E. M. S. Anno II n. 3 Settembre-Dicembre 2010 Ricerche/Articles

3. The indefinite benefits of reputation

Turning to Constitutional Code and its preparatory materials, the reader is struck by the even more central role played by the principal-agent logic in Bentham’s reflection on representative democracy as a form of government that aims to avoid or minimise the ‘sinister interest’ of governors (Dinwiddy 1975, 1989; Hume 1981; Rosen 1983). The principle of ‘union of interest with duty’ becomes the main pillar of Bentham’s political analysis (Schofield 1996; 2006: 110–11, 137–40). Bentham’s starting point is that normally constituted individuals, in whom self-interest naturally prevails over ‘other-regarding motives’, if endowed with power and social status, will invariantly profit from them to pursue their private interests. Self-interest becomes in these cases a ‘sinister interest’ opposed to the general interest of society. In this situation, the main political question consists in discovering those mechanisms that secure ‘responsibility’, i.e. the ‘junction’ of interest and duty. At the political level, the solution consists in transferring the sovereign power into the hands of the greatest possible number, and attributing the legislative power to an assembly elected with ‘virtually’ universal suffrage. Another problem analysed by Bentham is that of the ‘aptitude’ of the civil servants who compose the State machinery. The problem consists in selecting a bureaucratic class with top professional and moral qualities, disinclined to corruption and willing to work hard in the interest of the governed. Bentham (1830a: 21) divides ‘aptitude’ into three branches: ‘intellectual’ (mental skills and education), ‘active’ (productivity), and ‘moral’ (probity) aptitude. Of these three branches, ‘moral aptitude’ is the most important.

The psychological underpinnings of Bentham’s analysis are still those presented in An Introduction to the Principles of Morals and Legislation (1789), and re-examined in a coeval unfinished work entitled Deontology (Bentham 1814-1831): individuals are calculative beings who try to maximise their own well-being in every circumstance. Inspired by Cesare Beccaria, Bentham argues that sinister interest is in an inverse ratio both to the amount of punishment and to the probability of detection (Bentham 1838-43, I: 398). Individual choice depends on the calculation of the costs and benefits of the crime of corruption: ‘commit it he will, if in his eyes the benefit of the depredation is greater than the burthen from detection: probability in regard to detection being taken into account’ (Bentham 1830a: 357).

In this framework, a crucial questions is the relationship between the amount of wages of civil servants and their propensity to be corrupted. Bentham criticises the moderate view expressed by Edmund Burke in 1780^7, that high salaries prevent corruption (Bentham 1830a: 358-59; 1830b: 44 ff.). Although he had partially shared this argument in his early writings on reward, Bentham is now convinced that, with high salaries ‘attached to the office, the endeavour to commit depredation [cannot] be prevented, or at least in an adequate degree improbabilized’ (Bentham 1830a: 356). Bentham advances many arguments in support of this statement. He argues that although ‘necessity’ incites to corruption badly paid officials (ibid.: 139, 357), well paid ones may equally be inclined to corruption, since social standing and patronage create additional and more expensive needs. ‘Opulence’ is therefore a cause of corruption.

On the normative side, the goal of the legislator consists in minimising corruption, since it is impossible to eliminate it altogether (ibid.: 89). Bentham’s strategy is based on three mechanisms: 1. ‘Public examination system’; 2. ‘Pecuniary competition system’; 3. ‘The choice left to the locating functionary’ (ibid.: 350), and the ‘location of subordinates by effectually responsible superordinates’ (ibid.: 23).

From the point of view of economic analysis, the most interesting proposal is the second. In chapter IX, sect. 17, of Constitutional Code, Bentham suggests that a system of competitive examinations must be institutionalised in order to ascertain the intellectual and professional characteristics of applicants. Once this procedure has been completed and the results of examinations have been published, the Prime Minister must summon the best ranked and set up an auction among them. This auction may be ‘reductional’, ‘emptional’ or a mixture of both (ibid.: 338). In case of ‘reductional’ auction, the winner is the candidate who accepts the lowest salary, whereas in case of ‘emptional’ auction the office goes to the one who offers the largest sum. However, the Prime Minister is not strictly obliged to accept the best bid, since he must also weigh the ‘intellectual’ and ‘active aptitude’ of candidates.

