 This afternoon, it's my pleasure to introduce our Henry Haslip Memorial lecturer, David Cohen. He'll be talking to us on economic indulgences, old and new debates on welfare and freedom. His lecture is being generously sponsored by Hunter Lewis. David Cohen is communications advisor, author, and a visiting scholar at Boston College. His latest book, Frank H. Nye, Profit of Freedom, was published just last week by Palgrave McMillan as part of the Great Thinkers in Economic Series, is that correct? Dr. Cohen has 30 years experience as a financial journalist and communications advisor to global corporations. He has worked for various organizations in Europe, North America, and the Middle East, including the World Bank and Clearstream International in finance. He's also worked for the Steel Company, Arcelor Middle, and Petrochemical Company, Sabic. He is the author of Economic Parables, the Monetary Teachings of Jesus Christ, which is in its second edition, and Strategic Internal Communication, How to Build Employee Engagement and Performance, which will be published in a second edition next year. He has written for many publications, including the Journal of Theological Studies. Dr. Cohen has studied theology in Britain at the universities of Glasgow, Oxford, and St. Andrews. That's 2,000 years of educational history there, where he earned his PhD jointly in the schools of divinity and international relations. So I introduce Dr. Cohen. Good afternoon. Thank you, John, for the introduction and my thanks go to Hunter Lewis for the generous sponsorship of this lecture, which has taken place in quite a wonderful setting. I've kind of lived in worse places than this. I'd like to stay on here after the lectures. But it's a privilege to be invited to deliver this Henry Haslip Memorial lecture, which I give in the spirit of economic ideas and philosophy rather than economic theory or what one don at an Oxford University high table dismissed to me as, oh, that's economics without the numbers, to which I said, Tim, well, there's only three kinds of people in this world, those who can count and those who cannot. In this lecture, I will look at a debate in the 1960s between Frank Knight, the subject of the book Joe mentioned, and Henry Haslip memorialized by this lecture. I will look at the dispute that they had on welfare, freedom, and power, which was an important debate then and now. I'll take Knight's observations and apply them to some of the debate today on inequality and what I suggest are economic indulgences, which are referenced in the lecture title. Frank Knight was a curmudgeonly character, who I dare say in our politically correct and oversensitive age would not last long, and certainly would never make tenure, because as we know tenure means never having to say you're sorry. Knight was not the kind of debater or discussant easily given to flights of fancy or express in misgivings. And I was intrigued to see all the names around here on the wall as kind of a who's who of Frank Knight managed to offend. But I assume at least they pass an acquaintance with Frank Knight on the pass of this audience, but perhaps a lamentably short intellectual biographical note is in order. Within the economic world today, he is chiefly noted for the notion of knightly and uncertainty featured in his first book, Risk, Uncertainty and Profit, establishing his reputation in the pantheon of economic thinkers on a book that was essentially his PhD thesis. Knight was brought up in a conservatively theological home, which was also a Republican household. His early undergraduate work was actually at evangelical colleges in the neighboring state to this one. He attended colleges in Tennessee. In spite of all this, he grew up to have distaste for much organized religion. He was particularly against the Roman Catholic Church, but he did attend the Unitarian Church for much of his life. Aside from being kicked out of Cornell's philosophy department, so it wasn't just these guys he annoyed, he managed to do that at Cornell as well. And a couple of years or so at the State University of Iowa, Knight spent his academic career at the University of Chicago. He inspired an almost cult-like devotion amongst his students at Chicago, leading his students, which included most notably Milton Friedman, James Buchanan and George Stiegler, to say there is no God but Frank Knight as his prophet. Knight was a co-founder of the Chicago School, but he was a teacher more than a theorist or producer of books. And it is because Knight was essentially a teacher and a critic that he did not pen the major volumes one might have hoped for. Buchanan, who became a longtime friend of Knight and a Nobel Prize winner, notes in the forward to the 1982 edition of Freedom and Reform that Frank Knight was a critic. And apart from risk, uncertainty, and profit, his work can be interpreted as a series of long book reviews. His work is thus scattered across a host of economic journals in essay form standing on the base of his first and major work. What ideas he had were stated, restated, and then refashioned multiple times in various essays. Hence, the synthesizer's work, which I have attempted to do in my own book, means working through the remainder of his writings