Hamilton and Madison believed that wisely crafted institutions can supply what virtue cannot.

by Phin Upham

James Madison and Alexander Hamilton – founding fathers and the primary authors of the Federalist Papers – shared some basic assumptions about human nature, about the human condition, and about virtue and its unreliability, and these assumptions informed their views of the appropriate institutional structure of government. The Constitution reflects their beliefs in numerous ways – from the division of powers among many branches to limits upon the conduct, roles, to the number of people in the legislative branch. Moreover, the structure of government is instrumental to people’s interactions economically and politically both vis a vis one another and vis a vis the government. What are the presuppositions of the framers of the Constitution regarding human nature, the human condition and virtue as they bear on government? The assumptions of these two men differed somewhat, and these differences also provide interesting insights. Endeavoring to understand these beliefs – their differences and their consequences – I will refer to the work of Madison and Hamilton in the Federalist Papers and their private correspondences as well as some modern work in Game Theory and Firm Structure Theory for theoretical analysis. Hamilton and Madison saw that sometimes in order to achieve a goal one must take unexpected and counter intuitive routes. Sometimes the most direct route is unstable, unproductive, unfeasible, or unreliable. Such is the case, they believed, when structuring a government. When in a governmental position, or when making political decisions it would seem to be ideal if people made decisions in keeping with what they know to be virtuous. The virtuous decision in such cases is to make a decision to promote the public good. But usually people are self-interested, and invariably information is incomplete. Information that is incomplete and unevenly distributed* renders decisions regarding the common good particularly poor. And both of the founding fathers recognized that, anyhow, virtue cannot be depended upon to motivate decisions considering that the interests of each man will necessarily be at odds with his fellow man. Thus Madison and Hamilton structured the institutions of government such that “avarice might guard upon [man’s] avarice” (Hamilton, Federalist Papers. 72) and such that one’s baser or more personal attributes worked toward the public good. In an unexpected and counterintuitive route, they crafted political institutions that enlist those qualities most dependable and often most troublesome in man to spontaneously maximize public good – a goal that altruistic virtues cannot be counted upon to achieve. This profound understanding of human nature and the necessarily divided interests of individuals allowed Madison and Hamilton to help structure a governmental system that has profoundly changed the world. Rather than disregarding fundamental – though not necessarily attractive – aspects of human nature, they chose to employ them – and that made all the difference.

Madison and Hamilton assumed that human nature was essentially unchangeable. They assumed that the human condition was one in which factions and divergent interests were essential. Further they assumed that people were often, if not always, inclined to behave in their rational best interest. Given these assumptions they helped structure the constitution to incorporate those aspects of human nature that could be depended upon – ambition, avarice, pride, self-interest. These attributes, if properly channeled, resulted in the best interests of the people, even though the best interests of the people were not always or often the intended result. Thus the appropriate structuring of institutions led indirectly, even inadvertently, to what virtue could not lead to directly. That this structure works can be seen around us today and whether this structure is best or paerado optimal is another question.

Thucydides put it well when he spoke of “human nature, always ready to offend, even where laws exist” in his History of the Peloponesian War. Hamilton and Madison both viewed human nature as immutable, a constant. They wanted to, as Hamilton put it “view human nature as it is, without either flattering its virtues or exaggerating its vices” (Federalist, 76). They recognized that men, even very good men, would often act in accord with their ambition and self interest rather than with altruistic virtue. They spoke of men being motivated by the “love of power and the desire of pre-eminence and domination – the jealousy of power” (Hamilton – Federalist 6). Given that this is essential to human nature, is it a surprise that “republics in practice have been [no] less addicted to war then monarchies… are not the former administered by men as well as the latter?” (Hamilton – Federalist 6). Human nature is the common denominator and a potential cause for problems. So, the two felt that an institutional structure ought to take into account the selfish human as well as the selfless. “It may be a reflection on Human Nature that such devises should be necessary to control the abuses of government. But what is government but the greatest of all reflections of human nature? If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary” (Madison – Federalist 51). In light of the contention that “appointments are sought for three motives 1)ambition 2)personal interest 3)public good … and the second are the most industrious and most successful in pursuing their object” (Madison – Fed 63), it must be from a pragmatic point of view that government is structured. “It is time to wake… we… are yet remote from the happy empire of perfect wisdom and perfect virtue” (Hamilton, Fed 6).

