Keywords

1.1 Reasons for the Book

2016 was the hundredth anniversary of the publication of John Maurice Clark’s article The Changing Basis of Economic Responsibility in the Journal of Political Economy. Clark (1884–1963), a representative of institutional economics and of the First Chicago School in economics (Rutherford 2015), was a profound pioneer of what he called the economics of responsibility . There are two reasons for our interest in the anniversary and the topic of Clark’s article, economic responsibility . First, Clark was addressing an issue of major importance for the discipline of economics: economic responsibility, that is, the responsibility of economics for the study of complex and changing economic phenomena and the responsibility of actors for their economic affairs. As the recent financial and economic crisis has shown, the importance of these two kinds of responsibilities has not changed in the last hundred years. The second reason for our interest in economic responsibility could not have been foreseen by Clark and his contemporaries: the development of business ethics and Corporate Social Responsibility (CSR) as fields of study in the second half of the last century and their understanding of “economic responsibility.”

In business ethics , CSR studies and beyond, Caroll’s models of social responsibility (Caroll 1979, 1991) attracted exceptional attention (Caroll and Shabana 2010). These models identify four dimensions of social responsibility : economic, legal, ethical, and discretionary or philanthropic responsibility. In the graphic presentation of these dimensions, that is, the CSR pyramid , economic responsibility is the basic “layer”; the other dimensions are built on it in the above-listed order. Both articles include a discussion of each dimension; in case of economic responsibility one short-cut formulation won out over other interpretations of economic responsibility – viz. the equation of “economic responsibility” with “be profitable.”

This equation expresses a certain view on economic activities and their objectives that is falling short from our perspective. One reason for that is that Caroll’s models do not draw on economic theory ; thus, “economic responsibility ” in these models is not what economics (in case of Clark’s work) had or (with respect to future work) has to say on the issue. As Clark’s article makes clear, economics has more to say about economic responsibility than what is expressed in the equation of “economic responsibility” and “profitability .” If John Maurice Clark had a chance to get knowledge about the interpretation of “economic responsibility ” in business ethics and CSR, he would probably turn in his grave. He may wonder why the majority of scholars in the above-mentioned fields of study did not oppose this equation. One reason for this is perhaps that, with respect to CSR, “distorting ideology” (Jones 1996, p. 33) characterizes the views of even those who oppose CSR as the Band-Aid of capitalism (Fleming and Jones 2013). A second issue would not amuse John Maurice Clark as well: concerning the development of an economics of responsibility , he is a pioneer without followers.

For Clark, the institutional economist, it is an explicit objective to develop an economics of responsibility from the institutional-economic point of view. This can be considered a task of the economic scientific community ; it can be considered a responsibility of this community as well. Scientific communities have been conceived of as epistemic subjects (Kuhn 1962), and as such, they are responsible for the knowledge they create and the ways they impart it to academic offspring and other groups. In this case, the development of an economics of responsibility would be an issue in academic ethics . A concept of economic responsibility would then result from the conceptual work of the scientific community and it is no surprise that this concept would be based on the analysis and normative assessment of economic action and economic affairs. Clark outlined this structure and provided it with content, but the framework has not been completed yet. As a general rule, but in particular after a hundred years, both structure and content have to be critically reflected upon. A topic open to discussion is also whether there is still a need for an economics of responsibility and an explication of the concept of economic responsibility . Figure 1.1 expresses a reconstruction of Clark’s approach to economic responsibility :

Fig. 1.1
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Clark’s approach to economic responsibility

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1.2 The Article

The Changing Basis of Economic Responsibility was published in 1916, one year after Clark accepted an appointment at the University of Chicago. Clark was one of the leading figures of institutional economics ; and he was a recognized scholar beyond that economic school (Rutherford 2000). The Changing Basis of Economic Responsibility was written by a young scholar (in the year of publication of the article, Clark turned 32) who just began to mark his territory within the discipline. Clark did this by looking back, by addressing the changes in the economy that took place in the two decades prior to 1916; by appraising the performance of contemporary mainstream economics; and by looking forward and creating milestones for the further development of the discipline. In a nutshell, Clark announced an academic project: the development of an economics of responsibility .

1.2.1 The Changes in the Economy

Clark analyzed the changes in the economy that took place between 1886 and 1916 in the USA. Table 1.1 summarizes these changes with respect to metaphysics , the locus of responsibility, and the understanding of social responsibility .

Table 1.1 Expressions of the changing basis of economic responsibility
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1.2.1.1 Metaphysics and Loci of Responsibility

In 1916, compared with the previous two decades, the starting point of economic analysis had changed: Prior to the change, the self-reliable and self-dependent individual was seen as being responsible for his own affairs, whereas after the change, individual responsibility was seen as liable to become absorbed by the influence of “societal forces”: “We have swung far away from narrow individualism toward a sense of solidarity and social-mindedness … The old idea of free will is giving way to determinism , individualism to public control , personal responsibility to social responsibility ” (Clark 1916, p. 210). Here, “social responsibility ” means that “society ” is seen as being responsible for something (for example, unemployment or criminality) that was previously in the range of individual responsibility or action, respectively. Both the individual’s range of action and the individual self have changed or face respective pressure.Footnote 1 Against the backdrop of a comparison of the(at Clark’s time) contemporary understanding of the faculty of human beings to enact their free will with that available 20 years before, Clark observed the emergence of “a most disquieting phase of the spread of deterministic ideas among people ready to absorb them one-sidedly” (Clark 1916, p. 121). These economic changes had occurred, and they could not be dialed back: “It is the product of new situations and new knowledge , and we must use the knowledge to make the best of the situations. We must take what it gives and fight to keep whatever of good it threatens to take away” (ibid., p. 212). Thus, Clark (ibid., p. 217) objects to an interpretation of determinism “in such a way as to undermine the responsibility of the individual for his own choices.”