comprised of these essays and lectures and book reviews. The most notable being collected in the single volumes of the economic organization, the ethics of competition and other essays, the economic order and religion with T. W. Merriam, Freedom and Reform, on the history and method of economics, and lastly, intelligence and democratic action published in 1960, which is actually the most readable of the lot. Knight himself described his social function as one of exposing fallacies, nonsense and absurdities and what was passed off as sophisticated scientific discourse, that's his quote. His relevance as a great economic thinker for us today, apart from uncertainty and found in the Chicago School, can be stated in a threefold sense. First, he is arguably one of the most interdisciplinary of economists and thus provides a basis on which thinkers can discuss economic issues from their own disciplines. Secondly, he raised issues that are prevalent in the latest stages of capitalism and the issues we currently face and will continue to face in the future. Lastly, he was an economic realist who knew the weaknesses and strengths of capitalism so while remaining a supporter of capitalism as a best system, he also addressed the limitations and difficulties thrown up by this imperfect way of organizing economic affairs without overthrowing what he saw as an ultimately workable system. In pursuing this agenda, Knight found himself, as I've already alluded to in a number of fights, especially with Keynes and the Austrians, with protracted arguments in the 1930s with Friedrich Hayek. In many respects, though, I would typify these not as full-scale arguments but instead boundary disputes somewhat akin to members of the same club or union fighting over the rules of association, which brings me to the boundary dispute that is the subject of this lecture, the one between Knight and Henry Haslott. The journalist Haslott and the academic Knight had a short but fractious relationship in print, which started from the lecture podium at Montpellerem and was waged via the pages of the journal Ethics. For his part, Haslott thought Knight's attacks on him was one quite unprovoked on his part. Having initially fired a salvo or two at Haslott from the podium, Knight committed his more sustained attack to print in an essay published in April 1966 entitled Abstract Economics as Absolute Ethics. In the essay, he offered a critique of Haslott's book The Foundations of Morality. Knight refers to the book as a polemic, at the heart of which lie two chapters entitled The Ethics of Capitalism and The Ethics of Socialism. Knight started out by stating that Haslott's book demonstrated good workmanship and the makings of a good treatise on socio-political ethics. A kind of condescending could do better is the tenor of his remarks. This is because he surmised that Haslott's work contained many of the faults he believed that defenders of capitalism tend to have, namely that it was the kind of oversimplified extremist propaganda that ignored change in theory and practice. Hence, he wrote, Haslott's work failed to deal with the complexity of modern society and defeated the purpose of his argument. Knight outlines the content of the chapters as they apply to ethical rules in terms of the questions of justice, which he says is settled for Haslott by John Bay's Clark's argument in his 1899 book The Distribution of Wealth, with its thesis that free competition tends to give to labour what labour creates, to capitalist what capital creates, and to the entrepreneur what the co-ordinates and function creates. It tends to give each producer the amount of wealth that he specifically brings into existence. This argument Knight quickly points out is fallacious for three reasons. First, there is only a general tendency, he says, to remunerate each product of agent. Second, society does not consist entirely of producers. Lastly, producers are not economic men or homo economicus. Apart from the key factors of economic capacity, labour power and managerial skill and property ownership, Knight points out production also involves a large portion of luck. Hence individual production is due much more to biological and social inheritance for which the individual is not responsible than to the individual's past efforts. Knight concludes that Haslott simply applies a principle of production too broadly, he has an account for these elements. Knight then turns to the ethical argument. Haslott summarizes capitalist ethics as a system of freedom, justice and productivity, which Knight argues cannot be precisely defined, besides which distributive justice has a number of meanings. The real point Knight wants to get to though is against Haslott's individualistic ethic as he sees it, which he argues is individualistic to the extreme, so the point he never even mentions the family. Knight goes on to say ethically one must condemn the unfairness of an unequal start in the competition of life. And this inequality inheritance, as he calls it, he says tends to increase with each succeeding generation. It is this notion of inequality inheritance that is at the heart of the welfare question for Knight, and of course at the heart of notions of injustice tackled by many