Dr. Michael Towsey
Queensland University
and Assoc. Director, Prout Researhc Institute, Australia
December 2009

Continued from Part 1

Since Richardson wrote more than a decade ago, considerable scientific research has gone into understanding the way in which people make economic decisions and the factors which influence them. The research is important for two reasons. First, its insights inform the work of advertisers and marketing departments. Second, and more importantly for our purposes, the entire edifice of neoclassical theory depends on the validity of its assumptions about human behaviour. The results, discussed in parts three and four of this essay, turn out to be fascinating and often humorous, but damning for neoclassical theory. Now let us briefly review each of the assumptions concerning Homo
economicus.

People are not always well informed
Advertisers do not always tell the truth. As just one example, in October 2008, Coca-Cola in Australia employed a well-known actress to feature in a series of ads which claimed that accusations the drink was full of caffeine, rotted people's teeth and made them fat were a "pack of lies". The Australian regulatory body that deals with false advertising ordered Coca-Cola to run another series of ads saying that the originals were misleading.86

The participants in a market may not be equally well informed. Insider trading deals depend entirely on having information not available to the majority of others. Indeed successful trading in many markets depends on the participants gaining an information advantage. Equality of information does not exist in the real world.

People do not reason by logic alone
We know that people do not purchase rationally because they will still buy cigarettes, even when the packet displays images of diseased lungs. But scientifically controlled experiments illustrate the irrationality of human economic behaviour even where addiction appears not to be involved. Here are just a few of countless observations:

It is well-known that placebos are often as effective as a medicine, illustrating the so-called power of the mind. But it is also observed in controlled experiments where subjects are required to purchase their medicines, that the more expensive the placebo, the more effective it is.87

In controlled experiments where men are asked to play a simulated financial investment game on a computer, those shown pornographic images before hand make high-risk investment decisions compared to those shown neutral photos.

A study of 443 women, aged 18 to 50, found that the participants were more prone to impulse buying in the luteal phase of the menstrual cycle (10 days prior to menstruation)88.

Much research has been devoted to the best supermarket layout to maximise sales. The placement of every product is guided by research. Take just one example. Supermarkets around the world will guide you on a path that takes you first past the fruit and vegetable stands, leaving the sweets and dairy products till last. This is because studies have revealed that people are more inclined to buy high fat, high calorie
foods if they have first been given the opportunity to select healthy foods.

The conclusion we may draw is that economic decision making is not guided by logic alone. A range of factors plays a role and in particular every 'rational' calculation is made in a complex physiological environment. Numerous hormones and neuro-active substances are playing a role, either consciously or unconsciously.

People do not necessarily seek to optimise their gain
Numerous experiments have revealed that human economic decision making is far more complex than accepted by the simple theory of maximising gain. This turns out to be true even for animals. For example, if two monkeys perform the same task side by side, and one is rewarded a grape (big money) and the other a cucumber (small money), the latter will throw a tantrum and toss the cucumber out of its cubicle. Yet if both receive a cucumber, both eat happily. Conclusion: monkeys show an aversion to inequality. The reward does not even have to be physical - it can be the affectionate attention of laboratory staff.

Humans also behave 'irrationally' in rejecting inequality, even if it means walking away empty-handed. This is demonstrated in experiments where two strangers (A and B) are asked to share a sum of money, all of which is first given to A as if it belongs to A. The rules stipulate that if B rejects what is offered by A, neither of them gets anything. Classical economic theory says that gain will be jointly maximised if A gives just a small portion of the money to B because B at least gets something rather than nothing and A's displeasure at giving up something is minimised. In practice, this seldom happens. A almost always offers close to half the money and B usually rejects any offering much less than half.89

This behaviour cannot be explained by a theory which says that agents should accept whatever reward they are given to maximise gain. And here lies a problem because, as already observed, the entire theoretical edifice of modern free market economics is built on supply and demand curves whose validity requires humans to optimise personal gain. The theory breaks down because it turns out that factors other than personal advantage also influence mental cost-benefit calculations. We will return to these other factors below.

In conclusion, the assumptions made by neoclassical theory concerning human economic decision making have been shown to be flawed. It is hard to avoid the conclusion that the entire mathematical edifice built on those assumptions is also flawed.

The Culture of Neoliberalism
The reduction of the world of economics and commerce to a mathematical abstraction has far-reaching consequences. When the goods we make and sell - the clothing, the books and clean water - are all reduced to dollar units to facilitate accounting, it is but a short step to believing that manipulating dollar figures is the be-all and end-all of business and that the reality behind those figures is of little consequence. Psychologically, the shift is from a preoccupation with production to a preoccupation with finance.

This shift in preoccupation has even been accompanied, Sarkar notes, by a change in the meaning of words. The original Sanskrit word for a business person was vaeshya and it meant "one who earns a living through the production of goods". The word survives in modern Indic languages but it has come to mean "one who profits by trading and broking without being directly involved in production".90

The sophistication of financial instruments and services has increased steadily over the centuries. However, the 1980s witnessed a singular transition in the history of capitalism because, during this decade of deregulation, financial instruments became an end in themselves rather than a means to production. The transition from finance as means to finance as end in itself paralleled the transition from Keynesian welfare capitalism to neoliberalism. One of the first countries to make this transition (with much haste and social dislocation) was New Zealand.91,92 Writing from his own experience as a politician and bureaucrat administering the transition, Bruce Jesson compares workplace culture before and after:

The difference between a productive culture and a finance culture is that the world of the producer is tangible whereas the world of the financier is ethereal. The old-style manager dealt with workers, customers and actual productive processes. The modern manager deals with spreadsheets and figures on a screen. The difference is expressed quite graphically in the changed attitudes of managers to workers. The old-style manager knew the workers, dealt with many of them personally and had a feeling of some responsibility for them. Laying them off was a last resort. The new finance-oriented managers have no contact with the workers and assume that there are too many of them. Laying workers off is their first option. The contrast between the culture of a production-based and public service-based economy and that of a finance-based one is crucial. Each has an ethos of its own. Production-based industries develop ways of life that are unique to them. They evolve standards of excellence and pride in their craft... People learn to cooperate in their work and form bonds of mateship...