One important source of “keeping the good” is the causal knowledge generated by economics. The importance of beliefs in causality in empirical science notwithstanding (Moneta and Russo 2014), causality cannot be observed or otherwise proved as true. Clark’s belief in causality can thus be subsumed under “metaphysics .” Clark distinguishes between significant and responsible causes . The former “are the causes that are really important in deciding the exact nature of the outcome” (Clark 1916, p. 214); the latter “are the causes over which we have some control and before which we do not stand entirely helpless” (ibid.). Therefore, human beings do not need to give up “to shape the world – or a little bit of it – ‘nearer to the heart’s desire’” (ibid.).

The second column in Table 1.1 documents a change in the loci of responsibility: the self-reliant and self-dependent individual has control over his or her actions and knowledge about action consequences ; therefore, the classic model of the ethic of responsibility (Bayertz 1995) applies (also called liability model , see Young 2004). According to Bayertz (1995), the classical model is constituted of two parts: a description of the situation in question and its normative assessment. The former is based on empirical knowledge , the latter on principles and values (and normative assessment).Footnote 2 The linkage of actors and action consequences in the model draws on empirical knowledge; and normative assessment is the origin of the selection of actions and action consequences of interest. Metaphysical assumptions such as causality and intentionality underlie this model.

This model faces two problems: first, the emergence of collective action units challenges the importance of individual decision -making. It led to the problem of collective action units being the origin or cause of action consequences which, in the tradition of the classical model, were related to individuals. Clark acknowledges this type of problem: “But the fact that a large part of them (social responsibilities, M.H.) are business responsibilities has not yet penetrated, and this fact does need to be brought home to a community in which business men and theoretical economics alike are still shadowed by the fading penumbra of laissez-faire ” (Clark 1916, p. 229). Second, the increasing complexity and interrelatedness of actions (no matter what the type of actors) makes the connection of actions or actors and action consequences impossible or at least difficult. In common law , compulsory compensation was utilized to overcome these difficulties.

1.2.1.2 Individual, Collective, and Social Responsibility

In Clark’s approach, “social responsibility ” has a double meaning: First, it denotes the attitude that society is made responsible for something the individual formerly was hold responsible for. Clark’s position concerning this attitude is ambivalent: on the one hand, facts cannot be neglected; on the other hand, economics can provide the knowledge for the identification of facts and their causes, as well as for the assessment of the causes’ importance. Second, social responsibility as collective responsibility is a personal and a business responsibility : we are “jointly responsible for the general social environment ” (Clark 1916, p. 217).Footnote 3 A person who accepts the view that “individual responsibility is becoming less because collective responsibility is becoming greater is making a mistake” (ibid., p. 216); thus, the relationship between personal and collective responsibility has to be rethought. Collective responsibility has increased but not at the cost of individual responsibility : “For what is collective responsibility but personal responsibilities reflected in the social mirror?” (ibid., pp. 216 f.). Consequently, the range of economic responsibility as an individual responsibility (or business responsibility ) has not decreased, but quite the contrary, “(t)he scope of personal responsibility is broader than ever before, not narrower” (ibid., p. 217).

From this diagnosis, it does not necessitate the giving up the idea of individual responsibility or substituting public control for it. Thus, for Clark, “economic regulation ” means the “bringing home of existing and very real responsibilities” (ibid., p. 220); it does not mean “the creation and attempted enforcement of arbitrary requirements” (ibid.). There are two “working horses” for the realization of joint responsibility : the economics of responsibility proving the required knowledge and the actors putting this knowledge into practice. With respect to the latter, “responsibility” means to strive for social value or the balance of economic and social value . In other words, economic actors need to balance self-interest and public interest: “All industry and trade is primarily affected with a public interest” (Clark 1936, p. 29).

Pithy sayings such as “(t)he economics of control is at war with the economics of irresponsibility ” (Clark 1916, p. 219) should not obscure that Clark was not an advocate of public market regulation per se. He was aware of the evils misinformed and misguided public regulation can create, although he was not of the opinion that such “public failure” always is a result from the malfunction of the authorities. Sometimes it results from intended misinformation imparted from those whose actions and activities are the object of regulation (the ruled) to those who are the subject of regulation (the rulers). That this happens is indicative of a misled process or a situation in which the individuals have not taken social responsibility . As Fiorito and Vatiero (2011, p. 211) point out: “Clark’s discussion of legal processes was instrumental to his own ‘social control ’ agenda for the reorganization of the market in the interest of social welfare and democracy .”

1.2.2 Revision of the Economics and of the Working Ethics

Clark distinguishes three tasks of economic theory : first, the detection of causes and consequences of human interaction; second, the provision of knowledge for reasonable or adequate regulation ; and third, furthering the growth of willing cooperation. Clark criticized laissez-faire economics as an “economics of irresponsibility ” (Clark 1916, p. 218) and the business system as “a system of irresponsibility” (ibid., p. 218): “We are coming to see that our everyday business dealings have more far-reaching effects than we have ever realized, and that the system of free contract is by itself quite inadequate to bring home the responsibility for these effects” (ibid., pp. 217 f.). With this phrase, Clark addresses what today is called negative externalities. The increase in the interrelatedness of economic actions and the complexity of man-made environments have led to a conflict (or aggravated the conflict) between responsibility and control : responsibility requires control over actions and, with it, over action consequences . For all kinds of actors (individuals, organizations, state ) the possibility to identify the consequences of their actions has decreased. This is a consequence of poor knowledge and a lack of awareness of problems, due to the prevailing laissez-faire economics : “In other words, theory and practice combine to further an irresponsible attitude among leaders of industry and workers alike” (ibid., p. 219). No question, then, that “the business economics needs revision” (ibid., p. 221). “In a broad sense the great task of the theorist of our tremendously dynamic age is to substitute an economics of responsibility for the economics of irresponsible conflict” (ibid., p. 220).