socialist pamphleteer who wants to overthrow the capitalist system. But to have socialism instead of capitalism is to replace business with politics, and Knight explains that many of the features most objected to in capitalism are in general similar in politics, though in his view very obviously worse. They are very much alike in that functionaries in direct control inevitably have, he explained, much arbitrary power and get their positions chiefly by competitive persuasion or simply by accident. Bivory, which he calls an instrumentally irrational motive, is more natural to men than rational cooperation. Although it permeates both, Knight estates this competitive persuasion takes the form of propaganda and politics and sales activity in business. They do however also differ. Firstly, no one has the power or effective freedom to form a state or jurisdiction except perhaps Donald Trump. While there is some albeit limited power to start a business enterprise, obviously for Knight limited by access to investment skills, inheritance and so on. Second, people are born into a state and into a family, but in capitalism they can choose membership among many organizations. And so for instance a laborer has a wide choice of employers to work for. In pursuing our choices we seek better conditions and Knight explains that when social groups seek better conditions, which they feel are rightfully theirs, their efforts can create social problems since social changes that benefit some can lead to a worsening situation for others. This can lead to a conflict between freedom and progress. For this reason social conflict is not necessarily the off-stated problem simply of order, it becomes a problem of power and I'll return to that later. But first let's see how Haslott responded tonight. For his part, Haslott said, space does not permit me an examination of Knight's own obscure pronouncements, though they seriously need one. He does however offer up a defense against Knight, with the opening salvo of calling Knight's original tack at Montpellere a strange performance. Haslott stated, he did not recognize the opinions attributed to him by Knight in the written assault. In fact he says that Knight probably never even read half of the book that he was critical of and the point on family that I mentioned earlier, Haslott does actually reference the family, though not in the way that Knight would have preferred him to. But Haslott rebuts the number of the points that Knight made and explained his book as a whole is neither polemic nor are the two chapters Knight singles out of the heart of the book. Contrary to Knight, Haslott explained the heart of the book is the much earlier chapter, chapter six on social cooperation. He also rebuts the number of specific points like the family point and the ones I've drawn attention to earlier, but these are now very important to go through and I suspect they are simply a case of an academic and a practitioner talking past each other. Haslott then set out what he considered to be the essential justice of the capitalist method of distribution. As Knight noted, Haslott was drawn on the distribution of wealth by Clark. The central thesis that Clark pointed out, as I pointed out earlier and quoted, merits repeating here, that free competition tends, a word Haslott italicizes, to give to labor what labor creates, to capitalist what capital creates, and to entrepreneurs what the co-ordinates and function creates. It tends to give each producer the amount of wealth that he specifically brings into existence. As I said this last, this is a point that Knight called fallacious, but Haslott points out that while Knight is at pains to make this qualification about a general tendency, as Haslott italics demonstrates it's there already in the text in the original quote, to which Haslott adds that in his own book he explained that certain qualifications were necessary and that he was well aware that Clark's thesis had been contested. However, he suggested much is overlooked in the dispute with Clark and what he wanted to do was to correct this by drawing our attention to three matters. First, Clark was rebutton the Marxian argument that capitalism systemically exploits labor and robbed the workmen of his produce. He argued that Clark in fact proves that the capitalist method of distribution is not inherently unjust, which many people believe to this day, and he states that this falsehood has given rise to unrest, resentment, demagogy, revolutions and wars and now threatened to destroy not only capitalism but civilization itself. Second, Clark and Haslott's view demonstrates the tendency of the competitive market system to give to each what they create and this is in accord with the most generally accepted principle of distributive justice, at least in the first instance of economic reward for labor. He explained then there is nothing to stop people to redistribute their wealth voluntarily and indeed capitalism does nothing to hinder or discourage charity and generosity. Now this problematic is the attempt to coerce by means of a socialist or a qualitative rule, a redistribution that ignores effort or efficiency and destroys incentives and production. True justice, Haslott argues, is not achieved