Good Commercial Faith and the City: What Adam Smith really would say… Reply


In teaching a Property Seminar,I have asked students to write response essays to books that have property themes.  One student, Jim Dickinson (employers out there, hire this guy now), decided to take on Milton Friedmon’s Capitalism and Freedom.  In doing so, I suggested he read Deirdre McCloskey’s Bourgeous Virtues: Ethics in an Age of Commerce.  James wrote back this past weekend and said: “I began reading it this morning, and it is very helpful.  The author is brilliant and hits on points that Friedman leaves out.  McCloskey brings to light the other side of the capitalism, the side of exercising personal virtue, that Friedman omits.”

So I decided to dig through the archives and find a post I wrote about three years ago for Commercial Law blog.   Enjoy!

This post appeared on Commercial Law Prof Blog March 18, 2009

I want to talk about commercial virtues. One of the troubling aspects of commercial dealings today is the focus on ethics. Truthfully, I despise the topic (perhaps because I was never very good at the subject in either theological classes or law classes — like professional responsibility for one). But the real reason I despise ethics, my own discordant academic performance in the subject aside, is I think we are often times asking the wrong questions. We assume that by ethics, we mean some form of social responsibility, but more often than not, that responsibility is defined by communities of interest, rather than greater social values. Consider the problem with UCC 1-201 and the definition of good faith. Do we really mean good faith is “honesty in fact” when we combine that with the observation of “reasonable commercial standards of fair dealing”. Which takes precedence — clearly the latter. The secured lender that tells only part of the story to his debtor (your income statement is a mere formality) has not been completely operating with “honesty in fact” though his actions may well fit within the constraint of reasonable commercial standards of fair dealing — after all, fudging your income was hardly the act of just a few bad apples. The subjective element of good faith gives way to the relevant community that defines what good faith means.

Deirdre McCloskey in her defense of capitalism, aptly named, the Bourgeois Virtues, makes many debatable claims that Capitalism makes the world better (many of which I will not attempt to defend). But what McCloskey does get is that commerce (and commercial law) urges the continued development of social structures for the betterment of the individual within a community that is itself working to be better. Her perspective is that capitalists, like Adam Smith understood that capitalism was constrained by a quite powerful force — the internal virtue of the individual.  Quoting Rabbi Starks, McCloskey writes:

It is the market — the least overtly spiritual of contexts — that delivers a profoundly spiritual message… The free market is the best means we have yet discovered… for creating a human environment of independence, dignity and creativity.

McCloskey’s message of capitalism as a movement of social ingenuity is at its core the spiritual message of hope we find in some of our best religious literature. The prophet Jeremiah admonished the Israelites in Captivity:

This is what the Lord Almighty, the God of Israel says to all those I carried into exile from Jerusalem to Babylon: ‘Build houses, settle down; plant gardens, eat what they produce, Marry and have sons and daughters; find wives for your sons and give your daughters in marriage so that they too may have sons and daughters. Increase in number there do not decrease. Seek the peace and the prosperity of the city to which I have carried you into exile. Pray to the Lord for it, for if it prospers, you too will prosper

Ralph Waldo Emerson also saw that hope comes from capitalist engagement but only when the mind is able to reflect upon its work. Emerson distinguishes between the Brute Economy, in which labor and strength build vast empires of material longing only (i.e. its good to spend money to relieve us of the pain of 911), with the capitalist economy which employs intellect in an analytical expansion of labor, material and wealth. What Emerson says the Capitalist lacks is the moral and spiritual wisdom of the poet – “who acts upon nature with his entire force — with reason as well as understanding.”

The virtue of McCloskey’s work is that Commerce (and capitalism) share a common goal of enhancing our social order, instilling the hope that we might reshape “the city” into an image that is not of ourselves as we currently stand, but of the selves that we might one day hope to be, both individually and collectively. And that actions should be weighed and measured against both of these standards. Whether we segregate capitalists from capitalist poets, we nonetheless, come to the same conclusion as Emerson and McCloskey — that commerce creates the potential for humans to be good.

Which brings me back to 1-201. Do we really want good faith to be watered down by community constraints or is there a moment for reflection of the aspirational norms that commercial dealings might adhere to? I was much happier when good faith was simply “honesty in fact” without the burden of community differences, whatever that might mean — even if the aspirational view of good faith was nearly impossible to enforce.