According to Clark, contemporary economics (laissez-faire economics ) was of no or little help in this regard; thus his “quest for a socially responsible economics” (Rohrlich 1981, p. 343). Therefore, there is a need for a new theory in economics, named by Clark “economics of responsibility .” This economics of responsibility has to address what Clark considers the important issues in a changing world and to provide the actors with the knowledge they need to conduct responsible economic actions. As Stanfield (1981, p. 282), in his comprehensive analysis of Clark (1916), points out: “Not only the extent of interdependence has increased, however, but also the knowledge of interdependence .”

Moses Abramovitz and Eli Ginzberg (students of Clark and editors of Preface to Social Economics) have internalized Clarkean economics (an expression used in the foreword to the book), as their introduction indicates:

“Thus, these essays are an attempt, in part by way of criticism of older theories, in part by the fashioning of new tools of analysis to attack the economic problems which are judged to be of greatest importance in our own day. Further, in selecting new problems for study, they have done much to force economic theory in a new mold. An economic problem arises when evils are recognized and when methods to overcome the evils suggest themselves. Evils which cannot be controlled raise insoluble problems. They are taken for granted – like bad weather. We must look for the change in our problems, therefore, in two directions: to the emergence of evils requiring remedies, and to the growth of knowledge which makes remedies possible for evils both old and new” (Abramovitz and Ginzberg 1936, p. xix).

This economics of responsibility can inform individual and collective actors about their action opportunities in terms of the creation of economic and social value against the backdrop of identified significant and responsible causes . On the other hand, there is a need for “responsibility in the economy” as well – a change of economic practices in the economy. In this case, it is the economic actors who have to perceive and recognize their (increased) responsibilities. The economics of responsibility can conduct economic analyses; it can produce knowledge and provide actors with action-relevant information. Whereas economic theory is responsible for the knowledge it produces and the way it communicates it to non-scientific communities and actors, it is not responsible for the activities economic actors actually take. It cannot control the minds, attitudes, routines, or habits of actors. Thus, compared with Fig. 1.1, there is an additional economic responsibility that is not a responsibility of economics but of economic actors – a responsibility that includes individual affairs (or business affairs) and social affairs as well as the finding of a balance between economic value and social value .

1.3 Social and Economic Value

For the understanding of The Changing Basis of Economic Responsibility, the close relationship between this article and Toward a Concept of Social Value (Clark 1915 [1936]) is important. The highly recognized Preface to Social Economics (Clark 1936 [1967]) contains both articles in the first part,Footnote 4 headed by Economic Theory and Social Problems. The inclusion of both articles in the Preface to Social Economics and the heading Economic Theory and Social Problems demonstrate Clark’s fundamental interest in pointing out the relevance of economic theory for the study of social problems.Footnote 5

For the understanding of Clarkean economics, two articles, both published in the Review of Social Economy, Footnote 6 are helpful as well: John Maurice Clark’s Unmet Challenge (Rohrlich 1981) and The Instructive Vision of John Maurice Clark (Stanfield 1981). Rohrlich reviews both Clark (1915), (1916) as well as Clark’s later work. He identifies a dual concern of both articles. The first article argues for “a holistic rather than marginalist concept of social value , i.e., the value ‘of things to society ’ (…) in explicit contrast to the conventional measure of ‘value in society ’ as registered by market standards” (Rohrlich 1981, p. 343, italics in the original). It is not by chance that Clark has been named one of the founding fathers of what is called today social economics . Lutz (1990, p. 411): “But the real boost to the concept of an independent and academically respectable social economics came with John Maurice Clark’s celebrated Preface to Social Economics (1936 [1967]).” In the second article, “Clark tackled the other prong of his dual concern: the nature of economic responsibility ” (ibid.). Two challenges result from this for the discipline of economics: first, the development of “a concept of economic value and valuation with reference to society as a whole, independent of market valuations and capable of scientific application to concrete cases” (Clark 1915 [1936], p. 54; quoted by Rohrlich 1981, p. 343); second, the development of economic theory that is able to support individuals in their endeavor to put their joint responsibility “for the general social environment ”Footnote 7 (Clark 1936, p. 76; quoted by Rohrlich 1981, p. 344) into effect. These developments lead to the substitution of an economics of responsibility for the economics of irresponsible conflict (Rohrlich 1981, p. 344).

The second article focuses on Clark (1916). Stanfield (1981, p. 279) emphasizes the relevance of The Changing Basis of Economic Responsibility for the study “of social challenge and social reform in industrial society .” As Clark has argued in the article, individual responsibility has not become smaller, but greater in our society . The reason for this is that the individual is not only responsible for him- or herself but also for the social environment . Clark (1916), in the light of his discussion of determinism and the limited range of individual action, has pointed out: “The environment has become responsible for John Smith. But at the same time John Smith has become responsible for the environment.” This responsibility is a joint responsibility that needs to be based on objective knowledge about the social value that can be accomplished by the execution of social control . Social control is an issue addressed by Clark in a book first published in 1926: “‘Social control ,’ as we conceive it, is control exercised by or in behalf of the entity we call ‘society ’” (Clark 1926 [1939], p. 7).