Finance has an ethos of its own too, to do with financial efficiency and competitiveness. From a financial point of view, there is nothing unique about any particular industry. Finance is fluid, mobile, moving constantly around the world. Finance recognises no boundaries between industries - or countries - and it treats each industry the same way...

At the same time, there is a fundamental contradiction in the ethos of finance. On the one hand, there is all this obsession with efficiency; yet the personal goals of the finance elite are apparently to make and spend money as conspicuously as possible. There is none of the frugality of earlier generations of capitalists, nor much apparent thought for the future. The lavish life-style of the elite is matched, within their own companies, by the emphasis that is placed on advertising and marketing. Industry is increasingly dominated by the sales process, with its parasitic caste of PR people and ad people promoting a culture of hedonism and avarice.93

Of note in Jesson's comparison is the deteriorating relationship between managers and workers. When finance is everything, a business has no use for ethics and the culture of cooperation. Margaret Thatcher, the person who perhaps more than any other, symbolises the temporary triumph of neoliberalism, once famously remarked: "There is no such thing as society - there are only individual men and women."94 It was a nonsense statement then, as it is now. But its significance is clear. Society is the relationships between people. If those relationships are made invisible, then the violence done to them by neoliberalism is also made invisible.

The Ethics of Capitalism
Debates about the ethics of capitalism usually revolve around the ethics of market outcomes because the market is supposedly the determinant of everything that matters in a capitalist society. Markets are populated by producers and consumers. In a free market, consumers are free to choose whatever affords them the greatest utility. In this way, capitalism side-steps the nature-nurture debate and instead asserts the supremacy of choice. Between producers however, neoclassical economics promotes the virtue of competition and here we find an echo of Darwin's theory of natural selection and survival of the fittest. Producers compete in order to satisfy consumer choices and only those with the best business acumen survive or become rich. However what commercial competition selects is not genes but behaviour - and not moral behaviour but any behaviour that turns a profit. So we find that as the culture of neoliberalism pervades a society, business, and social ethics more generally, begin to decline. In this section therefore, we are concerned with the ethics of capitalism, both the theory and the reality.

The invisible hand
The ethics of liberal capitalism were articulated by Bentham and became known as utilitarianism. According to this philosophy, the morally good is that which makes people happy and that which gives them pain is bad. Bentham made no distinction between pleasure and happiness. Of course, happiness and pain are seldom unalloyed, so one state of affairs is better than another if it involves a greater proportion of pleasure over pain.

Bentham went further however and claimed that each individual pursues that which he/she believes will deliver them the greatest net happiness. We recognise here the self-optimising goal of economic agents - which is not surprising because the utilitarians did the philosophical groundwork for neoclassical economic theory. The concept of utility underlying supply and demand curves arises from utilitarianism.

The utilitarian ethic says that individual desires and actions are good where the outcome promotes the general happiness. But, and it is a significant 'but', the outcome does not have to be the intention of the original action, only its consequence.95 This takes us back to the previous century when Adam Smith first articulated the metaphor of the invisible hand.96 His assertion was that in a free market, pursuit of self-interest (that is, pursuit of profit) leads participants to achieve the material advantage of society as a whole, as though "led by an invisible hand to promote an end which was no part of his intention".

Utilitarians take this argument two steps further: first, they equate a materially optimal result (measured at the government level as per capita Gross Domestic Product or GDP) with the greatest happiness of the greatest number; second, they make an ethical jump and equate the greatest happiness of the greatest number with the public good. Conclusion: self-interested action in free markets leads to the public good. Also implicit in the above chain of reasoning is the neoclassical definition of progress - an ever increasing per capita GDP. By this definition, progress depends on free markets and the invisible hand. Neoliberals ignore Adam Smith's own doubts about the efficacy of the invisible hand and his belief that "economics should be subordinate to and in the service of society and morals"97 rather than define those morals. Noam Chomsky argues that the invisible hand has been stretched to the point of abuse. Adam Smith believed, he says, that the invisible hand would destroy the possibility of a decent human existence "'unless government takes pains to prevent' this outcome, as must be assured in 'every improved and civilized society'."98

The 2001 Nobel Prize winning economist, Joseph E. Stiglitz, has a different objection to the invisible hand - it is invisible because it is probably not there.

Adam Smith, the father of modern economics, is often cited as arguing for the "invisible hand" and free markets: firms, in the pursuit of profits, are led, as if by an invisible hand, to do what is best for the world. But unlike his followers, Adam Smith was aware of some of the limitations of free markets, and research since then has further clarified why free markets, by themselves, often do not lead to what is best. As I put it in my new book, Making Globalization Work, the reason that the invisible hand often seems invisible is that it is often not there.

Whenever there are "externalities" - where the actions of an individual have impacts on others for which they do not pay or for which they are not compensated - markets will not work well. Some of the important instances have been long understood - environmental externalities. Markets, by themselves, will produce too much pollution. Markets, by themselves, will also produce too little basic research. (Remember, the government was responsible for financing most of the important scientific breakthroughs, including the internet and the first telegraph line, and most of the advances in bio-tech.)

But recent research has shown that these externalities are pervasive, whenever there is imperfect information or imperfect risk markets - that is, always.

Government plays an important role in banking and securities regulation, and a host of other areas: some regulation is required to make markets work. Government is needed, almost all would agree, at a minimum to enforce contracts and property rights.

The real debate today is about finding the right balance between the market and government (and the third "sector" - non-governmental nonprofit organizations.) Both are needed. They can each complement each other. This balance will differ from time to time and place to place.99

Ethics in the era of MBAs
It is not unreasonable to trace the source of the current Global Financial Crisis to a failure of ethics, which in turn can be traced to deregulation and the inadequate schooling of business students in ethics.