through a leveling down. Lastly, Clark was not really described in a purely economic system in his description of capitalism and its consequences, rather he was described in a legal system that protects property rights, promotes free labor, markets and wages, enforces contracts and regulates against fraud, violence and other illegalities. Haslott argued capitalism evolved over centuries and had a moral origin. The evolution of capitalism, unlike the socialist and communist revolutions, was never instantaneous or expedient and so the real oversimplifiers and recall this is what Knight called Haslott are those who contend ethical and legal considerations are irrelevant in judging capitalism. So after an interesting passage of defense and explaining his moral arguments through Clark, Haslott returns tonight and he concludes, I find Knight's article rambling, fuzzy and full of inconsistencies even after a second or third reading, I cannot decipher. On this criticism, I certainly experienced Haslott's sense of a terrain that was rambling and difficult but I hope for my readers' sake I have successfully deciphered his work. So that was Haslott's response tonight. Exactly one year later, Knight's response to Haslott's defense was published with the telling title, a word of explanation, sort of like a word in your ear. Knight does not attempt a formal rejoinder, he says, rather a clarification. While he notes the odd touche or two with Haslott, including I think the point on family, he responds by clarifying rather than emitting defeat on any one point. This is a little like when an Englishman says with the greatest respect and then proceeds to insult you. So having said with the greatest respect, Knight states the major fault with Haslott's book is a constant harping on cooperation, which Knight argued was never defined and neglected his opposite rivalry. For his part, Knight thought of cooperation as implying freedom and discussion as a means of reaching free agreement. Knight concluded his rejoinder by accusing Haslott of making sweeping statements of half truth. And I should point out here that Knight himself was accused of the same crimes by his own critics at various points in his career. He goes on to say, I regret my critique being so negative but some clear in a way even of rubbish often precedes building and social construction is a complex and hard problem. If Haslott's style propaganda is politically effective, I dread the consequences for the better society that might be had through wiser policies. His last word in these exchanges are these. So this is the end of the Knight-Haslott exchange with Knight saying, and anyhow, blessed are they to whom all things are simple and in Putin head Wilson's adage is differences of opinions that make horse races. That's horse races. I'm not sure the English accent really captures that horse races. So having looked at the demarcation dispute between Knight and Haslott, we can delve a little deeper into Knight's notion of cooperation, which has three aspects of welfare, freedom, and power. There's not sufficient time to go into depth in each of these, but I would like to highlight some of the key points. At the core of Knight's conception of welfare is the premise that economic welfare must not be identified with aggregate, i.e. allocative economic efficiency. Rather welfare must be seen as the sum of economic freedom, the balance of economic power, and economic efficiency. He also offered an argument that the outcomes of imperfect competition reflect the relative power imbalances in an industry, and these outcomes are fundamentally unfair. We can extrapolate from this the general conclusion for all markers that unconstrained self-interest will not always lead to fair outcomes or outcomes beneficial for society as a whole. And this is a challenge to the invisible hand of Smithian economic thinking and provides an alternative notion of perfect competition to orthodox economics, critical to which is Knight's conception of economic welfare. Thus, in looking at welfare, Knight draws our attention to the relationship between the economic and moral domains of our society, arguing that self-interest cannot maximize the value of the aggregate social welfare function. He refused to separate the intellectual from the moral pursuit of understanding society, nor could he accept that there was a way of having widespread agreement on the goals of social policy, the idea that social and economic thinking can achieve the best ends of society is not an idea agreeable to him. The problem we face in social policymaking is one of values, not a fact, he argued. And social problems arise through conflict caused by the mere assertion of opposite claims. In a market society, a price theory amounts to a value theory because prices are means by which we arrive at agreement between individuals in exchange. Yet we have higher wants and goals of conduct with which to test our values, rather than simply having a system that accepts and satisfies wants. What we see in his analysis is how Knight used his economics and social philosophy combined to help us understand the human predicament. If we simply look at the competitive system as a want satisfying system, then we will see into a mirror