There are many reasons to doubt that such a mechanism would at the same time minimise the cost for taxpayers (ibid.: 299-311) and highlight the best qualities of candidates, still less their ‘moral aptitude’, as Bentham believed (ibid.: 298, 395-96, 353). However, Bentham was convinced that the fact of accepting low salaries or being disposed to pay for getting offices were signs of a high subjective ‘relish’ for these jobs (see Guidi 2010). This amounted to reappraise the pre-Smithian doctrines on the inverse ratio between wages and productivity (Hutchison 1988: 39) and the ‘sale of offices’ (Bentham 1825: 246-8), which had been the bugbear of many Enlightenment philosophers (see for example Condillac 1776: 341). Bentham did not suspect that low wages may produce ‘adverse selection’, in that the most efficient labourers may be stimulated to renounce to such employments, leaving them to second best applicants (Shapiro and Stiglitz 1984; Weiss 1991). It is important, however, to understand the inner reasons of Bentham’s proposal.

Firstly, the ‘reductional’ or ‘emptional’ auction is called for only among the best ranked in competitive examinations. The goal of the auction mechanism is not to highlight the aptitude of candidates, but to bring to light the appropriate motives for the tasks they will accomplish.

Secondly, Bentham thought that a ‘bearish’ competition for salary or the sale of offices is an instrument for selecting a class of functionaries motivated by the love of reputation, instead of pecuniary interest (Bentham 1830a: 138). A civil servant should correspond to the ideal-type of an individual who prefers social to pecuniary rewards and is insensitive to corruption. Bentham was not naively looking for a disinterested class of statesmen, and was convinced that the self-regarding motives prevail – or it should be assumed that prevail – in every description of people. However, he was convinced that the desire of good reputation, though motivated by the self-regarding pleasures of the popular or moral sanction^8, could serve as an antidote to the use of public resources for private purposes.

Although Adam Smith was not explicitly quoted in this context, Bentham had certainly in mind book 1, chapter 10 of Wealth of Nations, where Smith illustrates his famous theory of the ‘compensating wage differences’ (Weiss and Fershtman 1998: 807-8, 810) determined by social rewards. After stating that, with full mobility of labour and perfect liberty of contracting, wages and profits should converge towards uniform rates, Smith remarks that differences in both variables may arise on account of natural or artificial causes, such as ‘the ease or hardship, the cleanliness or dirtiness, the honourableness or dishonourableness of the employment’ (Smith 1776: 117). There is a trade-off between the social prestige of a profession and its pecuniary remuneration⁹:
Honour makes a great part of the reward of all honourable professions. In point of pecuniary gain, all things considered, they are generally under-recompensed […]. Disgrace has the contrary effect. The trade of a butcher is a brutal and an odious business; but it is in most places more profitable than the greater part of common trades. The most detestable of all employments, that of public executioner, is, in proportion to the quantity of work done, better paid than any common trade whatever (ibid.).
The same applies to profits (ibid.: 118). Smith explains compensating wage differences as an effect of emulation. Explaining the reasons why ‘all the most generous and liberal spirits are eager to crowd into’ intellectual professions, he states:
Two different causes contribute to recommend them. First, the desire of the reputation which attends upon superior excellence in any of them; and, secondly, the natural confidence which every man has more or less, not only in his own abilities, but in his own good fortune (ibid: 123).
In Theory of Moral Sentiments Smith (1759: II.III.III, especially pp. 105-6) had spoken of self-confidence as one of those providential ‘deceptions’ that encourage human beings to improve their condition. Self-confidence is inappropriate in lotteries or in insurances, but is vital in inciting the younger generations to invest a lot of energies in education. Criticising the incumbencies of the clergy, Smith states that, thanks to reputation, ‘the hopes of much more moderate benefices will draw a sufficient number of learned, decent, and respectable men into holy orders’ (Smith 1776: 148).