In the early 1990's the then Professor of Business at Monash University, Murray Cree, became interested in the ethical attitudes of his students. He conducted a survey of some 380 students from three Australian universities in the departments of business, accounting and marketing.100 Their average age was 21. Cree asked two questions:

Q1: Would you be open to being involved in an insider trading scam if the payment to you was to be $500,000?

Q2: Would you still be open to the proposition if you knew it would wipe out your parents' life savings?

The percent of respondents answering 'yes' to these questions is shown in the following table.

Accounting students
Marketing students
Business Students

Q1 72% 46% 63%
Q2 42% 30% 26%

Approximately two thirds of students surveyed were prepared to engage in illegal and unethical practices for their own personal gain and one third would have been prepared to destroy their parents' life savings in the process. This is a frightening result. As Cree points out, many of these same students would be today's executives in the banking and investment sectors and would be managing large sums of money. If one is seeking the origins of the Global Financial Crisis, Cree considers the results of his investigation to be "Enough said!"

Other studies published in accounting journals have concluded that the threat of prosecution significantly lowers the propensity for financial wrong doing, suggesting that an effective regulatory regime helps to keep business people honest. The obvious corollary is that deregulation would have the opposite effect. It is also of interest that men appear to be less perturbed by the threat of prosecution than women.

Much of the finger pointing during the current Global Financial Crisis has been at the MBA courses offered by universities around the world. And the Harvard Business School, as the world's premiere business education institution, has come in for particular attention. This is the institution where, as one commentator points out, "currently, 1,800 students are beavering away, trying not to think too hard about the economic triumphs achieved by such notable alumni as George W. Bush and Rick Wagoner, the chairman of General Motors"101. (General Motors went from being one of the largest car makers in the world to declaring bankruptcy in 2009.) Another commentator, analyzing the movements of Wall Street, discovered that the more Harvard graduates are employed in any one year the worse the market performs.102

But the times are changing. Conscious of their reputation, Harvard business students have taken matters into their own hands. Nearly 20% of the 2009 graduating class (one may ask why only 20%) have signed The MBA Oath, a voluntary student-led pledge stating that the goal of a business manager is to "serve the greater good". It promises that Harvard MBAs will act responsibly, ethically and refrain from advancing their "own narrow ambitions" at the expense of others.103 All students at the Columbia Business School must pledge to an honour code: "As a lifelong member of the Columbia Busines School community, I adhere to the principles of truth, integrity, and respect. I will not lie, cheat, steal, or tolerate those who do." The code has been in place for about three years and came about after discussions between students and faculty. Business school academics say that what we are seeing is "a generational shift away from viewing an MBA as simply an on-ramp to the road to riches."104

What is Economic Truth?
It is worth asking why a demonstrably flawed economic theory has become the only economic truth taught in universities around the world. Why have alternative economic perspectives, such as those provided by schools of political economy for example, almost disappeared from universities? In answering this question, we are obliged to recognise the contested nature of academic knowledge. That which is learned at universities is not universal truth but rather the outcome of a struggle in which many forces are brought to bear. The development of economics as an academic discipline has been subject to diverse and powerful influences, of which it is worth identifying three: the struggle for power, the struggle for rationality and the struggle for distributive
justice.

1. The struggle for power: The dominance of neoliberalism in$ universities has been due to the ability of its proponents to render the issue of power and class struggle invisible. As in politics, a basic question in economics must be power - who has economic power and how is it obtained? Who does not have economic power and how is it lost? Power is rendered invisible to economics students around the world in order to hide the reality that neoclassical economics serves the interests of a powerful social class. When class struggle is made invisible, it allows teachers of economics to advance their subject matter with the aura of rationality.105

2. The struggle for rationality: Rationality in neoclassical theory is defined in terms of efficiency. Free markets are rational because they are claimed to be the most efficient at allocating scarce resources. The term economic rationalism has its origins in this claim. Efficiency is no doubt a worthy goal and certainly an inefficient system is open to attack on moral as well as rational grounds. However the extent to which free markets deliver efficiency is debatable, because of the problem of external costs noted above. It is also of interest that neoclassical economists have attempted to enhance their aura of rationality by claiming the methodology of the physical sciences. To question neoclassical theory requires an audacity comparable to questioning Newton's theory of gravity.106 Davies explores this issue in some detail and finds neoliberalism guilty of scientific fraud.107

3. The struggle for distributive justice: Ethical outcomes are certainly of concern to many economists, notwithstanding the insistence of conservatives who argue that "real economics is not a morality tale".108 At least two difficulties arise. First, measures of economic wellbeing, such as growth in per capita GDP, are averages which ignore
inequalities in income distribution. Second, economic well-being tends to be conflated with efficiency - the assumption being that efficiency is a prerequisite for justice, so achieving the former somehow achieves the latter.

Unfortunately for those who cherish a belief that universities are the creators, preservers and disseminators of enlightenment, university economics in recent decades has been motivated mostly by a desire to preserve class privilege and least by social justice.

To claim that neoclassical economics is objective in the same sense as physics and chemistry is both nonsense and dishonest. Physical and economic laws are not the same kind of laws. Economic laws describe the aggregate of human behaviour in markets. Markets are systems created and managed by humans and behaviour in them is mediated by money, another human artefact. Since markets are essentially human creations, they come within the purview of human consciousness. Their performance can be modified if humans desire it. Physical laws describe the aggregate behaviour of inert atoms or bodies in space. These behaviours, as exemplified by the law of gravitation, for example, are not amenable to persuasion by human consciousness - at least not in the present age. Not to see the difference is nonsense.

The dishonest aspect of the assertion is that its true purpose is to undermine the fourth principle of egalitarianism - that economic circumstances are, by design or neglect, a product of political processes and not of immutable universal laws. To surrender to the supposed law of the market is to surrender to any market result, even those which produce poverty and pollution. And this brings us to a more compelling reason to recognise a distinction between the physical sciences and economics. A theory of physics which gets the number of fundamental particles wrong is unlikely to spawn poverty or threaten the survival of the human race. A theory of economics which ignores the reality of external costs, such as climate change, is a serious threat to the planet.109

The Renaissance of Cooperation
We turn now to a discussion of the cooperative principle. The argument is that a society based on the principle of cooperation is possible given some reasonable effort to put it into practice. Furthermore, the future development of human civilisation depends on our ability to establish such a society.