that reflects back who we are rather than what are our highest ideals. Knight argued that the social order we have may gratify us, but it also shapes our wants. And hence, our system must be judged ethically by the type of character it encourages and forges in the people within this social order, since given the public what it wants usually means corrupt in popular taste. The problem emerges, however, that prices a measure of efficiency and reflects what people really want through their free choice in the market while also leading to the corruption of public taste. Yet who is to say what is in good taste? Is this not simply liberal elitism? Joe mentioned my book, Economic Parables. And there I looked at what Jesus had to say about what we would consider economic matters. And in that book, I conclude that the economy is like a mirror. And if we look in the mirror and decide that we are looking very ugly, smashing the mirror is not going to make us look any prettier. And so what I found is that many theologians sort of look down the wrong end of the gun barrel when they discuss economics. The problem is with what people are like, and I'm about to go on to that with Knight, not the system. So the Marxist desire to smash the system does not make Marxist look any prettier. So let's turn to freedom. Put plainly, for Knight's economics is about freedom. His essays in Freedom and Reform were collected and published in 1947, essentially as a sequel to the 1935, The Ethics of Competition, and again on the initiative of some of his former students. The major theme of the work, as the title implies, is freedom, but the reference to reform makes this very much a nightian expedition, as he sought to mount an attack on any superficial grasp of freedom and roost it into some deep economic and philosophical soil. If we think of freedom in terms of laissez-faire, then Knight, in his major essay Laissez-faire Pro and Con, explained that the relationship between laissez-faire and government control cannot arise outside of an economic and political order operating under market conditions. He argued it is absurd to draw strict battle lines between laissez-faire and planning. He explained that humans are social animals and social life sets many limits to freedom, which includes social and welfare issues. He also explains that laissez-faire has been rapidly modified down the ages by political regulation, but how far this change will go, he suggests, is a question for profits. The point remains, we need to recognize the necessity of a democratic political order and its inherent limitations on freedom. Certainly Knight is in the business of support in the market, but this means addressing the significant challenges faced by capitalism in respect to freedom and equality, and there are many aspects of inequality to consider in the 19th view. He accepted inequality as an inevitable outcome of freedom and a necessary part of capitalism, even if at times it leads to unfortunate outcomes for some. The past is very much a foreign land in Knight's view. Making freedom, he wrote, an historical anomaly. A few generations ago, the opposite was the case. Conformity and obedience were moral norms of social life, and that was very much the case under the Holy Roman Empire, in terms of the church empire that is. So complaints about inequalities, big business and monopolies are for Knight born out of a romanticism, and he argued this is not the way to confront the real economic problems we face, though he is by no means denying the seriousness of the problems that exist. What is essential for Knight is that such romantics need to see freedom as the core sentiment if we are to fully understand economic society. Ultimately, and this is at the heart of Knight's welfare approach, social policy must deal with power and weakness as well as freedom. He finds Haslott's conception of freedom problematic and ignorant of the problems of weakness and rivalry. He argued Haslott failed to address adequately the relations between freedom and power, and this is related to his treatment of equality and inequality. A proper treatment would recognize that serious inequality of power, especially economic power, limits the effects of freedom of the weaker party, and if extreme destroys it, making him helpless. Freedom, thus effectively, depends on power, which is power an individual possesses with meaningful content only insofar as a person has the means and effective freedom to exercise their power, which for half the normal population he says means little as they have no such power or means. As noted, people will aspire to improve their position, which they will do so by improving their wealth and income and by gaining distinction and power, and they will do this in any way open to them. This means using whatever power they possess to persuade an influence. To get influence, they must get attention, which is what people want anyway. And he says it is at this point that social rivalry is most acute and free society often seems to be mostly a phenomenon of competitive screaming for notice in one connection or another. Such attention seeking, refined people, he says, find repugnant, while the Marxists would hope their dictatorship would educate this out of