It is the differing contexts of human condition that make the ambition, avarice and self-interest of individuals dangerous, especially the context of a heavy-handed and encroaching government. Different positions in life, in geographic location, monetary wealth, or natural ability, causes people to have different self-interests. Human nature, motivated by rational self interest, causes these different interests to form factions which group like self-interests together. “As long as the reason of man continues fallible, and he is at liberty to exercise it, different opinions will be formed. As long as a connection subsists between his reason and his self love, his opinions and his passions will have a reciprocal influence on each other” (Madison, Fed 10). This admixture of reason and passion leads to self interested decisions. Given this world, virtue cannot be counted upon. Though some men might sometimes make virtuous decisions, Madison’s studies of history make it plain that this would not result in a stable government. “Ambition… [and] passion… divided mankind into parties, inflaming them with mutual animosity, and rendering them much more disposed to vex and oppress each other than to cooperate for their common good” (Madison, fed 10). So the combination of a human nature, diverse self interests, and rational self-interested choices results in a situation where virtue cannot be counted upon.

Though Madison’s and Hamilton’s views are very similar, and come to compatible assumptions, there are differentiating nuances regarding their views of human nature. These nuances flow and then cascade into interesting variations on the appropriate way of using human nature for societal good. Whereas Hamilton, like Thucydides, seemed to consider human nature to be essentially mischievous and always ready to offend, Madison seemed to believe instead that human nature was not intrinsically bad, but that differing interests in society acted upon it to produce ambition, lust for power, and corruption. Hamilton thought “the sane man might be vain or ambitious, as well as avarice” (fed 72). Madison would, it seems, see these attributes as resulting from imperfect information, and differing self-interests. These subtle, diverging assumptions of Hamilton and Madison regarding the nature of human beings is most clearly seen in their treatment of factions, but also influences all of their work. Madison’s emphasis on factions and differing self-interests being at the root of the problem is clear in Federalist 10. Almost never does he, as Hamilton does (despite a brief and arguably inconsistent adjuration of the kind of man elevated to presidential leadership), level the blame directly on human nature. Though these two views seem only trivially different, they do express themselves noticeably when dealing with a force that both feared – the majority. Hamilton, seeing humans as essentially contentious and at odds due to their intrinsic natures, wants a plurality of different factions – the more the better. After all, if there are enough factions, then no one faction constitutes a majority and this danger is avoided. If factions are unavoidable, then they might as well be multiplied, the number of factions maximized – thus making innocuous one more annoying and dangerous variable. Hamilton thus supported an industrial system which multiplied differentiation of tasks and interests and enriched speculators. Madison, on the other hand, expressed his fear of majorities by hamstringing the power of the majority to act effectively. Since factions are a result of a certain, unavoidable, set of conditions of the world and their effects as they interact with human nature, they ought to be minimized in the equation as they occur. “The inference to which we are brought is that the causes of fraction cannot be removed and relief is only to be sought in the means of controlling its effects” (Madison, fed 10). So whereas Madison would minimize and try to suppress factions, especially majorities, Hamilton would encourage a multiplicity of them to counteract and diminish their danger.

Madison and Hamilton structured government such that it used the most reliable of human characteristics – and those often associated with trouble – in order to benefit the common good. Rather than depend on the virtue of those in office they depended on everyone’s ambition, pride, and self-interest. They did not fall into a “mistaken confidence that the justice, the good faith, the honor, the sound policy, of the several legislative assemblies would render superfluous any appeal to motives” (letter of 1787). After all, “it is vain to say that enlightened statesmen will be able to adjust these clashing interests and render them all subservient to the public good” (Madison, Federalist 10). One way they structured government in response to this realization was by dividing up the powers into three branches. This allowed each branch, in the service of its own best interest, to check the power of the other branches. The founding fathers made sure to structure the legislative branch carefully, with not too many members and not too few – just enough so a representative and timely consensus could be reached. Hamilton also argued that the term for office of the president ought to be a lifetime; else the president would take advantage of his last few years in office to maximize his life after leaving office. By thus linking the long term interests of the president with the long term interests of his office Hamilton hoped to link the ambition of man for fame and power to the best interest of the people of the whole. “His avarice might guard against his avarice. Add to this that the sane man might be vain or ambitious, as well as avarice. And if he could expect to prolong his honors by his good conduct, he might hesitate to sacrifice appetite for them to his appetite for gain” (Hamilton, Fed 72).