In the simplest of terms, a society consists of a collection of individuals and the relationships between them. It is the relationships that make a society something more than the sum of its individuals. To be of any practical use, a social theory must offer an adequate account of social relationships and of the individuals expected to participate in them.

Experience tells us that multiple factors help to maintain the cohesion of a social group (some formal, some informal, some coercive, some heartfelt) and likewise multiple factors encourage its disintegration. Obviously social integrity depends on the balance of cohesive and fissiparous tendencies. It is generally accepted that a predominance of self-interest over collective interest is detrimental to social cohesion. Societies which embrace neoliberalism are faced with increasing problems due to this defect. It is also generally accepted that rewards and inner convictions are better ways to preserve social cohesion than punishment. Fascist societies are relatively short lived because they have little other than propaganda and punishment to preserve an otherwise highly unstable social stratification.110 Sarkar cites "too much self-interest in the individual members, the formation of groups for economic or social advantages, and the lack of understanding of others" as the principle reasons for the downfall of a society. "Instances of so many groups and empires disappearing altogether are not rare in the little-known history of this world."111

The essential problem to be solved by all societies, and the problem addressed in the remainder of this essay, is how to achieve a social cohesion which is sustainable because it is consistent with the spectrum of human needs and aspirations. The discussion is divided into seven sections, each of which approaches the challenge of building a cooperative society from a different perspective. Here is an overview of what is to come.

Section 1, What is Scientific?, argues that Western materialistic science, which now dominates world culture, is in its present form partly a help and partly a hindrance in building a cooperative society. This section makes the case for a broader definition of science based on a synthesis of Western materialistic science and Eastern spirituality.

Section 2, The Concept of Progress, links social progress to the pursuit of happiness, but links the pursuit of happiness to the development of human potential. Any kind of social or economic development, therefore, can only be considered progress if it enhances the more subtle and more expansive potentialities of human consciousness.

Section 3, The Theory of Cooperation, introduces the concept of social capital, a term used to describe the network of relationships between people and especially the moral and empathic component of those relationships. We also introduce Neohumanism, that part of Sarkar's social philosophy which links cooperation to social progress.

Section 4, The Science of Cooperation, introduces the (Western) science and sociology of cooperation. Surprisingly we find that humans have a genetic predisposition for cooperation, which can be elicited given appropriate social encouragement.

Section 5, The Ethics of Cooperation, explores the ethical dimension of cooperation and affirms that a cooperative society is possible given the right kind of individual and collective effort. We must also address the problem of power, which has undone all attempts so far to establish a cooperative society.

Section 6, Egalitarianism, begins with the dilemma that egalitarian societies can be shown to be happier and yet the imposition of material equality has proved to be a disastrous failure. What is the appropriate degree of egalitarianism required to encourage cooperation?

Section 7, The Future of Cooperation, looks to the growing importance of an economy for the mind.

What is Scientific?
The reader may be wondering why a discussion of cooperation should begin with the philosophy of science. Recall that Marx and Engels stamped dialectical materialism with the authority of science and likewise neoliberalism attempted to claim the authority of science, although neither of these attempts stood up to close scrutiny. The label 'scientific' endows validity because the discipline of science is both powerful and rational. When the discipline is followed wisely, the knowledge so obtained reduces the element of surprise in our dealings with the world (that is its power) and it provides a view of the world that is both internally consistent and consistent with human well-being
(that is its rationality).

Science is motivated by questions and the question that motivates us here is: what kind of social relationships serve to strengthen society and at the same time promote the general happiness without encouraging selfishness? Obviously the answer we are inviting is cooperative relationships. But cooperation, like finding peace and love in our lives, is much easier to talk about than to achieve. We need something more than a wish and a prayer in order to build a society based on cooperation. We need the confidence and the rationality that science provides.

In the previous two parts of this essay, we considered the Marxist and the neoclassical views of the human being and we found them both wanting. The fundamental defect of both is that they are reductionist - but for different reasons. In the case of Marxism, the human being is reduced to a material entity for ideological reasons, but the theory flounders when the intellectual, aesthetic and spiritual human being begins to assert itself. In the case of neoclassical economics, the human being is reduced to a behavioural parody, because it supposedly facilitates a mathematical description of the narrow world that interests economists. Clearly we require a theory of the human being which avoids these problems.

From the Proutist perspective, a healthy society (and therefore a healthy economic system) can only be built on a holistic understanding of the human being, one which accepts humans as multi-dimensional, that is, as physical, instinctual, sentimental, intellectual, social, aesthetic, moral, spiritual and so on. Human beings have needs and aspirations in all the above dimensions of life and each of them impinges one way or another on social cohesion and on economic activity, which is why they must all somehow be acknowledged in theory and in practice. This idea is fundamental to everything that follows. However, we are faced with a difficulty. Western materialistic science is founded on the assumption that only matter exists and therefore only matter
can be known. Due to this presumption, Western science can only ever seek to understand the more subtle aspects of human beings, their sentimental, intellectual, social, moral and spiritual lives, as epiphenomena of matter. The quandary is that we wish to embrace Western science for its ability to improve our quality of life and to defeat dogma with rationality. Yet constrained by its own dogma of materialism, Western science is inadequate to explore the inner mental and spiritual worlds. Even the neuro-philosopher, Patricia Churchland, admits that "We do our research as if materialism is a proven fact, but of course it isn't".112 The philosopher Ken Wilbur argues that the non-material worlds must be approached on their own terms, that is, each of the dimensions of human existence is deserving of its own science and methodology. In Eye to Eye, he gives an elegant account of the three kinds of science required to deal with the physical, mental and spiritual worlds, and he highlights the common features of the three methodologies that justify their deserving to be acknowledged as scientific.113

Sarkar also embraces the Western scientific method but, not surprisingly, rejects the dogma of materialism. As with much of his philosophy, Sarkar's approach is to find a synthesis of East and West.

