Can you guess the decade in which the following words were written? How about the century?

…a certain class of dishonesty, dishonesty magnificent in its proportions, and climbing into high places, has become at the same time so rampant and so splendid that men and women will be taught to feel that dishonesty, if it can become splendid, will cease to be abominable.

This quotation is from the 50s. The 1850s, that is. And the author was prolific British novelist (and postal service employee!) Anthony Trollope. The reflections on dishonesty come from his 1856 Autobiography, but he is probably best-known for his novel of greed and fraud, The Way We Live Now.

Trollope’s most famous creation is undoubtedly the flamboyant con artist Augustus Melmotte, to whom Bernard Madoff was often compared in recent years. In fact, a comparison between the two is illuminating. Like Madoff, who built his hedge fund on a “big lie,” Melmotte conjured a fortune out of smoke and mirrors, through moves like selling shares in a railway that never existed. And both parlay wealth into access to positions of social prominence and public trust—Melmotte buys a seat in Parliament, while Madoff chaired NASDAQ for several years during the 1990s. Life imitating art, or just tragedy following farce?

This kind of financial chicanery, “dishonesty magnificent in its proportions,” was very much on Trollope’s mind in 1856 because English law had recently re-legalized and expanded the rights of the joint stock company—the ancestor of the modern corporation, and a form of business enterprise so tarnished by fraud that it was outlawed for over a century in the UK.

What, you might ask, was the big deal? Why get so exercised about a change in the legal status of an organizational form?

Four words: the South Sea Bubble. Also known as the world’s first great financial fraud, the Bubble was so destructive to England’s economy and society that Parliament banned all new incorporations (with a very few exceptions) for more than a century.

The Bubble arose around the stock of the South Sea Company, an entity created by act of Parliament to trade exclusively with the Spanish colonies in South America—and, not incidentally, to rid the British Crown of a crippling national debt by raising capital through the sale of shares.

Even though, as UBC law professor Joel Bakan has written, “the South Sea Company was a scam from the very start,” it was wildly successful—until it wasn’t.

Investors flocked to buy the company’s stock, which rose dramatically, by sixfold in one year, and then quickly plummeted as shareholders, realizing that the company was worthless, panicked and sold. In 1720 — the year a major plague hit Europe, public anxiety about which “was heightened,” according to one historian, “by a superstitious fear that it had been sent as a judgment on human materialism” — the South Sea Company collapsed. Fortunes were lost, lives were ruined, one of the company’s directors, John Blunt, was shot by an angry shareholder, mobs crowded Westminster, and the king hastened back to London from his country retreat to deal with the crisis. The directors of the South Sea Company were called before Parliament, where they were fined, and some of them jailed, for “notorious fraud and breach of trust.” Though one parliamentarian demanded they be sewn up in sacks, along with snakes and monies, and then drowned, they were, for the most part, spared harsh punishment. As for the corporation itself, in 1720 Parliament passed the Bubble Act, which made it a criminal offense to create a company “presuming to be a corporate body,” and to issue “transferable stocks without legal authority.”

It was possible to outlaw the corporate form of organizations because at that time, they required a  government charter to exist. If a corporation broke the law, it could be punished by revocation of its charter—sort of like the death penalty for juris persons (“legal persons,” which distinguished the status of corporate actors from that of “natural persons,” i.e., human beings).

This tight legal control was driven by deep suspicion of the corporate form which long predated the South Sea Bubble. In contrast to business partnerships, where the managers were also the owners of the firm, the corporation innovated by separating management from ownership, with the latter belonging to shareholders. Even Adam Smith thought this was a bad idea, warning in The Wealth of Nations that

The directors of such companies, however, being the managers rather of other people’s money rather than of their own, it cannot well be expected that they should watch over it with the same anxious vigilance with which the partners in a private copartnery would watch over their own….Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company…They have, accordingly, very seldom succeeded without an exclusive privilege, and frequently have not succeeded with one (1776: 439).