human nature. Haslott's individualism in nice view ignored these problems of power, weakness, rivalry, and equality because for night the family, not the individual, is the effective unit in society because he explained differential inheritance, particularly wealth, entails an unequal start in the competition of life, which violates fundamental individualistic ethics. Night typifies Haslott's approach as an ideal of a primitive society or small tribal groups with face-to-face interaction, and he operated under what night called a cheerful assumption that if society let man be, they will cooperate rationally based on known rules. In contrast, night has a somewhat Augustinian view of human nature, and as such, believe something akin to original sin militates against any such hope. In contrast, night's understanding is that people to be moral must change themselves and then by mutual understanding change the world. This is what he means by discussion. This is also a very theological approach to the problem, found in conservative and Augustinian schools of theology. So paraphrase Luther, you can try and rule the world with the gospel, but you better fill it with real Christians first. So for you guys, to rule the world by Austrian economics, you'd have to fill it with Austrian economic economists first. In other words, we remain in a world of conflicted values. So what kind of discussion of values can we have? Perhaps we can conclude that night fails on his own terms, because as he himself states, people are screaming for attention for their cause, and whatever change results is likely to be disagreeable to others. He is certainly right about the screaming, though goodness knows what he would make of today's presidential primaries, or the attempts to pull down monuments of the past because of racial politics. Night is not against change, and he certainly does not want things to stay the way they are, but neither is he a progressive. So in the concluding section of this lecture, I want to set out in a nightian way of how we can come to terms with the moral question of modern capitalism. In the nightian view, there is inevitability about inequality and the conflict between various desires. The problem of equality and inequality lies at the confluence of welfare, freedom, and power. We see inequalities in developing nations, and in developed nations, and emergent nations. We see different levels of poverty. There is not sufficient time to go into the nuances of these differences. Suffice to say, when we think of extreme poverty in Africa, for instance, the causes are similar to our own. It is more a matter of scale. The problems of Africa and the contradictions of wealth and poverty on that continent reflect the same root cause I'm about to unpack in drawing this conclusion. Just as capitalism brought many out of poverty in the West, so it can in Africa and elsewhere, but the nations cry out for illegal and political system complementary to capitalism, and they also cry out for a technical assistance. But they're at the mercy of corruption and skewed property rights. All of which brings me to today, and a problem I identify of indulgences, of which there are many, but I will unpack the main kinds. I suggest we live in an era of emotionalism or emotional indulgence, where what one thinks is less important than expressing what one feels. I was talking to a colleague last week who complained to her students, I don't want to know what you feel, I want to know what you think. But we do live in an age where rationality does not trump given offense. This emotionalism leaves many people in a spiritual search in the economy, and in this search they are looking for easy ways, looking for indulgences. I borrow the term indulgences I should say from the turning point of the medieval period that led to the Reformation and a new age of enlightenment. As we all know, Martin Luther railed against the selling of indulgences in the Western Catholic Church, as an easy morality, a forgiveness of sins without conforming to God's will, it was merely the buying of a certificate. Today's indulgences come in the form of cash till receipts for free trade and organic produce, as people scream out the gotcha examples of extreme poverty in Africa and environmental damage caused by big business. It comes in the form of Occupy Wall Street and other protests as they point the finger at the bankers and financiers. It comes in the form of celebrities, campaigning for a better world and against capitalist greed, which naturally they do as CEOs of their own multinational businesses. It comes in the form of the runaway sales of the book on capital and inequality by French economist Thomas Piketty. All these instances admirably demonstrate, I suggest that the specter of inequality is never far away in the consciences of the left, but very distant in terms of solving the actual problems of equality. But what is equality? If we listen tonight, it just is, it is unavoidable. We can do something about inequality in a limited sense, but only through discussion and cooperation, the point about filling the world with real Christians. Perhaps the instances, all real Austrians, perhaps the instances I just suggested are nighting discussions. After