The Asian countries, in spite of their long heritage of morality and spirituality, have been subject to great humiliation during periods of foreign invasion. While the higher knowledge of philosophy propagated by the oriental sages and saints has been accepted as a unique contribution to the store house of human culture and civilization, the people of these lands could not resist the foreign invaders. The history of all the Asian countries, a region of so many religions, has been dominated by foreign powers for centuries together. This imbalance brought about their material deprivation and political subjugation.

On the other hand, the West is completely obsessed with physical development. It has made spectacular progress in the fields of politics, economics, science, warfare, etc. In fact, it has made so much material progress that it seems to be the sovereign master of the water, land and air. But for all that, it is not socially content and miserably lacks spiritual wealth. Unlike the East, in the West plenty of wealth has created a crisis. Therefore, it is abundantly clear that no country can progress harmoniously with only one-sided development.

Therefore, it behoves both the East and the West to accept a synthetic ideology that stands for a happy synthesis between the two. Here, the East can help the West spiritually, whereas the materialistic West can extend its material help to the East. Both will be mutually benefited if they accept this golden policy of give and take...

In the educational system of the East, there is the predominant element of spirituality... So the people of the orient could not but be spiritual in their thoughts and actions. Whereas there is, in the Western system of education, a clear and unilateral emphasis on mundane knowledge. So to build up an ideal human society in the future, the balanced emphasis on the two is indispensable.114

There are many schools of Eastern philosophy and it is as difficult to generalize about them as it is about the many schools of Western philosophy. Some might be characterized as idealistic, some materialistic, some dualistic and so on. Sarkar places himself in the tradition of Tantra115 which might best be described as the science of spirituality. Tantra earns the title of a science (as opposed to a philosophy) because its methodology requires the practice of physical and mental disciplines to gain access to the subtle experiences described by the theory. Furthermore, like any good science, its body of theory and practice has evolved over time. It is not bound by the semantics of ancient texts.

Our assertion is that, in order to build a society based on cooperation, we desperately need science - but not a single science bound by the dogma of materialism but multiple sciences each with a methodology appropriate to the dimension of human experience it investigates. It must be admitted that not all the sciences we require are equally developed. But this is not the point - we cannot know everything in advance. We can, however, start with an immature science and develop it into a mature science over time. It must also be reemphasised that advocating the need for new methodologies to investigate the inner mental and spiritual worlds is not a rejection of the material sciences. Western material science has already begun to investigate cooperation and it offers a good starting point to which we shall return shortly.

The Concept of Progress
Happiness
The pursuit of happiness is a fundamental human motivation. All social theories must provide some account of it. In the case of Marxist theory, happiness is implicit. Individuals find it in the solidarity of social struggle and ultimately in the harmony of a classless society. In neoclassical theory, happiness is explicit. Individuals pursue their own desires and the mechanism of the free market delivers the greatest happiness of the greatest number. Happiness is also explicit in Sarkar's social theory. All humans pursue happiness because it is human nature to do so. But desires appear to know no bound - when one is satisfied another appears in its place. In truth, human desires are limitless. Therefore, says Sarkar, they can only be satisfied by something that is itself limitless and herein lies the value of spiritual science because only spiritual experience has this particular quality.116

So with respect to the pursuit of happiness, the science of spirituality promotes two principles. The first concerns balance. Given that humans are multidimensional beings, their well-being and therefore happiness depends upon maintaining a proper balance within and between all the dimensions of their lives. Just as the physical body requires balanced nutrition (pabula), so too, the mind also requires the right kinds of intellectual, cultural and spiritual pabula. Sarkar makes a distinction between carbonic pabula which are required to sustain the physical body and non-carbonic pabula required to sustain the mind. (We need this unusual terminology because Sarkar uses it subsequently to define an ethical principle.117)

The second principle stems from the observation that the many kinds of pabula which humans pursue are not equivalent in their ability to satisfy. Pabula can be arrayed on a spectrum from crude to subtle, defined by how easily accessible they are to onsciousness - sensory stimuli are easily accessible, intellectual ideas range in difficulty and certain kinds of spiritual experience are very difficult to grasp with ordinary human consciousness. According to the second principle, the different kinds of pabula sustain human happiness in inverse degree to their ease of attainment. Tasty food is necessary for happiness but it fails to be enough once readily obtained. On the other hand, spiritual experience can be elusive but is found to offer sustained contentment in the long term.

Development and Progress
The above two principles have ramifications for both the individual and the collective pursuit of happiness. From the individual perspective, the pursuit of happiness is a developmental journey. Humans are at first frustrated in their search for happiness, because they search where it is easiest to do so. By stages however, they turn their attention in more subtle directions. Psychologists identify a definite sequence of developmental stages in the unfolding of the various potentialities of the human mind. The natural sequence (and thus also the healthy sequence) is from the crude to the subtle and from narrow concerns to expansive concerns. From baby, through infant and child to adult, the intellect becomes by steps more subtle and more powerful. Eventually the mind can span great physical and even metaphysical distances. Likewise from baby to adult, a person gradually acquires the faculty of empathy - the selfish concerns of the child give way to concern for the welfare of others. And again, moral perceptivity begins with fearful obedience to rules and grows to the appreciation of virtue. A happy life depends entirely on making each of the many steps of this developmental journey, a journey which continues for as long as one lives.

However the developmental journey is not without its struggle, because there is a palpable tension between the developmental transitions in life and the requirement to maintain balance. At each developmental stage, a person gradually learns to achieve equilibrium but each inner impetus for further unfolding of mind threatens the equilibrium that was carefully established after the previous step. Indeed Sarkar defines life as a never-ending struggle "to restore an unstable equilibrium".118 Wilbur offers a comprehensive description of the equilibrium-development tension in Eye to Eye.119

With regard to the collective pursuit of happiness, the same dynamics apply, but on a longer time scale. There is the same tension between development and equilibrium requiring the same struggle to restore an unstable equilibrium. Societies and civilizations, by gradual degrees, move from the crude to the subtle and from the selfish to the collective welfare. This movement becomes the basis for Prout's definition of progress. Any kind of social or economic achievement can only be considered progress if it encourages the unfolding of the more subtle potentialities of individual and collective life.