In other words, the corporate form had trouble written all over it. Specifically, it presented a built-in problem of moral hazard by given managers authority over “other people’s money.” Among other things, this created tempting conditions for financial fraud.

All these suspicions were borne out and more by the South Sea Bubble. But by the time of Trollope’s reflections, the memory of the disaster was fading, and the Industrial Revolution was generating tremendous wealth. By 1856, Parliament had not only repealed the Bubble Act, but expanded the powers of juris persons, clearing the way for super-charged economic growth—and for a return to the “magnificent” frauds perpetrated by corporations.

Yet, as Bakan writes, the corporate frauds that have come to light since the re-legalization of the corporation have not provoked anything remotely like the “Bubble Act” in response:

Today, in the wake of corporate scandals similar to and every bit as nefarious as the South Sea bubble, it is unthinkable that a government would ban the corporate form…over the last three hundred years, corporations have amassed such great power as to weaken government’s ability to control them. A fledgling institution that could be banned with the stroke of a legislative pen in 1720, the corporation now dominates society and government.

To Bakan’s power-based explanation—that the power of the corporation has simply outgrown that of the state—we might add Trollope’s notion of public tolerance for fraud in high places. That is, the state doesn’t crack down on corporations because it lacks the popular mandate to do so.

Indeed, the platform of Tea Party—a new political group predicted to win an influential number of Congressional seats in the upcoming midterm elections—seems to validate Trollope’s pessimism: the Tea Partiers want to repeal even the relatively limited regulatory reforms that were made in the wake of the 2008 subprime mortgage crisis. Because the answer to a crisis in which fraud flourished in the absence of proper oversight is…even less oversight!

Trollope would probably have appreciated John Kenneth Galbraith’s rueful observation that “There can be few fields of human endeavor in which history counts for so little as in the world of finance.”

Adam Smith observed in his Lectures on Jurisprudence (1762)–a series of talks that he gave at the University of Glasgow– that national character plays a significant role in economic transactions: the Dutch, he said, are “more faithful to their word” and better at “performing agreements” than the English, and the English more faithful than the Scots.

In the past few months, I’ve observed a similar kind of cultural variation in a much more prosaic setting: the panhandling interaction.

If you’re from North America, as I am, you’ve probably seen people on the street requesting money from strangers using appeals such as “Homeless—Please Help” or “Homeless Veteran.”  There are a number of variations, but homelessness is the common theme in many cases.

Elsewhere in the world, panhandlers use quite different rationales—or what the great mid-century sociologist C. Wright Mills would call “vocabularies of motive.” Mills wasn’t interested in what actually motivated people—such as what psychologists would term “needs” or “drives”—but rather in the ideologically-charged terms they used to justify their actions to themselves and others. As he observed, some motives are more acceptable than others, and we can learn something about local cultures based on what passes for a “good reason.”

So it’s sociologically interesting that within the North American context, the concept of “home” has such resonance that the claim of “homelessness” is considered a compelling and sufficient motive for giving money to strangers. But while the need for shelter would seem universal, it’s rare to see a panhandler outside North America requesting a donation on the basis of homelessness.

In Germany, for example, one often finds people begging for “trinkgeld”—“drinking money.” And they’re not playing for laughs, as one sometimes finds in the US, when panhandlers give a wink and a nod to the stereotype that money given to beggars is only ever used to buy alcohol (or drugs). When a panhandler asks for “drinking money” in the US, it’s sort of an in-joke, or an attempt to appear disarmingly honest; based on the limited examples I’ve seen, this seems to jolly people up and get good results (i.e., quantities of cash).

But in Germany, drinking money is serious business. In the four years I lived in the Rhine Valley, I saw dozens of men (always men) on public transport and on the street, asking for “trinkgeld, bitte” in monotonous, dirge-like tones that seemed to express just how grim a fate it was to lack beer money. Equally surprising to me was the willingness of Germans to open their purses for this reason, as if it was a truth universally acknowledged that a man with empty pockets must be in want of a beer. In the interactions I witnessed, no one on either end of the transaction ever smiled.