Therefore, the ‘crowding in’ of people in honourable professions explains their low equilibrium remuneration, although from a subjective viewpoint the recipients of such a remuneration are perfectly satisfied owing to the compensation effect of social rewards.

Finally, the same effect exists also within a same profession:
To excel in any profession, in which but few arrive at mediocrity, is the most decisive mark of what is called genius or superior talents. The publick admiration which attends upon such distinguished abilities, makes always a part of their reward; a greater or smaller in proportion as it is higher or lower in degree. It makes a considerable part of that reward in the profession of physick; a still greater perhaps in that of law; in poetry and philosophy it makes almost the whole (ibid.: 123).
The mechanism of ‘pecuniary competition’ suggested by Bentham has similar albeit non identical implications. Firstly, whereas Smith believes that the labour market spontaneously generates compensating wage differences, Bentham proposes an institutional mechanism that artificially produces a polarisation of the labour market: those who rank pecuniary rewards first are left to the private sector, whereas those who prefer social rewards are recruited into the public sector. Secondly, as already explained, the main goal of such a dual division of the labour market consists in minimising corruption. And thirdly, the social reward Bentham has in mind is not so much honour or status as reputation.

This third implication is worth some comments. As the preliminary remarks to the 1825 edition of the Rationale of Reward quoted above at the beginning of section 2 reveal, Bentham’s democratic theory was characterised by a ruthless opposition to any kind of aristocratic privilege. Therefore, the love of reputation that Bentham recommended was radically different from honour and status, and the use of complicated scales of ranks, honorary rewards, pensions, sinecures etc. was now regarded with extreme suspicion. Insofar as distinctions confer greater ascendancy and power, they inevitably encourage abuses (Bentham 1822: 30-34). Even the most symbolic and ineffectual species of distinction should be circumscribed. As Bentham’s legislator declares:

A similar attitude permeates Deontology. In section I.21 of this work, Bentham examines the ‘[f]ictitious entities deriving their import from the pleasures and pains of the popular or moral sanction’. After listing, among them, ‘1. Reputation; 2. Honour; 3. Renown; 4. Fame; 5. Glory; 6. Dignity’ (Bentham 1814-31: 229), he argues against the ‘shared opinion that these motives cannot be carried to excess’. This opinion, he goes on, is false, because the pursuit of honour and status creates ‘one of the most fruitful sources of improbity and consequent mischief that are any where to be found’ (ibid.: 230). The magnitude of this mischief depends on the scope of the field of action over which the influence of a person extends. ‘Applied to national or international concerns, they operate as incentives to misrule in the shape of usurpation of power, or to war’ (ibid.). However, in section I. 22, Bentham makes a distinction between ‘vanity’ and ‘pride’. Both aim at ‘the esteem of that portion of the human race upon which [an individual’s] well-being is regarded by him as in any way depending’ (ibid.: 234). But pride is a desire of esteem accompanied with contempt for those on which esteem depends. Vanity is a desire of esteem unaccompanied by such a contempt. Therefore whereas pride is generally a vice, vanity may be a virtue. Vanity often produces beneficence­ motivated by the love of praise or even by a mixture of vanity and pure benevolence (ibid.: 237). On the other hand, a sentiment of pride is typical of the ruling few and generates every sort of misgovernment and abuse (ibid.: 236-7). But among the ruling few, vanity can also compensate and reduce the influence of sinister interest:

After declaring that when he wrote his manuscripts on reward he had only an indirect knowledge of Catherine’s Scale of Ranks (U.C. CXLIII, 101), Bentham affirms that, differently from the military department, the object of this mechanisms was that of creating among civil servants a hierarchy ‘not of power, but of factitious dignity’ (U.C. CXLIII, 104). He then distinguishes what renders a ‘factitious dignity’ ‘ill-adapted to the increase of the beneficial service’, from what makes it a ‘purely and extensively mischievous’ reward (ibid.). From the first point of view, the problem is one of inappropriate incentives. Significantly, Bentham uses an economic metaphor to define this problem:

But a scale of ranks is also dangerous, since it favours the ‘sinister interest’ of the ‘ruling few’: ‘Whatsoever be the hands by whom it is drawn, the application made of it will be the purchase of service in some shape or other, for the particular and exclusive benefit of the drawer’ (U.C. CXLIII, 104). In a monarchy, for example, the issuing these ‘drafts’ is ‘almost exclusively in the power of the Monarch. The service for which it is drawn will therefore consist in obsequiousness to his will, or to that of those who [are] in favour with him, or to that of those who are in favour with them’ (U.C. CXLIII, 111). The mischievous consequence consists in this case in ‘making an addition to a power already too great without it: a power employed in the promotion of an interest opposite to that of the greatest number’ (U.C. CXLIII, 112)

Another mischief of such a hierarchy of honour is that it creates or encourages aristocratic behaviour. Bentham discusses this case with the help of the classification of pleasures and pains he had already employed in Rationale of Reward. He still admits that the great advantage of such a scale consists in the amount of ‘pleasure of expectation’ it creates in ‘the rank composed of the great majority of the people’ (U.C. CXLIII, 112. See also 108).
This accordingly is the case in Russia. But in Ireland, suppose a scale of this sort introduced and four or five hundred thousand Orangists admitted into it, while the six millions of Catholics remained excluded. What would be the consequence? The utmost possible quantity of enjoyment capable of being infused into the privileged class would in a prodigious degree be outweighed by the pain of humiliation injected [?] into the breast of the degraded class (ibid.).
This example should not be misleading. Bentham has already argued that every allocation of honours is arbitrary and inspired by ‘sinister interest’. The suggested ‘humiliation effect’ is therefore systematic.

For these reasons Bentham concludes that such a scale of ranks in incompatible with ‘a well organized representative democracy’, i.e. a government ‘which has for its end in view the greatest happiness of the greatest number’ (U.C. CXLIII, 112). There is only one acceptable method of encouraging the production of ‘extraordinary services’:

Although these arguments on Catherine’s ‘scale of ranks’ remained unpublished, Bentham as usual recycled and restated them in sect. 15 of chapter IX of Constitutional Code. The thrust of this section is that the love of good reputation does not require ranks, since it consists in the simple spectator’s approval, or in the ‘natural reward’ awarded by the ‘Tribunal of Public Opinion’ for the services that politicians and civil servants guarantee to the public (Bentham 1830a: 301). It is not important to enjoy a higher status than others, but simply to attract the good will of the public. Contrarily to honour and status, reputation does not depend on our relative position in society, but on being among those who are worthy of admiration. In modern economic terminology, whereas the positional goods related to status are intrinsically private (since they are both rival and excludable), good reputation is excludable but not rival (it is a ‘club good’), since the fact of being approved for acting in the community’s interest does not limit the approval of all those who behave in the same way (although it excludes those who do not). It is true that there are different degrees of reputation, as far as there are different degrees of merit. But these consist in purely quantitative degrees of good will, not in rigid qualitative distinctions. Finally, although honours and ranks can be removed, they enjoy a high degree of stickiness, whereas ‘public respect’ is strictly contingent on merit and lasts only as long as merit subsists (ibid.: 304). The benefits of reputation are therefore a scarce (and therefore costly) resource. These are the reasons why reputation cannot generate aristocracies, privileges and corruption.

However, Bentham admits that among the benefits accruing to honest and efficient public officers there are not only ‘appropriate sentiments of love and respect’, but also ‘the special good will, good offices, and services, in whatever shape, tangible or intangible, naturally flowing from these sentiments’ (ibid.: 301). The incentives that induce at least a part of humankind to undertake a career in the civil service are accordingly both reputation, and the material and immaterial advantages deriving from reputation. These benefits should be approved by the legislator, provided that they do not trespass the threshold of peculation (ibid.: 89). In conclusion, the ultimate result of competition for public offices seems to be the improvement of personal well being as a result of social esteem.