We are now in position to understand the particular challenge confronting the human race in the opening decades of the 21st century. We are taking another small but collective step away from a pre-occupation with self-interest towards a pre-occupation with the welfare of the planet as a whole. We cannot expect to take such a step without some disruption and some letting go of the past but by making this step we are surely building a cooperative society.

The nature-nurture debate
Human development is from crude to subtle. Mind has an inner impulse to unfold which is not dependent on, nor imposed by, the external environment. In other words, mind has its own dynamic, its own nature. This understanding has an immediate impact on our interpretation of the nature-nurture debate. In essence we are saying that, in addition to their physical attributes, humans are also intellectual, social, moral, and spiritual, by nature. But nature in this view is something more than the universe of atoms and molecules - it now includes the universe of minds and consciousness. How a human being develops still depends on choices made in the context of inborn and environmental factors but now the inborn is not confined to genes and likewise environment includes all the physical and metaphysical worlds into which human life penetrates. So concerning the old debates of nature versus nurture and determinism versus free will, Sarkar is clear that a useful social theory must accommodate both sides of both arguments. It is not at all helpful to be dogmatic in these debates. The assertion that the subtle aspirations of human beings are in part innate is significant for a second reason. Socialists have traditionally preferred to argue that all morality, all aesthetics, all spiritual yearning is imposed, for better or for worse, by family and society. The utopian socialists relegated all expressions of vice and virtue to the arena of nurture in order to reject the conservative argument that working-class vice was innate. Marxists went further and insisted that all human subtlety was derivative of socially imposed material circumstances. Both views are inadequate because they try to squeeze human reality into a very tiny mould. The reality is larger, more complex and more subtle. A better approach surely is to expand one's theory to embrace reality, not to squeeze reality into the strictures of an outdated theory.

Economic progress
In the healthy developmental sequence, the human mind unfolds from a predominance of crude to a predominance of subtle preoccupations. We have already noted that this developmental sequence becomes the basis for Prout's definition of progress. Sarkar takes a highly significant step by linking the trajectory of economic development to the unfolding of human mind. In the first instance, humans are preoccupied with their physical existence, that is, to provide themselves with the basic requirements of life, which Sarkar lists as food, clothing, housing, health care and education. He describes an economy which cannot meet the basic requirements as undeveloped. Once physical requirements are satisfied, we find that more subtle intellectual, social and artistic expressions quickly assert themselves. Serious social problems arise if an economy is not reorganised to satisfy those aspirations. And finally, when a widespread refinement of intellect and aesthetic expression awakens spiritual interest, economic priorities change yet again. Of course these are not three distinctly separate phases, but unless one recognises human development as an unfolding of more and more subtle aspirations, economic development will stagnate and human aspirations will at some point become frustrated, with potentially disastrous results. It also goes without saying that the economic indicators used to measure collective welfare must periodically be adjusted to accommodate changing aspirations.

Most communist countries were able to provide the basic material requirements of life but stagnated because they were not able to take the next step. Capitalist economies are able to satisfy some of the subtler aspirations of the middle class by diverting relatively modest resources into education, the arts and the like. However, their disregard for ecosystem relationships, social relationships and ethics leads ultimately to the disintegration of the social fabric.

Ecosystem relationships in the context of a cooperative society are discussed in another essay in this volume.120 In this essay, we are concerned only with social relationships and ethics.

The Theory of Cooperation
Our concern in this section is to develop a theory of cooperation and social cohesion. The key argument is that social cohesion depends on cooperation and cooperation depends upon social relationships characterised by trust and empathy. Social cohesion will therefore depend on the aggregate quality of social relationships, which in Western social science, has come to be described as social capital. The term is used by way of analogy to other kinds of economic capital, such as human capital and financial capital. Some resist the term because it represents the further intrusion of economic thinking into the social sciences, but it is widely accepted and therefore used here. Interest in social capital arises because the concept is believed to be measureable and because research has shown that measures of social capital correlate with other important social and economic indicators.

Although Sarkar does not use the term as such, much of his Neohumanist philosophy is concerned with the quality of social relationships.121 We begin with the theory of social capital as understood by Western social science and then introduce the contribution of Neohumanism.

Social Capital
In Taking New Zealand Seriously - The Economics of Decency, Hazeldine defines social capital as the "empathy and sympathy" in human relationships and the "shared attitudes and goals" of a community.122 Putnam, a sociologist, defines it as the "connections among individuals - social networks and the norms of reciprocity and trustworthiness that arise from them".123 Social capital is embodied in human relationships and in the social, educational and cultural institutions which mould those relationships. The evidence suggests that it is hugely important in explaining the differences in wealth and productivity between nations. Government investment in activities which build good social relationships and community, says Hazeldine, can be as productive as business investment in new machinery and factories. This understanding makes Margaret Thatcher's repudiation of society in favour of individualism look all the more ridiculous.

Many studies have attempted to measure social capital and thereby make inferences about its correlation with other apparently unrelated social and economic indices. Following the lead of Putnam, the social capital of a community is often measured as the levels of trust and civic involvement of its members. Trust is assessed by gathering information through carefully worded questionnaires and civic engagement by measuring the per capita number of church groups, unions, sports groups, schools groups, clubs and societies to which residents belong. One study124, for example, has shown that the correlation of income inequality with higher mortality rates (observed among the states of the USA) can probably be explained by declining social capital. In other words, income inequality occurs at the expense of social capital and declining social capital has a deleterious effect on public health. Hazeldine125 argues that New Zealand's program of economic rationalism (synonymous with neoliberalism in this essay), which began in 1984, is gradually destroying the social trust and empathy upon which economic life depends. In other words, New Zealand is living off the social capital
accumulated by previous generations and, as any economist will tell you, drawing on an account without making deposits cannot last forever. There are different kinds of social capital just as there are different kinds of physical and human capital. Putnam makes an important distinction between inclusive social connections and exclusive social connections. Ethnic organizations, sectarian church groups and fashionable country clubs tend to be exclusive even while their internal bonds are strong. Civil rights groups, youth service groups and charitable organizations tend to be inclusive. From this perspective, social capital can be both positive and problematic. However in the end, Putnam sees social capital as an essential force in society. He draws on a vast array of data that reveals how Americans have become increasingly disconnected from one another and how participation in sports, religious, political and hobby groups is declining. He links the disintegration of social capital to declining indices of individual and public health. Conversely he demonstrates how regenerating broken social bonds can improve those same indices.