Yet another vocabulary of motive can be found on the streets of Istanbul, where panhandlers often approach passers-by with a request for “ekmek parası”—Turkish for “bread money.” In perhaps 10 visits to Turkey in the last 3 years, I’ve never seen anyone on the street claiming to be homeless. Nor have I seen a cardboard sign of the kind so common in North America.

In all three settings, the vocabularies of motive among panhandlers have a common theme of need: for shelter, drink or food. What’s interesting is how each cultural setting changes the calculus about what kind of motive is most likely to bring in the cash. Perhaps it comes down to what each society views as among the basic human rights: in the US, shelter has a plausible claim to that status, but beer does not; whereas in Germany, it an appeal for “trinkgeld” succeeds as an appeal to common humanity and decency; in Turkey, hunger seems to trump all other claims.

Have you seen other variants in national culture and vocabularies of motive when it comes to panhandling? Your examples (and analyses) are welcome.

In all the public discourse surrounding Tiger Woods and his alleged infidelities, one of the primary topics of interest has been the millions of dollars he may have paid to silence his mistress(es) and mollify his wife. While there has been a lot of speculation about who got how much, I haven’t seen anyone question the idea of linking money and monogamy.

The same linkage underlies another contemporary phenomenon: the “bad boy clause” in some pre-nuptial agreements, in which one spouse (oddly, it’s usually just one, not both) agrees to pay a financial penalty for cheating on the other. It’s hard to say how common this is, but such contracts are apparently enforceable and have been upheld in court.

The money-monogamy link raises a number of questions in my mind, including:

• What are these payments supposed to mean to the wronged spouse?
  Say Tiger Woods has really paid millions to his wife as a result of cheating on her—is his wife supposed to understand that money as a conciliatory gift, like an XXL version of a bouquet of flowers with an “I’m sorry” note attached? Or is she supposed to receive it as a form of compensation, like the victim of medical malpractice who gets a big settlement in return for the loss of her health?

  
  Economic sociologists will recognize here the outlines of Viviana Zelizer’s (1996) taxonomy of exchange types and the kinds of social relationships they imply (“Payments and Social Ties”).
  
  Either way—gift or compensation—there is acknowledgement that a wrong has been done, which is probably valuable in its own right. What I’m asking, however, is the question implied by the Zelizer article: what kind of payment is this, and what kind of relationship does it imply between the spouses? Typically, gifts are associated with private life and emotional intimacy, whereas compensation forms of exchange more often occur in the public sphere. Gifts are (at least nominally) personal and emotion-laden, whereas compensation is impersonal, with legal-bureaucratic associations.

  The distinction would seem to matter for the future of the relationship: a gift would imply that there was still intimacy and a personal bond left to repair, and perhaps a hoped-for future together; in contrast, framing the payment as compensation has a kind of “cashing out” finality to it, shifting the relationship onto ground usually occupied by adversaries who have no intention of remaining connected to one another.

  In more concrete terms, if you’re the spouse receiving the kind of multi-million-dollar payment that Elin Nordegren Woods is supposedly getting from her supposedly cheating husband, what does that exchange mean to you in terms of the relationship, and your own self-image?

  It’s easy to be glib about this, and focus on her ability to “take the money and run.” But that ignores the emotions involved: if Elin loves her husband, the money may seem both totally inadequate as compensation for a broken heart and broken dreams, and inappropriately impersonal as a gift; if she doesn’t love him, she may still feel angry at the public humiliation she has experienced as a result of his behavior, and feel that neither gift nor compensation can fix the damage to her dignity.

  In other words, one can imagine situations in which the offer of money by a cheater to his wronged spouse could actually come across as adding insult to injury—as a cheap substitute for real understanding of the impact of infidelity, as if the wronged spouse is a kind of coin-operated machine, whose sense of betrayal can be assuaged with the application of sufficient funds to the wound.