To buy a copy of the Bourgeous Virtues, click the link:

http://rcm.amazon.com/e/cm?t=thelittab-20&o=1&p=8&l=as1&asins=0226556638&ref=tf_til&fc1=000000&IS2=1&lt1=_top&m=amazon&lc1=0000FF&bc1=000000&bg1=FFFFFF&f=ifr

Langston Hughes: The Ballad of the Landlord 1


One of the sad epithets of Property is the way claims to entitlements are used to shape human relations — particularly racial human relations.   Langston Hughes wrote about the unfair inequality between black tenants and white landlords in his poem, The Ballad of the Landlord published in 1940.  He tips us off as to who is ultimately victorious in societies eyes with his poem – the lazy landlord who collects rent without taking care of his property.  There has been a traditional thought that racial minorities negatively impact property values. This traditional belief was captured in the law’s reluctance to force property owners to financially improve the living conditions that minority groups lived in.  The ballad suggests that the landlord is victimized when the tenant takes out his aggression on him in the end.  Ironically, the landlord is victor in all things — the courts, the avoidance of basic human responsibility, etc…., while merely suffering a slight bruise at the hands of the person he has inflicted arguably more harm to.    Moreover, notice the response of the landlord when assailed — the assault by the tenant is not merely a response to protect his property; its a challenge to the basic security of the nation.  How little times have changed.

It was not until the 1960′s that the courts began slowly recognizing a remedy in the form of a warranty of habitability. One of the earliest expressions was from the Wisconsin Supreme court in a case titled Pines v. Perssion, 111 N.W. 409 (1961).  The case involved four University of Wisconsin students who leased a house that they later discovered had electrical, plumbing, and heating defects.  They later vacated the premises and brought suit to recover money already paid.  In the case, the court said:

To follow the old rule of no implied warranty of habitability in leases would, in our opinion, be inconsistent with the current legislative policy concerning housing standards.  The need and social desirability of adequate housing for people in this era of rapid population increases is too important to be rebuffed by that obnoxious legal cliche, caveat emptor. Permitting landlords to rent “tumble-down” houses is at least a contributing cause of such problem as urban blight, juvenile delinquency, and high property taxes for conscientious land owners.”

We know that the housing market (particularly the leasing market) tends to impact racial minorities with issues of adequate housing more than white people.  Part of the impact is certainly due to household economics.  For example Brophy et al, point out the disproportionate  number of minority households affected by lead poisoning in a note of their case book Integrating Spaces.  We’ve blogged about Integrating Spaces before here.  Brophy writes about disproportionate treatment of minorities in led poisoning cases:

According to a survey conducted from 1999-2002, “non-Hispanic blacks and Mexican Americans had higher percentages of elevated blood lead levels (1.4% and 1.5% respectively) than non-Hispanic whites (0.5%).  Among subpopulations, non-Hispanic blacks aged 1-5 years  and aged [greater than] 60 years had the highest prevalence of elevated blood lead levels (3.1% and 3.4% respectively).

These facts only make Langston Hughes’ poem The Ballad of the Landlord all the more relevant.

Landlord, landlord,
My roof has sprung a leak.
Don’t you ‘member I told you about it
Way last week?Landlord, landlord,
These steps is broken down.
When you come up yourself
It’s a wonder you don’t fall down.Ten Bucks you say I owe you?
Ten Bucks you say is due?
Well, that’s Ten Bucks more’n I’l pay you
Till you fix this house up new.What? You gonna get eviction orders?
You gonna cut off my heat?
You gonna take my furniture and
Throw it in the street?Um-huh! You talking high and mighty.
Talk on-till you get through.
You ain’t gonna be able to say a word
If I land my fist on you.Police! Police!
Come and get this man!
He’s trying to ruin the government
And overturn the land!

Copper’s whistle!
Patrol bell!
Arrest.
Precinct Station.
Iron cell.
Headlines in press:
MAN THREATENS LANDLORD
TENANT HELD NO BAIL
JUDGE GIVES NEGRO 90 DAYS IN COUNTY JAIL!

Epilogue

This poem made the news when a Virginia teacher requested an African American student read the poem “blacker.”  Kudos to the young man for refusing!

Two Book Reviews Reply


Reflections of a book addict posted a review of Mr. Fitzwilliam Darcy: The last man in the known world by Abigail Reynolds. Here is a brief summary from the blog:

We find ourselves following Elizabeth and Darcy immediately after his initial proposal of marriage to her at Rosings Park. We all know of her famous rejection, perhaps the most stinging line in the entire novel, “”I had not known you a month before I felt that you were the last man in the world whom I could ever be prevailed on to marry.” It carried all the bubbling resentment that Elizabeth held against Mr. Darcy once she learned of his involvement with Bingley’s abrupt separation from Jane. However, what if she never got to utter those famous words? What if mistaking Elizabeth’s silence for acceptance, Darcy kissed her? What if this kiss was witnessed by Colonel Fitzwilliam? How would their marriage work with a complacent Elizabeth and a deeply in love Darcy? Thanks to the imaginative prose of Ms. Reynolds, we can see just that.

Bookpeople’s Blog posted a review of Jennifer Dubois’s A Partial History of Lost CausesAgain, from the blog:

Aleksandr’s story begins in Leningrad in 1979, where he dreams of becoming a chess champion. Irina initially knows of Aleksandr because her father, an avid chess player, was a fan. We’re with Aleksandr as he moves into the world of Cold War era chess matches, and beyond into underground politics and the dangerous world of Russian politics under the reign of Vladimir Putin.