Neohumanism
Neohumanism is Sarkar's reinterpretation of Humanism. It is well described as a synthesis of the European humanist tradition with the Indian spiritual tradition. It includes: an analysis of social sentiments as the basis for social cohesion; the role of rationality in the struggle against dogmas; a commitment to egalitarianism; and a commitment to spirituality as the basis for building a healthy society.126 Various aspects of Neohumanism will appear in each of the subsequent sections but we deal here with its analysis of social relationships. Humanism was defined by the Greek philosopher, Protagoras (5th Century BC), as the principle that humans are the measure of all things. Human dignity takes precedence over the dictates of kings, queens, priests and tyrants. It remains an excellent definition and European history can be interpreted as the struggle to establish the humanist ideal in the face of determined opposition from successive kings, queens, priests and would be tyrants. However, today the humanist ideal appears to be inadequate in at least two respects. First, if humans are the measure of all things, then what about animals and plants? Do they only have value or meaning by reference to humans? Second, what can we say about the future of humanity if we only have the past as a reference? A vision of human potential is required if we are to approach the future with confidence and optimism.

Neohumanism is Humanism infused with spirituality and extended to encompass the plant and animal worlds. Elsewhere in this volume, Bussey introduces Neohumansim as follows:

Neohumanism is a reinterpretation of Humanism proposed by P. R. Sarkar. It takes the universal aspiration of Humanism, to reach beyond the limitation of humanity and to strive for unity at the social level, and suggests a universalism that includes all animate and inanimate existence. Humanity is thus part of a great whole and our job is to increase the radius of our heart's love... Furthermore, the Cosmos, its matter and the organic forms that populate it, are all taken to be conscious, thus human isolation is broken down. We are never alone, as Sarkar insists. Rather we are bound together in an infinite network of relationships that span material, intellectual and spiritual realities.127

Lying at the core of Humanism is both an ethic and a sentiment. The ethic is egalitarian - it asserts the essential equality of humans. The sentiment is an xperience of empathy or connectedness with those who come within the humanist embrace. Put another way, Humanism is about cooperation. Both the ethic and the sentiment of Humanism are required to sustain cooperation. But a cursory examination of history obliges us to ask: who is included in the humanist embrace? For the ancient Greeks, it did not extend to slaves or to women. In 18th century England, it did not extend to slaves or to colonies. Put another way, the cooperative ideal can be found on the inside of the humanist
embrace but it does not extend to the outside. The struggle of human history has not been so much to establish some fixed humanism but rather to extend the radius of the circle of those included within the ideal. In Neohumanism, Sarkar extends that circle to include animals and plants. Furthermore, spirituality is required in order to ensure that the circle of Humanism is extended to include more and more of the currently marginalised.

Sarkar's analysis of social sentiments and their contribution to social cohesion has some parallels to Putnam's analysis of social capital. Like Putnam, he makes a basic distinction between exclusive sentiments (for example nationalistic geo-sentiments or party political socio-sentiments that bind a group but then pit group against group) and all-inclusive sentiments. The Neohumanist sentiment is the ideal because it excludes nothing - everything and everyone is inside its cooperative embrace. Here then we have another perspective on Sarkar's definition of social progress - it is the ever expanding circle of Neohumanistic cooperation, made possible by the ever-increasing subtlety of the human mind.

Much of Neohumanism is concerned with the use of rationality to defeat social dogmas. Rationality is usually understood to mean the capacity for logical reasoning undistorted by sentiment. Neohumanism however acknowledges what neurobiologists have learned from investigations of the brain - that reason cannot be divorced from sentiment because the two are intertwined in the brain. Rationality is not reason divorced from sentiment but reason empowered by the all-inclusive Neohumanist sentiment.128 Logic alone can never defeat the combination of dogmas and cheap sentiments offered by communi€sm and fascism. Even the great 20th century logician, Bertrand Russell, came to the conclusion that the final argument against Nietsche's fascist philosophy must be an appeal to human emotion.129 Grounding social capital in human sentiments and therefore in human neurophysiology is an extremely important step because it opens up the apparently intangible world of social capital to (Western) scientific investigation. We now turn to that science.

The Science of Cooperation
In this section we examine some of the scientific evidence that humans have a predisposition to cooperation and in particular to economic cooperation. The evidence comes from a new and exciting field of research known as neuroeconomics.

We then turn to those insights provided by sociological studies.

Neuro-economics
Neuro-economics is the study of the neuro-physiological underpinnings of economic decision making. The field is new and providing unexpected insights into human economic behaviour. Recall that classical economic theory requires individuals to make complex calculations to maximise their personal advantage or utility. Utility, however, is a strangely ambiguous concept. On the one hand it is given a numerical value which implies the counting of something but on the other it is entirely abstract and not anchored to anything in the real world that can be counted. The advent of neurophysiology led to the idea that utility was really a surrogate for some chemical currency inside the brain, with most interest focused on serotonin molecules because these are known to be responsible for the experience of pleasure.

