The film tells the story of how a 'fairy scientist', Zarina, undertook an experiment, which went wrong. In response, Zarina left the fairy kingdom, taking pixie dust, and got involved with the young Captain Hook. Hook had convinced Zarina that they were a team, but in fact the pirate was using the fairy so that he could use Zarina's knowledge of pixie dust to get his ship to fly in order that he could become the most powerful pirate. Eventually, other fairies, led by Tinkerbell, rescued Zarina, by showing who her friends really were, and she was bought back into the fairy-fold.
I saw the film around the time I spoke at the Circling the square: Research, politics, media and impact conference last year and there was coverage of the idea that U.S. high tech firms were considering going 'off-shore' so that they would escape regulation. On the face of it, there seemed to be a connection between Captain Hook and the Seasteading Institute or Andreessen Horowitz.
These thoughts returned to me while reading Albert Hirschman's The Passions and the Interests: Political Arguments for Capitalism before Its Triumph on the advice of @tcspears. From the back-cover
In this volume, Albert Hirschman reconstructs the intellectual climate of the seventeenth and eighteenth centuries to illuminate the intricate ideological transformation that occurred, wherein the pursuit of material interests - so long condemned as the deadly sin of avarice - was assigned the role of containing the unruly and destructive passions of man. Hirschman here offers a new interpretation for the rise of capitalism, one that emphasizes the continuities between old and new, in contrast to the assumption of a sharp break that is a common feature of both Marxian and Weberian thinking.Hirschman begins his story with Machiavelli and highlights the following paragraph in Chapter 15 of The Prince
But since it is my [Machiavelli's] object to write what shall be useful to whosoever understands it, it seems to me better to follow the real truth of things than an imaginary view of them. For many Republics and Princedoms have been imagined that were never seen or known to exist in reality. And the manner in which we live, and that in which we ought to live, are things so wide asunder, that he who quits the one to betake himself to the other is more likely to destroy than to save himself; since any one who would act up to a perfect standard of goodness in everything, must be ruined among so many who are not good. It is essential, therefore, for a Prince who desires to maintain his position, to have learned how to be other than good, and to use or not to use his goodness as necessity requires.In 1532 Machiavelli appears to be making precisely the same point as behavioural economists make today, it beggars the question: what progress have we made in almost 500 years?
Hirschman identifies this passage as the start of the 'fact-value dichotomy' that features in Hobbes, Spinoza, Rousseau and, most famously (for English speakers?) in Hume. It reminded me that during the Enlightenment, when the consensus was on the dominance of the passions, today the fact-value dichotomy is invoked to ensure policy is guided by positivist, 'rational', arguments.
Before the nineteenth century the view was that humans, as they really are, are governed by their passions (in particular, lust, the excessive passion for love; pride, the excessive passion for honour, and avarice, the excessive passion for wealth) and during the seventeenth century there was discussion of how a damaging passion can be harnessed by another passion: a person sublimates their adulterous lust by their desire to be honoured.
Hirschman notes that these thought processes originate in political theory, where the entity in question is the state, but they become applied to individuals, or in the case of Mandeville, how a skilled politician should be able to harness the passions of the people to the benefit of the state. In particular, Mandeville identifies how personal avarice can be used to temper the other passions.
In Hirschman's account 'Interests' become the main tamers of passions and by the nineteenth century they are equated with wealth, due mainly to Adam Smith and from this point individual profit maximisation emerges as a virtue that results in public good. Interests guide the hidden hand.
Hirschman notes that the noun 'interest' is difficult, and this is covered in the current edition of the Oxford English dictionary:
There is much that is obscure in the history of this word, first as to the adoption of Latin interest as a noun, and secondly as to the history of the Old French sense ‘damage, loss’. No other sense is recorded in French until the 16th cent. As this was not the 15th cent. sense of English interess(e), it is curious that the form of the French word should have affected the English. The relations between the sense-development in French and English in 16–17th cent. are also far from clear.The main meaning of the word 'interest' is
with the earliest example coming from 1450 "Noon of youre Liege peple hafuyng interest, right or title, of or in ony of the premisses." and in 1478 we have "He neuer knywe..þat I hadde any clayme or entrest in the maner off Heylesdon.".1. The relation of being objectively concerned in something, by having a right or title to, a claim upon, or a share in.a. The fact or relation of being legally concerned; legal concern in a thing; esp. right or title to property, or to some of the uses or benefits pertaining to property;
Relevant to our discussion is the second definition
with a 1533 use "Without interest we commit sinne, seeyng peyne commyng withall." This is significant as it highlights the role of interests in repressing sin.2.a. The relation of being concerned or affected in respect of advantage or detriment; esp. an advantageous relation of this kind.
with a 1579 example "Caried with ambicious respectes touching their interests and desires particular."b. That which is to or for the advantage of any one; good, benefit, profit, advantage.
The OED places the financial meaning as secondary, but older:
II. Senses related to medieval Latin interesse, as used by Matthew Paris a1259, and frequently from 13th c. (see Du Cange), in the phrase damna et interesse, in French legal phraseology dommages et intérêts, the indemnity due to any one for the damage and prejudice done to him. Cf. Old French interest (1290 in Godef.) in sense ‘damage’, also recompense for damage done or caused, ‘damages’. In sense 10 French interest (now intérêt) occurs in Rabelais, 1535.
9.a. Injury, detriment.
9.b. Compensation for injury, ‘damages’. (French dommages et intérêts medieval Latin damna et interesse.) Obs. rare.and the examples are two hundred years older than the common meaning: 1259 Propter usuras, pœnas,et Interesse, or 1274 Tam super principali, quam super custibus, dampnis, et interesse refundendis
and the penultimate meaning is the technical, financial, meaning
10. a. Money paid for the use of money lent (the principal), or for forbearance of a debt, according to a fixed ratio (rate per cent.).