These safeguards existed not only between the different branches of government in order to limit the power of the federal government, but also between the people and their representatives and vice versa. In order to guard against sudden swings of popular mood that would not serve the public interest, a system of representative democracy was emphasized. “there are particular moments in public affairs when the people, stimulated by some irregular passion… may call for measures that they themselves will be most ready to lament and condemn” (Madison, Federalist 63). Thus room for deliberative consideration is left, yet another way the structure of government can compensate for a lack of virtue and result in a good outcome for all. Similarly, representatives and Congressmen are “b[ound] … to his (sic) constituents… by motives of a more selfish nature. His pride and vanity attach him to a form of government which favors his pretensions and gives him a share in its honors and distinctions” (Madison, Fed 57).

Modern Game Theory and Firm Theory can be used to lend weight to Madison’s and Hamilton’s considerations. At one point Madison points out in a letter that “a distrust of the voluntary confluence of each other may prevent the compliance of any, although it be the latent disposition of all” (letter of 1787). His observation is important. In the classical Prisoner’s Dilemma, there is a cost to doing the “virtuous” thing when you are unsure if the other party will cooperate with you over a period of time. But by structuring the government appropriately, Madison and Hamilton were able to modify the payoff matrix so as to unite the efficient outcome with the dominant outcome and make the efficient outcome the Nash equilibrium*. This is another way of saying that whereas virtue alone can be taken advantage of and can result in personal opportunity costs, nevertheless if the payoffs can be structured such that self interest is united with the common good result, then the result is a much more stable and dependable structure. Self-interest is served, and through self interest the common good is reached. Virtue alone, especially a Kantian notion of selfless virtue, is often at odds with self interest and one can never be sure which motive might win out. Dependence on such uncertainty results in instability and undermines both the effectiveness and the dependability of the government. It is better to rely on a part of human nature that you know to exist and you know to be generally strong rather than trying to call forth an attribute that may or may not have been developed and may or may not produce a desirable outcome. In depending on virtue, the common good is the direct goal, but as the constitution is structured, self interest is the immediate goal and the common good is the unintended but not serendipitous outcome. The structure that Hamilton and Madison helped construct was stable and self limiting. History and theory support the efforts of these men to reach their goal through wisely crafted institutions which put into play the diverse elements of human nature rather than depending on any one set of virtues. “The policy of supplying, by opposite and rival interests, the defect of better motives, might be traced through the whole system of human affairs, private as well as public” (Madison, Federalist 51).

Though Game Theory, Hamilton, and Madison converge to create a system that is often effective in limiting itself, and often results in good government policies that are in the common good, legitimate reservations remain about the normative aspects of such a system. I have discussed how the common good becomes an unintended outcome of self interested decisions when a system is structured under the Hamiltonian and Madisonian model. But isn’t something lost when good actions are done for mediocre reasons? The philosopher Michael Sandel distinguishes between systems that are intrinsically good and instrumentally good. He believes an intrinsically good system is one which helps those participating in it to develop their own selves as members of a larger community and their own basic freedoms as citizens. An instrumentally good system, he believes, is one in which the correct outcome is generated but no nurturing or self-development comes as a necessary part of that process. Traditionally, a full fledged democracy such as that in Greece could be seen as intrinsically good. It developed the abilities of its citizens by demanding that they participate in a larger whole, by encouraging deep discussion and by forcing individuals to be tied to their community in much the way Adler advocated as the route to becoming a balanced person. I believe that Hamilton and Madison, by adding more stability, size, and self-limiting effectiveness to the US democratic system also traded off some of the intrinsic goodness of the process, perhaps necessarily, for some instrumental goodness. The new system had its advantages in terms of effectiveness, but by relying on selfishness and self-interest, it changed what expectations the citizens had of their representatives and thus what expectations they had of themselves (since the represented and the representation are dialectically linked). Thus though game theory supports this new hybrid intrinsically/instrumentally good system as being more effective in many ways due to Hamilton and Madison’s contributions, such models cannot measure normative values such as ones growth as a citizen, the humanity and depth of empathy of representatives, or ones development as a citizen with certain broader responsibilities – all of which may be in some dander of erosion once they are no longer demanded.

