Julian Sheather on the day that human nature changed

At a certain point in life you start eyeing the word ‘crisis’ suspiciously. Inflationary pressures in the media devalue the linguistic coin and you could be forgiven for thinking that journalists have given up getting out of bed for anything less than a fully fledged catastrophe. But even a troglodyte like me cannot escape a sense that something seismic is taking place. Slightly more than six months ago, the global banking sector failed. The costs are going to hobble a generation. Over the last fortnight, the Telegraph has drip-fed the media with ever more depressing accounts of the petty venality of MPs. It is not the scale or the audacity of the claims that kills, it is their banality. Parliamentary democracy ends not in a bang but a whimper. Within less than a year, two of the UK’s leading institutions are on their knees.

There are of course many reasons why these institutions have failed, and many dimensions to their failure, but I want to talk about one. For too long, public life and public policy have been dominated by a facile view of human nature, a view that has been taken over without qualification from political economy. According to this view human beings can best be understood as self-interested actors in rational pursuit of preference satisfaction. Not homo sapien but homo economicus. There are two parts to this view. The first is descriptive, the second evaluative. The first part states that human beings will act in such a way. The second, or evaluative part, is that this is good, in the sense that it will maximise overall public benefit. This is sometimes referred to, following Adam Smith, as ‘the invisible hand’. Acting according to our self-interest will lead to socially desirable outcomes. Combined they add up to the view that, despite some fairly convincing evidence to the contrary, economies should be seen as mechanical systems governed by predictable and universally applicable laws that maximise overall social benefit.

Before I am castigated for setting up straw men it needs to be said that those who fashioned the original theories were not putting them forward as descriptions of reality. ‘Political economy’, wrote John Stuart Mill, ‘does not treat the whole of man’s nature…it is concerned with him solely as a being who desires to possess wealth, and who is capable of judging the comparative efficacy of means for obtaining that end.’ Nor is there a shortage of contemporary critique and qualification. Theoretical simplifications can provide useful knowledge. But when put to practical ends, complex theories seem inevitably to lose their subtletly and nuance. What was a restricted model to try and make sense of economic activity turns into a template for human kind. And this is the bloodless wraith that has been stalking the corridors of power for too long.

Asked to search out a plausible description of human nature I would avoid economists. In fact I would avoid academics of any sort. I would give my vote to a good novelist. Here is Iris Murdoch.

The psyche is a historically determined individual relentlessly looking after itself… The area of its vaunted freedom of choice is not usually very great. One of its main pastimes is daydreaming. It is reluctant to face unpleasant realities. Its consciousness is not normally a transparent glass through which it views the world, but a cloud of more or less fantastic reverie designed to protect the psyche from pain. It constantly seeks consolation, either through imagined inflation of self or through fictions of a theological nature. Even its loving is more often than not an assertion of self.

Granted there may be a little more Freud in this than we like these days, but, as Murdoch herself says, ‘I think we can recognise ourselves in this slightly depressing picture.’ Self-obsessed, given to fantasy, driven by libidinal energies, prone to ducking uncomfortable truths in favour of consoling day dreams – given recent events, isn’t this a slightly more plausible view of human beings than self-interested rational actors?

Virtuous behaviour is difficult. Even those who are good at it are bad at it. Self-interest is strong and shows remarkable cunning. Conscience is intermittent and weak. Recognising this, institutions have been crafted over the years to assist us in our exercise of virtue. Institutions, when they work properly, put limits on power and mitigate its abuses. They hold it accountable. They call for transparency. They create opportunities for those affected by decisions to have their say in them. Recognising the limits of our virtue, institutions have been developed to restrict our ability to exercise vice. Throw in a sunnier view of human nature however, combine it with the idea that personal vice actually amounts to public virtue, and the role of institutions begins to change. Instead of dampening our excesses, they begin, subtly to promote them. This is surely what happened in finance. Institutions that should have curtailed greed for the sake of wider public interests began to promote it. The rest is painful recent history.

Perhaps though, to strike an optimistic tone, one good thing to emerge from the credit crunch could be the abandonment of homo economicus and the recognition that human beings are more complex, and more questionable by far. And with it the recognition that we need virtuous institutions to help protect us from ourselves.

Julian Sheather is ethics manager, BMA. The views he expresses in his blog posts are entirely his own.