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Commons and Ideas Part 2

Using the ideas expressed in the last post, Commons began to construct the key to his institutional economics methodology which he called the ethical ideal type on pages 741-750 of the second volume of Institutional Economics. He defines the reasonable value as expressed in an ethical ideal type as “highest attainable idealism of regard for the welfare of others that is found in a going concern under existing conditions of all kinds at a given point in historical development.” (Commons, 1934, pg. 741).

What does this mean? It must be attainable by a going concern so it must exist in the world.  It is specific to the time period under investigation and not for all time.  In several places in these few pages, Commons refers to  “regard for the welfare of others”, then a page later he talks about “those above the average in their social regard for others” and again “both private self interest and social welfare”. What are we to make of this focus on social welfare, responsibility and regard for others statements? It could mean that the going concerns themselves exhibit a degree of social responsibility or regard or that from an external point of view there is socially beneficial outcome from the activities of particular going concern.  The language Commons uses clearly points to the former.  These goings concerns are exhibiting a characteristic of considering the social welfare of “others”.  Not, it should be noted, in that they are altruistic but that see it in both their own self interest and the interest of others to act in a certain manner.  If these can be identified in reality as existing going concerns, then the work of collective action is bring those changes forward in all existing and new going concerns in the same field.

Comnmons also rejects certain concepts related to ethical ideal types This is an explicit rejection of ethical ideals that are too lofty or unattainable.  This is a definite tie directly back to pragmatism and his citing of Dewey, James and Peirce in particular.   Unattainable ideas are those that Commons cites as heaven, utopia, communism and other isms….These cannot be used as ethical ideal types to compare existing and real going concerns.

The biggest problem I see is in judging which working rules represent the “highest attainable outcome”.  The question is by whom and for whom do we judge “highest”.  Commons also says we should seek those working rules that are “above average” But again, this seems to beg the question of whom will be the judge of which working rule is above average and from which perspective.  Later, on pages 94-95, he does state that it (the ethical ideal type) should be judged by “best attainable welfare relations of all who participate in transactions”. So again, I think we are seeing that the push here is for outsiders to investigate real going concerns and seek those that achieve have a high level of economic performance for many of those involved in the going concern.

In summary, Commons is quite emphatic about the importance of Max Weber for economic thinking. The ideal type is a thing we use to "a mental tool we construct in order to understand why beings, with emotions like our own, acted as they did....to answer only what and how much they did and what we may expect them to do" (Commons, pg. 727, IE). Thus, it is a comparative analysis and the thing we are comparing is ideal types that describe the world and the outcomes produced by various ideal types.

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