The responsibility of individuals has increased; a new task, the conduct of collective or joint responsibility , has to be accomplished in addition to individual responsibility . The individuals have to balance their self-interest (the creation of economic value) with the common interest in the common good (the creation of social value ). In addition, they have to identify their ranges of action in the changing economy and to develop viable modes of social control . The main idea behind this approach is: if someone can execute control over something, then he or she is responsible for it. But “we do not stand entirely helpless” (Clark 1916, p. 214). We can gain the knowledge necessary to decide if control is possible and how it can be reasonably conducted. The second qualification is important because not everything that can be controlled should be controlled: To achieve control over something is no end in itself. From Rohrlich’s (1981, p. 343) perspective, the potential value of economics is for “these valuations of both gains and costs of any particular activity or institution that we bring to bear in ‘every measure of economic reform’ (i.e., social legislation, such as minimum wage-laws, hours of work, workers health or safety legislation).”

From the perspective of today, one hundred years after the publication of The Changing Basis of Economic Responsibility, there is not only one but two unmet challenges (compare Rohrlich 1981): First, the development of a “coherent theory of objective social value or a systematic explication of any consistent set of laws comprising and reconciling the raisons d’être of both free exchange and social reform ” (Rohrlich 1981, p. 347; italics in the original); second, the impartment of knowledge to those who can use it in their endeavor to conduct control over their individual and collective actions.

The Changing Basis of Economic Responsibility is a starting point for the attempt to re-address the meaning of “economic responsibility ” on the basis of an economics of responsibility . It is questionable, or open to debate, if, after the Clarkean economics, a further strand of economics addressing this field of study has developed. However, that there is (beyond Clark’s approach) no economics of responsibility yet does not mean that there is no connection between economics and ethics at all. If one examines the types of problems addressed in economics, then numerous works that could be subsumed under “economic ethics ” come into sight. The volumes published in the book series Studies in Economic Ethics and Philosophy are an example for that. Accordingly, contemporary economics addresses many problems at the intersection of economics and ethics . Take, for example, Serge-Christophe Kolm’s introductory sentences to his entry titled “justice ” in the Handbook of Economics and Ethics (Van Staveren and Peil 2009): “Economics is a moral and normative science. It always has been. A large part of economics is ethics , applied ethics and often pure ethics as with social choice, theories of economic fairness or justice and concepts of economic inequality and poverty” (Kolm 2009, p. 291).

As has been argued above, Clark’s framework may be in need of adaptation or further development. In this regard, the implementation of a cooperation between economics and the ethic of responsibility may be indicated (for a fundamental approach to the cooperation between ethics and social science, see Birnbacher 1999). The Handbook of Economics and Ethics (Peil and van Staveren 2009) however does not include an entry on economic responsibility . The word “responsibility” does not appear in the index of the handbook at all.

1.4 The Contributions to the Book

The authors of the articles collected in this book dedicated their work to the celebration of the hundredth anniversary of The Changing Basis of Economic Responsibility. The articles in the book draw on various scholarly backgrounds, research foci, and experiences. They are divided into three groups. The three articles in the first group are headed by “Theories and frameworks: interdependence and complexity .” These three articles address the complexity and interdependence of human action in a modern society Footnote 8; and they provide a theoretical framework that they apply to the study of these phenomena. In addition, these articles reflect on The Changing Basis of Economic Responsibility from the point of view of their respective theoretical framework, and work out the strengths and weaknesses of Clark’s approach from their contemporary perspectives. These frameworks draw on different approaches stemming from economics (ordo-economics, institutional theories), philosophy and ethics (Hegel, Kant , theory of justice , ethic of responsibility), and cybernetics , systems theory, and social constructivism – a list not complete.

John Maurice Clark: An Early Classic of Ordo Responsibility (Ingo Pies) is the first article in this group. Pies sketches the ordonomic approach to business ethics and applies this approach in his analysis of Clark’s article aiming at “a modern interpretation” (Pies, p. 25). Pies develops his argumentation in four main sections. He begins with “some ordonomic concepts.” In the light of the ordonomic approach, Clark was arguing for an “orthogonal perspective,” that is, the relation between individual responsibility and social responsibility is seen as being contingent. Thus, Clark rejects the idea of a trade-off between the two responsibilities (Fig. 2.1). Pies then introduces two different areas of action and, with it, (private) “choice within rules,” and (public) “choice among rules.” The first relates to “responsibility in a game” and the second to “responsibility for a game” (Pies, p. 27). Social responsibility includes the responsibility of actors for the institutions that set the rules of the game and for their behavior as players playing the game. Pies distinguishes two types of subjects of responsibility (the individual and the group) and two types of objects of responsibility (responsibility for the way one – individual or group – plays the game and responsibility for the rules of the game). Regarding the responsibility for the rules of the game, the author reserves the expression “joint ordo responsibility ” while a group’s moves in the game are called “collective responsibility ” (Figure 2.2). In this vein, Clark introduced “a new sphere of moral obligation ” that can be interpreted as a “joint ordo responsibility ” (Pies, p. 28).

In the next section of the article, Pies introduces Clark’s line of thought in more detail. Based on a two-by-two matrix, social structure and semantics (two core concepts of the ordonomic approach) are discussed with respect to the orthogonal position and the trade-off position. Pies outlines the role of economics in the process of furthering the actors’ awareness of the need to act in accord with the objective of social responsibility and their faculty of acting consequently. He discusses the juxtaposition of market and state in laissez-faire economics and explains how Clark’s views differ from that. The fourth section is devoted to the strengths of Clark’s article. Pies explains in detail three characteristics which, from the ordonomic perspective, are strengths of Clark’s article: First, the moral orientation and the relevance of information for the identification of what is right or wrong. Second, economic theory (the economics of responsibility ) is part of the solution of the problems accruing from the “working business ethics ” (Clark 1916, p. 210). Third, Clark’s “vanishing point … was the democratic ideal of self-governance ” (Pies, p. 34). After that (section five), Pies elaborates on the weaknesses of Clark’s article from the ordonomic point of view. Here again three points are brought to the fore: First, Clark came “close to appealing morally” and expressing “the need of a public spirit” (Pies, p. 37). Second, Clark “underestimates the potential for corporate responsibility ” and third, he had only “little or nothing to say about the free press or civil society organizations for the ‘social interpretation’ as well as for the ‘social management’ of modern affairs” (Pies, p. 38). Pies concludes with “Lessons (to be) learnt:” First, there is a lesson (to be) learnt concerning the semantics of responsibility theories: “Taking social responsibility can provide an enabling environment for taking individual responsibility ” (Pies, p. 42; italics in the original). Second, further insights relate to the role assigned to theory in the process of exercising responsibility: it provides information and helps the actors to get rid of superfluous, harmful, or inadequate semantics . Third and finally, the conceptual weaknesses of Clark’s approach are again reflected upon, and the Clarkean framework is conclusively compared with the ordonomic approach.