all, celebrities and protesters are all discussing the problem, are they not? Well, yes, but in a somewhat self-serving way. They are long in talking about caring about the problems, but well short of a realistic solution. The challenge is to solve the problem, which is why night argue passionately in favor of capitalism. It helps far more than it hinders a reversal of the leftist view, so we need to find a balance or a nuance in our understanding of capitalism if we are to make the world a better place. And even then, we are unlikely to make it a better place for everyone due to human nature. If we take the working class of Marx, that he wrote so passionately about, it has improved its lot greatly. Indeed, in its own terms, many of the working class has become bourgeois. This change is a process of unbourgeois more, though this was reportedly dismissed for good by sociologist John Goldthorpe back in 1963. So if it's dismissed by a sociologist, then obviously it must still exist. But the world has changed a great deal since Goldthorpe was writing. The working class today take foreign holidays, own property, and even go to the opera on occasion, though as Mises pointed out as we heard earlier, this is funded by the government. The definition of poverty today is more related to how many white goods or cars or TVs you have rather than subsistence. More significantly, poverty today is more defined by desire in terms of satisfaction of wants and social aspirations than it is of needs. So what we have, to some extent, is an inequality and satisfaction of desires rather than needs. Though again, I hasten to point out that the middle class liberal protesters seem to have their desires satisfied by taking to what they see as the high moral ground. It is because the problem is one of desire that resentment has been breeding amongst the middle classes, especially since the 2008 recession. The reality is that in terms of income, the poor have benefited from the creation of wealth under capitalism. This is its great strength. We have all seen the graph of income as flatlining from the exit to the Garden of Eden until the 1750s, and then moving on an upward curve ever since. While communists under Stalin and Mao were being executed, the poor in Western economies were starting to buy their own homes. During the time of communism, however, intellectuals and leftists in the West could always pretend there was an alternative. Their economic theorists could posit alternative universes. The fall of communism and the victory of the market appeared to show, however, there is only one economic system, albeit flawed, but as Knight argued, it is flawed because it is a system that deals with scarcity amongst flawed humanity. This system may have triumphed and poverty may have changed, but what has not changed is the socialist bourgeois guilt over the continuing presence of the poor. Hence the popularity of the Piketty book and the crowds that occupy Wall Street gigs as they contemplate their own difficulties. As I stated just now, I suspect the problem has much more to do with resentment than guilt. But whatever it is, guilt or resentment, the fall of communists and socialist systems due to capitalist economic change, and I would add the inevitable impact of reality, has broken apart Marxism, socialism and communism. However, they have not disappeared altogether. There may have been a systemic breakdown, but the same instincts remain, and these instincts are dispersed in the shattered pieces that remain in the range of causes and groups that challenge the basic assumptions of capitalism in much the same way as these grand movements try to do. Yet while they are dispersed, they are not freely blown in the wind. They have become part of the capitalist system itself, to which I may add there is significant market for these causes, radical chic cells. There is another indulgence, which you can find on both sides of a narrative about the ills of capitalism. On the one side, we have the social responsibility executives who have both the wealth and the salve for their consciousness in one job. They jostle for attention alongside the Wall Street protest as I mentioned, who seem to have the time, technology and money to camp on the streets instead of looking for work or working itself. And when I worked at the World Bank many years ago, I always used to say that the protesters outside the bank were protesting because they couldn't get a job on the inside. But this is a far cry from the working classes that needed to break apart their chains. It seems they are the workers who simply prize open their wallet. Thus, the problem of inequality is a middle class problem. Of course, there has always been an air of the snob around the left, a middle class enclave, that looks down at the working class as their own personal playground. This thought came to me recently on another continent when I heard a corporate social responsibility person say how they wanted to visit poor areas to see how real people lived in a particular country we were visiting. It seems the left has to travel further distances and expand their carbon footprint to fulfill their fantasy of how the poor live in need of their health. The so-called anti-capitalist and