In medieval Latin interesse (Interest) differed from usura (Usury) in that the latter was avowedly a charge for the use of money, which was forbidden by the Canon Law; whereas originally ‘interesse refers to the compensation which under the Roman Law, was due by the debtor who had made default. The measure of compensation was id quod interest, the difference between the creditor's position in consequence of the debtor's laches and the position which might reasonably have been anticipated as the direct consequence of the debtor's fulfilment of his obligation’. This compensation was always permissible when it could be shown that such loss had really arisen (damnum emergens). At a later period, lucrum cessans—loss of profit through inability to reinvest—was also recognized as giving a claim to interesse; both cases appear to be included in the formula damna et interesse. The interesse was originally a fixed sum specified in the contract; but a percentage reckoned periodically, so as to correspond to the creditor's loss, was afterwards substituted (as sometimes in England in the first half of the 13th cent.). Interest in the modern sense was first sanctioned by law (though apparently under cover of the mediæval theory) by 37 Hen. VIII, c. 9 (see quot. 1545); this statute was repealed in 1552, but re-enacted in 1571.
1529 King Henry VIII Instr. Orator Rome, Which money..shalbe truely repayde with interesse.
1545 Act 37 Hen. VIII c. 9 §3 Be it also enacted..that no person or persons..by way or meane of any corrupte bargayne, loone, eschaunge, chevisaunce, shifte, interest of any wares..accepte or take, in lucre or gaynes, for the forbearinge or givinge daye of payment of one hole yere of and for his or their money..above the sume of tenne poundes in the hundred.Originally interest was the charge a debtor had to pay a creditor for non-repayment, it was a compensation payment. In the Middle Ages, this damnum emergens became lucrum cessans, a payment from the borrower to the lender in compensation for the loss of investment opportunities available to the lender. Over time interest came to indicate "a right or title to, a claim upon, or a share in" something.
It is here that I see the crux, interests imply a stake suggesting that the hidden hand will only work if an individual has a stake in society.
One aspect of Hirschman's account that had me thinking is that the implication was there is an internal dialogue taking place within individuals, there was no reference to the external, cultural pressures, on an individual.
The reason I thought about this is that when faced with a moral decision, I am not concious of sublimating one passion with another, rather I am concious of peer-pressure, what my friends and family might think of me. I guess in the framework that Hirschman presents this would be covered by 'honour', and maybe explicitly highlighting the fear of shame, a feature of Calvinism, might not be well received by an 'Enlightened' audience. Another explanation could be that the likes of Montesquieu, Hume and Smith took it as given that an individual is a part of the society that they will improve by pursuing their personal interests. None the less, it struck me that if the individual is set adrift from their society and culture, their morals are likely to be compromised (anyone who has experienced working as an ex patriate might be familiar with this phenomenon; I witnessed it working in Abu Dhabi in the 1990s, where adultery was the norm amongst westerners, not the exception). This to me is a the heart of The Pirate Fairy, and a central risk of Seasteading.
One character whom one might expect to appear in Hirschman's account, but does not, is Hugo Grotius. Grotius is widely regarded as setting the foundations of international relations in the modern era and Hedley Bull describes a contemporary interpretation of Grotius' theory of 'international society' as
A society of states (or international society) exists when a group of states, conscious of certain common interests and common values, form a society in the sense that they conceive themselves to be bound by a common set of rules in their relations with one another, and share in the working of common institutions. If states today form an international society . . . this is because, recognising certain common interests and perhaps some common values, they regard themselves as bound by certain rules in their dealings with one another, such as that they should respect one another's claims to independence, that they should honour agreements into which they enter, and that they should be subject to certain limitations in exercising force against one another.On the basis of Hirschman's claim that during the seventeenth and eighteenth centuries, philosophers adapted state-craft to individual behaviour, I think we can gain insight into the role of interests in guiding the hidden hand by replacing 'state' with 'individual' in the above quotation.
My intuition is that if people become alienated from society then we can't rely on their self-interest promoting the well-being of society, as proposed by Smith and others. When Zarina becomes alienated from the other fairies she loses here good judgement. Whether Seasteaders can construct a 'new Jerusalem', as the puritan immigrants to north America set out to do in the seventeenth century, remains to be seen. But I am doubtful: the 'founding fathers' had a definite moral compass that bound them together, not an infantile desire to do as they see best justified by their personal wealth.
Mark Carney's recent Mansion House speech touches on some of these issues. For example, when Carney argues that
The Bank of England’s general approach was consistent with the attitude of FICC markets, which historically relied heavily on informal codes and understandings. That informality was well suited to an earlier age. But as markets innovated and grew, it proved wanting.can the "informality was well suited to an earlier age" be interpreted as that when the City was less 'global', and market participants closer to each other, they shared 'common interests' which become diluted as traders become separated and potentially alienated (as in the case of Zarina).
Carney goes on to argue that "Real markets are resilient, fair and effective. They maintain their social licence." and "Real markets don’t just happen; they depend on the quality of market infrastructure." Developing these themes, he highlights the final report the Fair and Effective Markets Review, noting that
Firms’ systems of internal governance and control that were incapable of asserting the interests of firms – let alone the wider market – over those of close-knit trading staff;highlighting how market participants must share common interests that transcend the local interests of trading cliques. Carney goes on to observe that the result was
All these factors contributed to an ethical drift. Unethical behaviour went unchecked, proliferated and eventually became the norm. Too many participants neither felt responsible for the system nor recognised the full impact of their actions. For too many, the City stopped at its gates, though its influence extended far beyond.I am fairly sure that these comments are relevant as much to those advocating Seasteading as Fixed Income, Currencies and Commodity traders cast adrift from broader society.