It turns out that a wide range of molecules of emotion130 impinge on the mental cost-benefit calculations that are supposed to take place inside the brain and they have unexpected effects. For example, let us return to the 'sharing experiment' described earlier, in which person A was asked to share a sum of money with person B. Remember that these experiments demonstrated behaviour inconsistent with neoclassical theory. People appear to put a high value on fairness. In a follow on experiment, persons A and B were placed in the same experimental scenario as before, but they were (unknowingly) given an intranasal administration of oxytocin. Oxytocin is a neuropeptide that plays a key role in social attachment and affiliation in animals and causes a substantial increase in trust in humans. In these experiments the effect of oxytocin was to increase the amount of money that A gives B. The experimenters concluded that "oxytocin may be part of the human physiology that motivates cooperation."131 It is worth adding that such hormone-mediated interactions are not confined to human relationships but are also likely to be involved in human-animal relationships.132

Oxytocin is not the only neurochemical to promote cooperation. Recent observations of bonobo monkeys in the jungles of the Congo reveal fascinating contrasts with chimpanzees.133 Bonobos are matriarchal and show little aggression compared to the patriarchal chimps. Chimps respond to strangers with aggression, while bonobos demonstrate curiosity. When under stress, chimp tribes degenerate into fighting while bonobos respond to stress by engaging in collective sexual activity. Scientists have concluded that bonobos demonstrate higher levels of trust both with each other and with strangers. Of most interest, however, from a neuro-economics point of view, is the ability of the monkeys to perform a simple task requiring cooperation in retrieving some bananas that are out of reach. Although both species are intelligent enough to work out a solution (for example, by one climbing on the shoulders of the other or by one holding a ladder for the other), the chimps fail because they cannot trust one another. On the other hand, bonobos have no trouble cooperating to retrieve the bananas.134

It turns out that these differences can largely be correlated with a single gene - a so-called 'social gene' that acts via a neuropeptide called vasopressin. Bonobo monkeys have the social gene, chimpanzees do not. And of particular interest - humans have the same vasopressin gene as bonobos. Recall that social capital was defined in terms of trust and empathy and that these behavioural traits oil the wheels of social and economic interaction by encouraging cooperation between strangers. We now know that oxytocin and vasopressin are the physiological underpinnings of trust and that they influence levels of cooperation.

Managing Social Capital
We must immediately dispel any notion that trust, empathy and cooperation are predominantly determined by genes. In Sarkar's terminology, genes represent potentialities. How those potentialities are expressed depends entirely on the choices people make in the context of their genetic endowment and social environment. It is therefore extremely interesting to learn that measures of trust vary greatly from country to country. In one survey,135 an aggregate measure of trustworthiness ranged from a low 3% in Brazil to 65% in Norway. In a ranking of some 42 countries, Australia came in 8th position just ahead of India, Switzerland and the USA (see Figure 1 in Zak136). It is possible to measure other social and economic indicators in the same countries and determine how these correlate with trust. The data suggest that low aggregate trust is correlated with low levels of investment and with poverty. Zak also claims that governments can increase aggregate trust by adopting policies which promote education, civil liberties and communication and which decrease income inequality.

This conclusion is supported by a just-published, ground-breaking book which reviews 30 years of research into the adverse effect of income inequality on almost all social indicators. The title says it all - Spirit Level: Why More Equal Societies Almost Always Do Better.137 It does not matter if the average per capita GDP (the de facto measure of wellbeing in neoclassical economics) is very low or very high. It is the gap between rich and poor that is important.138 The effect appears to cross cultures because countries as diverse as Indonesia, Vietnam, Finland and Japan all have better indicators than the UK and USA. The rich in more equal countries are happier than the more rich in less equal countries.139 The evidence obliges us to turn the trickle-down-effect on its head
- the rich enjoy a better life by increasing the income of the poor.

The differences revealed, even between rich market democracies, are striking. Almost every modern social and environmental problem - poor physical health, mental illness, lack of community life, violence, drug abuse, obesity, long working hours, school dropout rates, imprisonment, violence and teenage pregnancies - is worse in a less equal society.140 As with the Zak study, trust and cooperation are found to decline with increasing inequality and the authors suggest that low trust is a key factor because low trust/high stress leads to many of the other poor outcomes. Ultimately the Spirit Level is an optimistic book. The good news is that it is easily within the ability of governments to manage levels of inequality and therefore levels of trust. Many of the other social problems respond accordingly, without requiring the expensive remedial programs that attempt to correct the negative effects of high inequality. To this extent, the early socialists and George Orwell had an accurate intuition - increasing material equality helps to solve many apparently difficult social problems.

In the end much of this is common sense, but somehow it has been ignored by governments around the world bent on promoting the neoliberal agenda. In particular, it is worth noting the negative consequences of deregulating markets. Neoliberals claim that regulation warps the efficiency advantages of a truely free market. However the efficiency of a market is also dependent on trust among its participants. Deregulation combined with a lack of trader ethics eventually destroys a market because dishonest behaviour begins to dominate. This is illustrated by an interesting experiment with a group of chimpanzees. 141 The object was to determine if chimpanzees could learn to trade using money. Chimps in the wild trade services with one another but not, as in this experiment, goods for goods with money as an intermediary. The results demonstrated that the animals could learn to trade using simple tokens as a currency convertible into snacks - but only as long as a human referee remained to keep the trading honest. In the absence of human supervision, trades started going sour because the chimps did not always return tokens proffered by their peers. "Lack of trust," trouble communicating and difficulty with mental scorekeeping were three explanations suggested for the breakdown in chimp trade. However another conclusion that one might draw from this experiment is that a market can be made to function adequately even if the participants have poor ethics, as long as it is well regulated. It would be interesting to repeat the same experiment with bonobos.

Contemporary economic theory places much stress on free market competition to achieve efficiency. Justification for the role of competition comes from biological theories of evolution which stress survival of the fittest. We now know much more about our closest primate cousins and have discovered that competition is only half the story. Some primates have a sense of fair play and an innate capacity for cooperative behaviour. The evidence points to humans also having a genetic and physiological predisposition to cooperation and, given the will, businesses and governments can foster that predisposition to promote a cooperative economy. Far from being weaknesses, trust and cooperation are economic strengths.

The more we understand human cooperation and how to strengthen cooperation, honesty and trust, the more economically successful our society becomes.142

Continued in Part 3