• Do financial penalties deter infidelity?
  From the perspective of the spouse who has been or might be unfaithful, does paying out a large sum of money alter his or her future behavior? If Tiger Woods has in fact paid millions to control the damage of having extra-marital affairs, should we expect the experience to make him think twice about cheating on his wife going forward? Or does someone who signs off on a “bad boy clause” in a pre-nuptial agreement really run through a mental calculus weighing the costs and benefits of having an affair?
  
  Causal linkages of this sort are implicit in the money-monogamy link, but I’m skeptical. I don’t think people are that rational, especially when it comes to governing their appetites for sex, power, admiration, or whatever extra-marital affairs may signify for them.

  
  Social scientific research established decades ago that humans are boundedly rational. And philosophers reached that conclusion even earlier: 18^th century Scottish thinker David Hume—a rough contemporary of Adam Smith, and like Smith, an economist as well as a moral theorist—famously argued that emotions drive our decision-making. Rationality, he claimed, enters into

  

  the decision process at the end, in the form of rationalizations applied to obscure the true nature of our choices. In Hume’s own formulation,”Reason is and ought only to be the slave of the passions.”

  Social psychology provides another reason for skepticism about the money-monogamy link, emphasizing the power of context over character in shaping human behavior. One consequence of this is the fundamental attribution error. As I’ve written elsewhere, the lesson I take from this literature and from my own research is that rationality is not so much a property of individuals as of situations.

  Schemes involving payment for infidelity represent one attempt to change the context of extra-marital affairs—to introduce a negative consequence. But there have long been other negative consequences of cheating which many have found all too easy to ignore, such as causing pain to one’s spouse and other family members, loss of reputation or social status, and even loss of one’s job (cf. former New York Governor Eliot Spitzer). If none of that has been sufficient to deter infidelity, why would a financial payout achieve better results?

To answer these questions, we’d really need to hear from people who have faced this situation in real life: both the cheaters and the spouses they betrayed. Unfortunately, we rarely—if ever—hear about the money-monogamy link except in the context of gossip magazines, where any commentary given by the parties involved is bound to be primarily about impression management. They’re certainly not the place to look for reflection and insight.

What’s really strange to me, however, is that in the absence of any evidence that say, “bad boy clauses” actually deter infidelity, people still use them. And that may be the most compelling evidence for interpreting them as purely punitive devices.

But that just raises another set of questions, like: why would you want to marry on those terms? When one spouse seems so likely to cheat that it’s necessary to have a “bad boy clause” in the pre-nup, and the other spouse spells out how s/he plans to exact retribution for any infidelity, I have to wonder why the couple are bothering to marry in the first place. The whole arrangement just has “train wreck” written all over it.

And why stop at infidelity when you could enumerate all the other deal-breakers in the relationship, like snoring and hogging the remote? Turns out people actually do this! For a bracing example of taking ideas to their logical extremes, check out this list of “14 Popular Provisions in Pre-Nuptial Agreements” from the Irish Times:

1. Who will do the housework, what type of housework, and how many times a week.


2. How many times a year is suitable to go on vacation, and where.

3. No contact with people from previous relationships.

4. No cheating, especially with people from previous relationships. Sometimes known as the ‘bad boy’ clause. Taking a second spouse is also sometimes forbidden . . . in Islamic pre-nuptial agreements.

5. No snoring.

6. No leaving the toilet seat up.

7. How many times a week it is acceptable to expect sex.

8. The division of seasonal tickets to sports games and the theatre.

9. How many times a year is suitable to visit the in-laws, and for how long.

10. A declaration of who owns the remote control.

11. A limitation of how much can be spent on a shopping spree, and how often said sprees should take place.

12. A declaration of the monthly plastic surgery budget.

13. Who takes out the rubbish.

14. No weight gain beyond an agreed point.

Each one of these provisions could be the basis for a short story—probably something really bleak and despair-inducing, à la Raymond Carver or John Cheever. And remember, these are just the “popular” ones: imagine what might constitute an uncommon stipulation in a pre-nup. The horror…the horror.

This post was inspired by a classic sketch by the 1990s comedy troupe The State:

Awww, yeahh…while whispering sweet nothings,  Barry and LeVon have raised Important Sociological Questions. Such as: what is worth? What does the word actually signify?