Another criticism of this method of supplying the common good through a structure in which “ambition [is] made to counteract ambition” (fed 51) lies in questioning the formulation of something such as the Constitution in the first place. How could such a constitution be written without it itself being tainted with inappropriate self-interest? Are the writer’s devoid of the very motives that they seek to protect against in the future? If so, is this not a challenge to their very assertions that virtue alone cannot be depended upon? Yet it is clear that the Founding fathers believed the Constitution to be for the public good. One might argue that the Constitutional Convention itself as well as its historical formation had a structure that promoted the common good. But this still leaves the question of who structured the Constitutional Convention? Through such a regression argument we may come to the conclusion that at some point a virtuous group or individual made a selfless act of organization since such a system cannot through its own principles generate itself. But then our conclusion would be that virtue cast aside virtue as a means of achieving its goal of the common good. So in a way the answer to our question is, through logical necessity, that virtue was at the root of the constitution, though indirectly and that there are some great people and great situations when marvelous works are done. The founding fathers preferred to think of themselves as the source of this virtue qua prime mover. “It is a misfortune, inseparable to human affairs, that public measures are rarely investigated with that spirit of moderation which is essential to a just estimate of their real tendency to advance or abstract the public good (fed 14)… the task of framing [a constitution] has [taken, throughout history] preeminent wisdom and approved integrity” (fed 38).

James Madison and Alexander Hamilton believed that wisely crafted and self-limiting institutions indirectly achieve the common good, a goal that virtue could not do dependably. They come to the conclusion through certain assumptions about human nature and the human condition. They helped create a Constitution that structures such a system. The virtues and the faults of this system can be seen today in a significant part of the world – both in America and in other nations that have borrowed parts of the founding fathers inspiration for their own use in contexts of varying cultures, attitudes, customs and habits. Their changes to the system, with all its advantages can be seen as fundamentally changing the nature of democracy – and in some ways not necessarily for the better. Mob rule may have been avoided – but perhaps only at the cost of distancing government form the people. The danger of those in government making decisions that benefited themselves at the expense of the country may have been partially circumvented, but only at he expense of demanding less virtue and less civic spirit in the representatives. Though much instrumental good was added, it was at the expense of some intrinsic good in the system – to use Michael Sandel’s terminology. Thus Hamilton and Jefferson, who had their trepidation’s about even calling their system a democracy, profoundly changed how a “democracy” functioned, what was demanded of its citizens and representatives, and how successful and stable a nations it was able to forge. Though the path Hamilton and Madison conceived if to reach the common good is a crooked one, detouring through ambition, greed, lust for fame, etc., they worked to make government well conceived and self-limiting, and helped to achieve beneficial incentives for a stable, dependable and successful society.* Altruism and virtue, on the other hand, directly attempting to achieve the public good, they saw as unstable and untrustworthy. The twists and turns of human nature as regarded by Hamilton and Madison and as set in the context of their carefully conceived and self-limiting government, promotes, albeit inadvertently and indeterminately, a society that is stable and tends to promote the common good.

Bibliography

American Political Thought SourceBook. Spring 1999.

Coase, R. H.. The Firm, The Market And The Law. University of Chicago Press. Chicago and London. 1988.

Hamilton, Madison, Jay. The Federalist Papers. Penguin Books, New York, NY 1961

Knight, Jack. Institutions and Social Conflict. Cambridge University Press, Cambridge England 1992.

Sandel, Michael. The Harvard Review of Philosophy. Camridge, Boston 1996.

Schelling, Thomas C.. The Strategy of Conflict. Harvard University, Cambridge, MA 1980

Phin Upham is an investor who lives in NYC and San Francisco.He has studied at Harvard University and Wharton Business School (UPenn) and is a term member of the Council on Foreign Relations.