depression in the 1930’s to be part of a trend and would be the norm from then onwards. Keynes’ theory is considered wrong because his idea of ‘euthanasia of the rentier’ was based on a presumption and didn’t take into account the possibility of persistent inflation which lead to his pessimism in monetary policy.

In some ways Keynes system can be linked to the ideas of John Stuart Mill in terms of government intervention; Keynes saw the government as a method of increasing employment, aiming to maximise happiness to the greatest number of people and Mill believed that the government could give individuals a stepping stone to improve their happiness, by reducing the gap between those more well off.  Though, he did emphasised limits to social systems which appeared to cause threat to individual independence.

Mill also believed that to safeguard individual rights the monarchy must remain in place because democracy alone holds the potential of tyranny of the majority and government authority should not be limited because society is capable of exercising other means of coercion. But this should only be acted on when the issue involves a group – not the individual.  This relies on liberty of thought, speech and writing, Mill believes that no level of authority has the right to suppress freedom of expression. This relies massively on the concept of toleration, which is dependent on the individual. Someone may feel that what another expresses effects their liberty. 

Though Mill is out to make sure the greatest number of individuals are happy, Bentham’s views around utilitarianism disregard the individual. He concerned himself with offering guidance to rulers and legislators on the management of community. But there is an issue with the principle - whether or not the aim is to maximise happiness or maximise the number of happy people – it needs limits for example, cutting the gap of inequality in-between the worst and well off or limiting the misery those worse off.