The next article in the group, Externalities, Complexity and Justice: Exploring the New Paradigm of ‘Deliberative Trade Policy’ (Carsten Herrmann-Pillath), relates to Pies’ article in several respects. Like Ingo Pies, Carsten Herrmann-Pillath interprets Clark from an institutional-economic perspective. However, this author does not address Clark’s article in similar depth as Pies; rather, he picks up important topics such as externalities and the state -market dualism rejected by Clark and makes them the subjects to be considered in the development of his new paradigm. Herrmann-Pillath’s article can be read as well as providing evidence for the importance of one of the categories that, according to Pies, Clark should have paid more attention to: civil society . Herrmann-Pillath’s article begins with a section on complexity and interdependence , in which he outlines challenges to global trade policy. He continues by addressing the central role of externalities for the understanding of the impact of trade policy institutions (section two) and, then, rethinks the idea or concept of free trade (section three). Kant and Hegel are the origin of the “perspectives in use” by Herrmann-Pillath. In this section, Herrmann-Pillath describes in detail and with respect to the TRIPS Footnote 9 agreement as exemplary case, the three pillars of free trade from a Hegelian perspective: personal freedom, moral freedom, and social freedom. While the Kantian approach shapes the contemporary conceptualization of trade relationships and the design of trade-related agreements , Herrmann-Pillath elaborates on the alternative Hegelian view in his article. Proponents of both views can use the same words, for example, “free trade,” that then mean different things in the one or the other approach. The author includes the World Trade Organization (WTO ) and several institutional arrangements in his analysis, particularly the GATTFootnote 10 and the TRIPS. At the end of section three, he proposes “a radical rethinking of the idea of trade liberalization which is based on Hegel’s analysis of freedom” (p. 70). In addition, Hegel’s approach provides a foundation for realization-focused comparisons that already take place at the WTO and ultimately aim at internalizing externalities accruing from trade relationships. This potential of the Hegelian approach is unfolded in section four. In the fifth section, the author concludes that, in the light of the Hegelian idea of “wisdom of history,” the WTO has already changed its practices and follows a track characterized by realization-focused comparisons . In the following, the author sketches what is needed for “a fully-fledged institutional elaboration of these developments” and argues that efficiency and justice “are no longer concepts staying in tension” (p. 78).

Herrmann-Pillath’s article relates in three substantial aspects to Clark’s article: complexity and interdependence are main characteristics of international trade relationships; externalities give rise to questions of responsibility and justice ; and the state -versus-market dualism, according to which business is responsible for doing business and governments are responsible for the regulation of the business. These three aspects are related today and were related at the time Clark was writing his article. Although Clark did not use the word “externality,”Footnote 11 he took account of negative externalities in his analysis. Externalities are an expression of interdependence and, against the backdrop of the state-versus-market dualism, it is the task (the responsibility) of the state (the ruler) to establish and enforce institutions or rules that have the wished-for effect on negative externalities. As Herrmann-Pillath (p. 56) emphasizes, “internalization of externalities is a central concern of institutional design” and the evaluation of institutions designed to influence the appearance of externalities is a central issue as well. According to Amartya Sen (Sen 2009), on whom Herrmann-Pillath draws in this regard, there are two different evaluation modes: transcendental institutionalism and realization-focused comparisons . In the light of the former view, every deviation from the single coherent framework of international trade policy is negatively assessed as haggling over special interests without having the one great standard in view. Herrmann-Pillath examines the analytical fruitfulness and explanatory power of the Kantian approach and concludes that the practice of the WTO has ceased to fit the Kantian theoretical underpinning. Thus, the WTO ’s constitutional-level rules fail to internalize externalities; worse, they are yet another source of the terms-of-trade externalities. The author distinguishes four kinds of externalities : technological, regulatory, terms of trade, contingent and systematic externalities on markets for market access .

Herrmann-Pillath outlines an economic framework for the domain of international trade relationships based on Hegel’s critique of Kant . While the Kantian approach highlights efficiency and draws on an – with respect to those affected by trade relationships or agreements – external standpoint for the evaluation of efficiency , the other approach, drawing on Hegel, emphasizes the internal standpoint accruing from comparisons and deliberations about the results of these comparisons. Three pillars are elementary for this framework: enhancing the inclusion of responsible actors in the trade process; inclusion of the civil society (based on the adoption of a wide or particular concept of civil society that re-vitalizes Hegel’s view of the market as a driver of change and, with it, of identifying the civil society with a market society ); and the inclusion of environmental (ecological) issues.

The article The regulative idea of recursive operations : a second-order cybernetic approach to responsibility (Stefan Hielscher and Helge Löbler) presents a short outline and critique of what the authors refer to as “first-order responsibility” (Fig. 4.1). In the light of the problems resulting from the conditions and consequences of social interaction in our modern societies or the “complex structures of interdependent social interaction ” (p. 83), the authors discuss the shortcomings of first-order approaches and outline the basic structure of an alternative approach to “responsibility,” that is, second-order responsibility and the role it may play in contemporary modern societies.

