Chapter 4 of Common's Institutional Economics is about the english philosopher David Hume and Charles Sanders Peirce the scientist and pragmatist philosopher. The main point of this chapter is to present Commons conception of the human mind and human behavior in the context of these two thinkers. Upon re-reading this section recently, I realized the importance of this chapter, which is a relatively short one for Commons, on his whole project.
The chapter started with his understanding of David’s Hume's conception of the human mind. Hume is well known for his extreme skepticism in breaking down that the human intellect is not as real as we think and further that the soul isn't real either. Some accused Hume of trying to demolish both science and religion. Hume was also known for stating that cause and effect were not real but only real in our mind in that we inferred cause and effect and we did not actually observe it in reality. I will leave it to the reader to determine their thoughts on this particular point.
Commons is interested in Hume because he attempts to deconstruct the idea from the english philosopher John Locke that human reason and intellect, in isolation for each individual, are the basis for economics, ethics and even law. Commons writes at the end of the section on Hume that he destroyed the idea of the “passive mind” and pushed us towards the “active mind”. The passive mind is one where the outside world is being perfectly reflected in the mind. Further, everyone's mind would have the same internal reflection of reality. This means that we should all be able to use human reason and intellect and come up with the same principles of how the world works and how we should construct human society. Hume is fighting against this idea and stating our minds reflect the outside world based on our experiences and feelings and this is not the same for all. That said, he only started the process of getting us to the idea of the active mind and next we turn to Sanders.
Peirce was an American pragmatist philosopher and scientist around the turn of the 20th century. His most important idea was that science and scientific investigation was based on a consensus of opinion by experts. The truth of an idea was whether experts agreed that a certain cause leads to a certain effect and that this relationship is provien out in empirical reality and evidence. John Dewey and William James, also American pragmatists, took this one step further and stated that the truth of an idea was based on the desirability of its consequences, not just the expectations of an effect or consequence. Common states a number of key definitions from this:
Bias is individual opinion
Science is consensus of opinion (social)
Habit is individual repetition
Custom is social compulsion imposed on individuals by the collective opinion
Also important to Commons was that Peirce’s active mind was organizing and reorganizing external stimulus and impressions. Thus, we see Commons typing to understand that individuals are constantly and actively trying to understand the world around them and at the same time relying on habit and custom to operate in a world where some set of stable expectations is needed to operate on a daily basis. Equally important, we are not just organizing and reorganizing information but using that process to predict the future of both our own and others actions and consequences. Thus, Commons is equating pragmatism with his idea of futurity.
Finally, Commons states he will use both Peirce and Dewey in institutional economics. Pierce gives us the idea that our investigation should be based on the active mind concept with a future orientation. Not everyone's active mind will be the same internally but there are important social influences on all us through collective will and opinion that create some stability of expectations and actions amongst most people. Commons also believes we can use Dewy and James ideas of the desirability of consequences when we are trying to understand what might motivate individuals and going concerns in their actions.
In summary we quote Commons from the very last sentence of the chapter, “Peirce's pragmatism, applied to institutional economics, is the scientific investigation of these economic relations of citizens to citizens. Its subject-matter is the whole concern of which the individuals are members, and the activities investigated are their transactions governed by an entirely different law, not a law of nature but a working rule, for the time being, of collective action.”
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