For answers, we must turn from Barry and LeVon to Luc and Laurent—Boltanski and Thévenot, that is. In On Justification: An Economics of Worth (Princeton 2006), these French sociologists argue that the concept of worth is a “social technology” used to adjudicate the competing claims to resources, legitimacy, and other goods that characterize social life.

As an example, consider the notion of the “deserving poor,” created in Elizabethan England in order to institutionalize the claims of certain people to public assistance (in the form of education, housing, medical care, money and food), while denying those resources to others (the “undeserving poor”).

Prior to the Reformation, these issues had been sorted out informally by the community. But with Catholic-communitarian morality giving way to a more individualist Protestant ethic (big shout-out to Max Weber here), people apparently stopped trying to save their own souls by doing good works for the poor. Which created a problem: the poor were still around, but they weren’t getting any kind of systematic help.

Enter bureaucracy: in 1563, Parliament began passing a series of laws, culminating in the “Poor Law” of 1601, to provide for the counting, classification, and treatment of poor people. The “worthiness” of these persons, and thus their legitimate access to resources, was defined as follows.

The “deserving poor” included

Those who would work but could not: these were the able-bodied…poor. They were to be given help either through outdoor relief or by being given work in return for a wage.

Those who were too old/ill/young to work: these were the impotent…poor. They were to be looked after in almshouses, hospitals, orphanages or poor houses. Orphans and children of the poor were to be given a trade apprenticeship so that they would have a trade to pursue when they grew up.

The “undeserving poor” were

Those who could work but would not: these were the idle poor. They were to be whipped through the streets, publicly, until they learned the error of their ways.

So the putative “worthiness” of some poor people justified their access to basic survival resources, while the “unworthiness” of others justified allowing them to starve. (Plus ça change, n’est-ce pas?) This is the kind of connection between moral and material worlds that Boltanski and Thévenot are trying to establish.

They argue that societies can be characterized by which standards of evaluation are considered legitimate, “universal” and binding on social actors. These evaluative standards are called “orders of worth” or “economies of worth.”

At any given time, multiple orders can coexist in a society, though they may not enjoy equal persuasive power. By analyzing contemporary French management training documents through the lens of political philosophy (!),

The authors argue that justifications fall into six main logics exemplified by six authors: civic (Rousseau), market (Adam Smith), industrial (Saint-Simon), domestic (Bossuet), inspiration (Augustine), and fame (Hobbes). The authors show how these justifications conflict, as people compete to legitimize their views of a situation.

Which brings us back to Barry and LeVon. Much of their two minute skit, particularly the opening 45 seconds, is devoted to justification:

LeVon: “Now we coulda bought $100 worth of of pudding…”

Barry: “And that woulda been a whole lotta pudding.”

LeVon: “But we had to go all the way, baby…”

Barry: “All the way home.”

LeVon: “With two hundred…”

Barry: “Forty dollars…”

LeVon: “Wortha pudding.”

This sounds just like the Augustinian notion of “inspiration,” which Boltanski and Thévenot define as a legitimation of value based on the “creation of a masterpiece” in a moment of creative genius. In fact, their description of this “order of worth” reads like an academic parody of Barry and LeVon:

…inspiration manifests itself spontaneously, suddenly, in a disorderly fashion, gripping the creator and obliging him to “surpass himself“…It is in the nature of inspiration to pour out, to spring up, to manifest itself in a “flash of genius, ” a “spark,” that will provoke the appearance of an idea, an illumination or unusual intuition that disturbs, bringing in its wake a “confused bubbling up,” a “strange whirlwind.” In this state, one grasps the world by means of impressions and feelings, through an aura of happiness, vertigo, fear and trembling.*

Awww, yeeaaahh. Happiness, vertigo, fear and trembling? “Now that’s the kind of pudding that only $240 can buy!”

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* Boltanski and Thévenot 2006: 163. All italics, unbelievably, in the original.