In their introduction (“Responsibility in Modern Societies”), Hielscher and Löbler criticize what they call the standard model of responsibility, which relates descriptions and interpretations with normative assessments. This model tells a story about task requirements, obligations, duties, norms, values, and valuations and draws on actors, actions, and action consequences as basic elements. As Clark’s article testifies, changes in the economy have led to the erosion of the applicability conditions of the standard (or classical) model of responsibility. In section two, the authors bring “The Threat of Erosion in the Standard Model of Responsibility” to the fore and discuss recent adaptations of the model. Scholars have modified the model to alleviate its shortcomings and to adapt it to the “conditions of modernity ” (see Bayertz 1995). For example, they introduced collective actions units (organizations) and amended the backward looking perspective by a forward looking one. Yet, Hielscher and Löbler don’t try to extend or adapt the standard model of responsibility to the conditions of modernity; instead, they invoke an alternative approach, a “Second-Order Cybernetic Approach to Responsibility” (section three). A second level of analysis is introduced through the application of the concept of responsibility in a recursive manner to itself in order to identify the so-called Eigenform of the concept of responsibility . After the introduction to second-order cybernetics , the authors substantiate their distinction between first order and second-order responsibility. Based on examples from mathematics and the use of the Google translator they show that a recursively-conducted operation can lead to stable interpretations or results, even if the operation continues. As the authors argue, “using the idea of recursive operations means to think about the consequences of applying responsibility to responsibility itself” (p. 92). According to the authors, both the classical model of responsibility and its adaptation express a misleading way to state the problem, while second-order responsibility is considered as a way “to think out of the box.” Instead, the goal of responsibility looks to the process of negotiations as a recursive operation . Pluralism of values, negotiation , and agreement characterize a process that is based on the engagement of actors and groups to participate in such a process; and this can be related to what Clark (1916, p. 226) called “public spirit” and “social responsibility .” The article ends with “Implications and Conclusion.” Here, the authors discuss the advantages of their second-order approach over the standard model and relate the insights gained from this discussion with theory traditions in cybernetics and economics. In essence, this article calls for “a perspective worth thinking about” (p. 94). To proceed always in the same manner in the attempt to solve a problem, or to adapt an approach to the requirements of modernity , may not be successful for systematic reasons. A paradigm change, a Gestalt shift, may lead to solutions which have previously not been in “sight” – simply because they are located on the blank area of the map. Thus, it makes sense to change the map and to see how successful travels may be made by using a new map. This article makes the traveler aware of this opportunity. As the authors argue, their approach is in “need for further elaboration” (p. 96).

The next group of articles, titled by “Topics: Problematic Online Advertising and Female Homeworkers in a Global Supply Chain ,” consists of two contributions. The first article titled Who is Responsible? Institutions for Self-Control and the Spread of Problematic Online Advertising is authored by a group of scholars (Jutta Krautter, Markus Feiks, Uta Müller and Guido Zurstiege) responsible for the DFG-funded project “Ethics and Advertising” at the University of Tübingen (Germany). This article addresses ethical problems in online advertising and, with it, in the use of a communication or social medium that was definitely not available hundred years ago: the internet. Notwithstanding, the authors address an issue of major importance for Clarkean economics in general and The Changing Basis of Responsibility in particular: tolerable social control : “We are in an economy of control with which our intellectual inheritance fits but awkwardly. To make control really tolerable we need something more; something which is still in its infancy. We need an economics of responsibility , developed and embodied in our working business ethics ” (Clark 1916, p. 210). As the authors point out, in the case of problematic online advertising , there are different actors who can and actually do exert different kinds and amounts of social control, that is, “control exercised by or in behalf of the entity we call ‘society ’” (Clark 1926 [939], p. 7).

In their introduction the authors relate their research question and statement of the problem to Clark’s article: diffusion of responsibility among different actors, interdependency and interconnectedness via the “inter-net” (p. 102). Part of the problem statement is that “producers of internet content and therefore also ads, have hence increasingly lost control over their ‘products’” (p. 102) and the exaggerated “hyper-semantics ” often in use in digital media. In section two, the authors discuss pros and cons of advertising in general and introduce advertising ethics with reference to marketing ethics and media ethics . In the light of the poor image of advertising and the attempts to exercise public control of it, self-regulatory institutions have been established “to prevent the development of further legal regulations that may result from (…) complaints, and to generally improve the image of the advertising business” (p. 104). The next section (section three) is devoted to the development and challenges of digitalization . After having presented some general remarks on the topic, the authors address digital advertising . For their line of argumentation, it is important that they state “the internet is uncontrollable when it comes to any kind of data and information, and whatever goes public becomes uncontrollable” (p. 107). Notice that the authors do not relate their work to authoritarian and dictatorial regimes that attempt to prohibit the use of the internet. Consequently, in case of problematic advertisements, “uncontrollability” means “that anyone, not just targeted groups, could get into contact with potentially unethically distributed commercials” (p. 109). In the light of this information, in section four, the authors ask the question “who is responsible?” (p. 109). They introduce the concept of responsibility in form of a four-digit relation and discuss the object of responsibility (responsibility for whom or what); the norms or principles referred to in the process of normative assessment of facts or of empirical evidence, respectively (responsibility for what reason); the instance of responsibility (responsibility toward whom or what); and finally the subject of responsibility (who is responsible). As potential subjects of responsibility, the article exemplifies advertising agencies , ethical standard authorities, advertising companies, and the internet user . In their conclusion, the authors point to the extended range of action of the internet user compared to other subjects of responsibility. However, it is questionable whether this subject of responsibility (the internet user ) is aware of the part he or she plays in the process of distribution of problematic advertisements and if he or she can (or will) exercise social responsibility . If we relate the topic of this article to Figure 2.2 in Pies’ contribution (Pies, p. 28), we could establish that Krautter et al. deal with moves from cell III to cell IV (e.g., the internet user , advertising agencies , advertising companies) or cell I (ethical standard authorities). In the case of the subjects of responsibility addressed by Krautter et al., it is unclear whether they want to make such a move at all in order to establish a form of “tolerable social control .”