anti-globalization camps that periodically spring up, oddly in times of recession, are the modern day kibbutz for the spoiled to search for meaning in their own life. They still imagine a life of the greedy boss and a despoiled and alienated worker of Marxist writing. But such a view is out of touch with reality. Companies today are focused on employee engagement because recognizing the engagement in interested worker is far more productive. This is the antidote to alienation. Indeed, alienation is not the preserve of the factory worker or the low paid. Many people in a workplace and in society can feel this way. Managers and even government bureaucrats can feel alienated from their workplace or the goals of the business or government. They too can be trapped by the mortgage or the sense that they lack advancement. The path to better engagement is dialogue, connecting people to each other in a workplace in a common cause, not trying to find reasons to divide them. Ultimately, in searching for our material satisfaction, we ought to be questioning what we are searching for beyond the economy, not just within it. But before we get carried away with that idea, we have to recognize that whatever our search and whatever our role in the economy, it is curbed by human nature, both ours and others. As Jean-Paul Sartre said, hell is other people. Of course, none of this is very romantic, which is why it doesn't appeal to a lot of the young and the protesters, because it is essentially a question of good old fashioned power. In the economy, people can feel powerless and the same may be said of our political system, both points made by night. It is wonderful that the market economy has moved so many out of poverty and low incomes, but it seems that we are a generation that remains in search of spiritual meaning. Our material status does not answer the spiritual problem, except perhaps in the mundane terms of retail therapy. It is simply the other side of a coin. To use again Marx's famous image, we can see this at the switch in a one set of chains for another. The historical move we have seen is a freeing of the chains of poverty for vast waves of the population, only to find themselves feeling they are chained by the materialism and indulgences of our age. This is what is revealed by the middle class recession we witnessed these past few years, because the working class has become middle class in relative terms and a larger middle class overextending and indulging itself through debt and property speculation got caught out by the inevitable force of economic gravity and they resent the impact. After all, when house prices were going up, I don't recall anybody ever complaining to me about how much their home was worth, that they bought it for $200,000 and isn't it terrible, my house is now worth 1.5 million. I don't remember them complaining to me about that, so why are they complaining to me on the way down? What suffered was their desire and expectations and this impacted their pockets and their consciences. No matter how successful our economy or even if humanity triumphed in the way that the left dreams, the problem will not be solved on material terms. Our economy is a reflection of our human condition. It puts numbers on what we truly care about. This has to be the starting point of any moral understanding of the economy. Knight is correct. We do need to face the brutal reality of inequality and we ought to recognize the inheritance deficit and help others to have a start in life. But what policies and social attitudes are necessary to tackle these is quite a different question. I personally don't give money to charity because it goes to bureaucracy and politics. I witnessed this at World Bank and saw a lot of the charities at first hand and the games that they played. So I put my charitable money into microfinance and I see that as a far better solution to helping people than to giving it to a lot of charities that are somewhat opaque in their accounting practices while they demand transparency from big businesses, they call it, but I won't get into that. Because there has to be a point where we say enough is enough and not allow emotionalism to dictate economic policy, which has two impacts in terms of how we might cooperate to tackle inequality and social welfare and I will finish on these two points. First, we need to educate better people in fundamental economics in our schools so that we can have a better, more informed and more realistic discussion about economic matters which will make cooperation more informed and easier to achieve. We obsess about teaching God in sects in schools so why not money? Second, we need to turn away from the emotionalism of our times and recover the enlightenment idea that we are not simply sentient creatures. We are creatures of thought. Cooperation is a rational activity, not an emotional one, and indeed, emotions tend to get in the way of cooperation and they also tend to rearrange our priorities. The commotionally knights may have set a high bar on this point, perhaps too high, but I fear we will make little progress politically or economically in these times if this attachment to emotionalism does not change in favor of economic realism. Thank you very much. Thank you.