The second paper in this group titled The Position of Female Homeworkers in a Global Supply Chain : How Do Capitalist Labor Market Practices Interplay with Gender Ideologies? (Farah Naz) addresses homeworking as “an integral component of the global production organization” (p. 125). As the author points out, the “involvement of homeworkers is on the rise in global supply chains ” (p. 125) and these workers face poor working conditions in their home countries. This article focuses on female homeworkers in the garment supply chain in Lahore, Pakistan. The author conducted a qualitative study; her article provides insights on the reasons for the conduct of homeworking, the contemporary practice of homeworking strongly influenced by patriarchal structures and gender ideologies, and the chance to transform these structures by homeworking.

In the introduction, the author motivates her research and presents the three research questions she wants to answer. These relate to the female homeworkers ’ embeddedness in the production organization of the garment supply chain , the working conditions in these chains, and the female homeworkers ’ perceptions of their situation. The second section introduces the study’s theoretical framework, referring to globalization and global commodity chains; home-based work and its potential to add to the empowerment or agency of women; and the restrictive interpretation of “economic responsibility ” in mainstream economics (what Clark called “economics of irresponsibility ”) that equates “economic responsibility ” with “profitability .” The third section focuses on the research methodology used in the article. The author conducted a case study of a garment-producing firm, Irfane Textile Ltd. (ITL), and carried out interviews in Lahore (Pakistan) with representatives of ITL, ITL’s subcontractors and the homeworkers . The following section on the empirical evidence (section four) provides insights into the structure of relationships established by ITL and the part played by firms such as ITL in the global supply chain . This section of the paper includes an analysis of what the author calls an “ideological construction of homework.” Naz argues that female industrial homework “is constructed as a feminine activity, not undermining the ideological expectation of the ‘male breadwinner role’” (p. 138). The “naturalization” of women’s skills devaluates these skills; their work is considered as “an extension of their unpaid household work and not considered as a “valuable professional activity” (p. 139). In consequence, the dominant patriarchal ideologies in Pakistan stand in the way of a change of “the living realities of the female homeworkers in the garment supply chains of Pakistan” (p. 140). Homeworking changes the daily routines of women; and it helps them to make some money for the family. However, it does not change the self-assessment of women, at least not in the short run. As the homeworking women do not conceive themselves as workers, homeworking does not make the female family worker a self-conscious participant in the labor market .

With Clark’s article in mind, in her discussion (section five) Naz points to the problem of diffused responsibility and asks for the causes responsible for the situation of the female homeworkers . In the discussion, Naz refers to the interplay of social structure (social and gender norms) and semantics (ideologies) that hinders Pakistan’s women “to access their rights and entitlements” (p. 142) and makes them “invisible … even to themselves” (p. 144). For the part of the social structure or social environment addressed by Naz, it is difficult to ascribe individual responsibility . However, as Clark (1916, p. 217) has pointed out, in some sense the social environment is nothing else than the rest of us: “And laying responsibility on the environment cannot take it off the shoulders of persons so long as the environment of each of us consists chiefly of the rest of us.” The female homeworkers , despite their precarious situation, are not only “victims of the social order” (Clark 1916, p. 212); rather, they are part of it and enforce it through their “beliefs put into action” (Da Fonseca 1991). Therefore, women and men share responsibility for this situation, but perhaps not to the same degree. The article ends with recommendations by the author.

Clarkean economics is an economics devoted to the consideration of change. For this reason, it opposes any type of “assumptions of contentment” (Abramovitz and Ginzberg 1936, p. xi) such as those Clark had related to “the dominant economics” (ibid.). As Abramovitz and Ginzberg with reference to Veblen further point out: “The impact of (…) institutions upon our thinking and acting is pronounced, sufficiently so in fact to lead to the transformations of the institutions themselves. A process of cumulative change is discernible …” (ibid., p. xii). In Pakistan, gender and other ideologies such as the ideology of domesticity (Haase et al. 2016) stand in the way of changing the role of homeworking women from homeworking family members to market actors. Naz’s analysis points to limitations of Clark’s approach from the perspective of today. Clark was focusing on knowledge , in particular causal knowledge , for the identification of responsible causes . That ideology can interfere with knowledge is not addressed in his approach. If the “right” knowledge is there, it will be effective; in particular, if the “right” knowledge is used by the autonomous individual. The “right” knowledge helps the individuals to extend their personal responsibilities by social responsibilities or to move (in terms of Pies’ Figure 2.2) from cell III to cell I or IV. A second limitation is the western origin of the ethic of responsibility and the conceptualizations of responsibility based on it. As Naz’s analysis illustrates, to conduct responsible action has philosophical and empirical preconditions; it requires, among other things, autonomy and freedom and, with it, acting persons. Naz’s study on female homeworkers in Pakistan provides further evidence that these conditions are not always and everywhere given. However, Naz’s message is not that western ethical principles and values such as responsibility cannot be applied in the analysis of the situation of female homeworkers in Pakistan.

The third group of articles in the book is headed by “Consequences: Economic Models and Economic Responsibility.” The first article in this group, On the Responsibility for Economic Models and their Use (Klaus Kornwachs), leads us back from ideology to knowledge . In the Clarkean economics, knowledge plays a pivotal role for the identification and solution of problems. Knowledge is embodied in theories; for that reason, Clark continuously insists on the need for new theory: “Today, economics faces these problems and their existence furnishes a revision of economic theory ” (Abramovitz and Ginzberg 1936, p. xx). Of models it may be said that they embody knowledge and are instruments for the generation of knowledge as well. In any case, models and their use are important for the development and success of an economics of responsibility . According to the author of the next article in the book, Klaus Kornwachs, this creates responsibilities of its own for the scientific community .

Kornwachs’ article ranges from an introduction to the concept of responsibility as an n-digit relation to a discussion of the responsibility of scholars for the development and use of models . Kornwachs begins with an introduction to Clark’s work and the objectives of his article that focuses on “the responsibility related to modeling and models in economics” (p. 151). In the next section, the author introduces the concept of responsibility and discusses the diffusion of responsibility taking place if the subject of responsibility changes into a group, community, or even to society . This discussion prepares the ground for the article’s third section that establishes a framework for the discussion of ethical principles and values; the moral judgment of economic behavior ; and the homo-economicus model. Kornwachs argues “for the view, that economic actions as well as economic action conditions can be the subject of moral judgments” (p. 167). In addition, “economics as a science and as a social practice is the subject of moral judgments with respect to its impacts, too” (p. 167). The recent economic and financial crisis has given rise to criticisms of economics and some of its models. Kornwachs bemoans double standards of moral behavior; the cause of the “problems” is not only – to relate his analysis to that of Farah Naz – Irfan Textile Ltd. but also the final customers or the “rational optimizers” of their own advantage in the garment supply chain . In the last subsection of section four, Kornwachs expresses his doubts concerning the adequate use of models in economics, an issue elaborated on the subsequent, fifth section. Here, Kornwachs outlines his approach to models and model building that pays particular attention to cultural patterns and their impact on the social and economic life. As formalization requires the abstraction from descriptions of “real-life phenomena,” the quality of model interpretation depends on the power of judgment of the interpreter. Ideas and interpretations have guided the processes of abstraction; and ideas and interpretations influence the model interpretations as well. Model interpretations can be conceived of as cultural patterns influenced by, among other things, economic education. As the interpretation of models cannot be separated from their use, Kornwachs’ next section addresses the interpretation and use of models . With reference to the distinction between laws, regularities and rules-to-act, he considers three “options” for the interpretation of models. Interpretation, however, is not an activity restricted to the community of economists. Economists communicate their models to other groups in the society (other scholars, politicians, or citizens ); and uno actu with a model they impart an interpretation of the model. As the receivers of these communications conduct their own interpretations or “mix” the meanings taken from the economists’ communications with those generated by themselves or other interpreters, differences in the interpretations of models can be expected. There is a great danger of misinterpretation in the processes of model interpretation, communication, and use such as taking regularities for laws, neglecting the missing theoretical relation between model variables, and conducting prognoses on shaky ground. As models are widely communicated and used, for example, for social reform and public control , the model builders and model communicators should take care in order to avoid possible misunderstandings and misuses of their “creations.” According to Kornwachs, this is an object of responsibility for economists and, with it, part of the responsibility of the scientific community . Consequently, the next and seventh section is devoted to “responsibility for the development and use of models ” (p. 190). Here, Kornwachs discusses several objects of responsibility. In the last section, the author pleads for recognizing the “duty to communicate honestly the real and possible limits of economic models” (p. 195).

The last article in the book, Economic Responsibility Revisited (Michaela Haase), addresses economic responsibility at the intersection of economics, business ethics , and CSR. Haase argues that Caroll’s influential CSR models draw on a concept of economic responsibility that is only loosely or indirectly connected to economics. In the second section, the article discusses these models and compares them with Milton Friedman ’s approach to social responsibility . Caroll’s models include economic responsibility – besides of three other responsibilities (legal, ethical, and discretionary or philanthropic responsibility) – as a sub-category of social responsibility while Friedman (1970) opposed any social responsibilities of a firm with the exception of what the CSR models have put on a par with economic responsibility , that is, making profits. Yet, Caroll’s and Friedman’s views on economic responsibility are not identical. Caroll’s conceptualizations of economic responsibility lack theoretical (economic) foundation while Friedman’s view is grounded on a sound, but limited approach to economic responsibility . The article further addresses the relationship between responsible and profitable economic action. In section three., it briefly introduces two models of responsibility originating from the ethic of responsibility. After that, in section four, Haase introduces Clark’s approach to economic responsibility . According to Clark, social responsibility is individual (or business) responsibility extended to the social sphere (sub-section one). Clark does not reject the influence of the social environment on individuals, but this does not mean that actors have completely lost control of their action consequences . Empowered by theory-based causal knowledge , they “do not stand entirely helpless” (Clark 1916, p. 214). There is thus a joint or collective responsibility for the social sphere. Drawing on his approach to social value , Clark promoted an ideal of responsible economic action that leads every actor to include the value to society into his or her action calculus. The views promoted by laissez-faire economics stand in the way of such a “working business ethics ” (Clark 1916, p. 210). Economic actors need support by an economics of responsibility , that is a dynamic economic approach dealing with, among others, the identification of significant and responsible causes , the furthering of willing cooperation, and the establishment of reasonable and moderate public control (sub-section two). The article continues on the basis of the conjecture that, for an explication of the concept of economic responsibility as well as for the development of an economics of responsibility , a broader framework of analysis composed of empirical, philosophical, or ethical theories may be necessary (sub-section three). This section ends with a brief comparison of Caroll’s and Clark’s approaches to social responsibility . The last section offers concluding remarks.