Case Overview – Hannington v. University of Pennsylvania, 809 1. 2d 406 (Pa. Super. 2002)

 

Hannington was a graduate student at the University of Pennsylvania and brought suit against the University for breach of contract. Hannington’s attorney sent Penn’s attorney a draft of a settlement agreement, which Penn signed and sent back to Hannington. But Hannington then refused to sign the settlement agreement, hired a new attorney, and opted to proceed to trial. The trial court refused to allow Hannington’s case to go forward, holding that Hannington’s former attorney had had “apparent authority” to settle the case. Hannington appealed, and the Superior Court of Pennsylvania affirmed the trial court’s decision, ruling in favor of Penn (Melvin and Katz, 2015).

From a legal aspect, this case involves the liability of the principal for acts of the agent, specifically touching on authority, and, in this case, apparent authority. The legal definition of apparent authority is when “an agent may also gain power to bind the principal from the appearance of legitimate authority to a third party,” and the key to understanding this party is “to determine whether a third party was objectively reasonable in her belief that the apparent agent is in fact authorized to act for the principal” (Melvin and Katz, 2015). The innocent party in this case, the University of Pennsylvania, had reasonable cause to believe that Hannington’s attorney was authorized to draft a settlement agreement. This led to their decision to rely on his attorney as an agent, and to thus agree with the terms of the settlement and sign it. As The National Public Accountant states, this type of liability can arise when either a former or current employee undertakes tasks which the firm does not sanction, endorse, or normally practice, but which appear to a 3rd party to constitute services approved and endorsed by the principal (1997). In these types of cases, the client (grad student Hannington,) usually asserts that he wouldn’t have entered into business with the agent and didn’t grant him the authority to make the settlement, in spite of the fact that the situation’s appearance suggested otherwise.

From a social aspect also, Hannington does not have the right in this case. The third party, Penn’s legal representatives, had every reason to believe that Hannington’s lawyer was acting as an agent with authority for his principal (Hannington.) He had apparent authority legally to offer the settlement, but it was also obvious from the social circumstances that the lawyer was Hannington’s agent. Penn had no reason to believe that Hannington’s lawyer was acting against his client’s wishes, because an attorney does not usually do this. Nor is Penn responsible for the situation between Hannington and his attorney. All they know is that an agent with apparent authority gave them a settlement agreement, and they wanted the settlement to happen, so they signed it.

From a business perspective, “the best first step for an association to take in protecting itself from unknowingly bestowing apparent authority upon volunteers is to adopt an official policy as to who may speak for the association” (Webster, 1996). A common business example of the relationship between an agent and a principal is the bond between employer and employee. Essentially, this is what Hannington’s attorney is to Hannington. These two allowed their miscommunication issues to affect their business relationship with a third party, the University of Pennsylvania, which was bad business conduct on their part. Hannington and his attorney could have avoided putting Penn into this position altogether if they had clearly expressed to Penn the type of authority that Hannington’s attorney actually had, or adopting “an official policy as to who may speak for the association,” as Webster suggests above. In a business context, the authority of the principal over the agent is an important concept, one that can endanger their relationships with each other, their business, and their relationships with third parties. It is best that this authority is clearly defined so that these types of issues don’t happen.

From an ethical standpoint also, Hannington has no right to bring a case against the University of Pennsylvania for signing a settlement agreement that they had every reason to believe was approved by Hannington himself. Giving off the impression that someone has the authority to act for you when they don’t, endangers your business relationship with them, as well as their trust in your authority. The Bible speaks to the principles of authority, which ability Hannington in effect gave to his attorney when he hired him. Penn reasonably assumed that Harrington’s attorney had authority – and due to their limited knowledge of the true situation, they cannot be held liable for signing a document that the principal did not approve, since they had every reason to assume he had.

            1.) Suppose in the middle of settlement negotiations, Hannington becomes frustrated with the impasse. He hires his neighbor, another attorney not yet involved in the case, to draft a settlement agreement and sends it to Penn. Is apparent authority created in this circumstance? Explain.

 

           Apparent authority would still be created in this circumstance, seeing as how Penn would still reasonably assume that Harrington’s new lawyer has authority to act as an agent for his principal by drafting a settlement agreement. Whether or not the lawyer was already involved in the case is a moot point, because either way the attorney is currently acting as an agent with authority for his principal Hannington.

            2.) Since Hannington never actually signed the agreement, was it reasonable for Penn to assume that Hannington’s attorney had obtained his express consent to the terms? Has the court effectively deprived Hannington of his right to proceed to trial?

           

           Even though Hannington’s signature was not on the settlement document, Penn could still reasonably assume that the attorney had obtained his client’s consent to the terms – he was, after all, acting as an agent for Hannington, meaning that he had appearance of authority to draft documents and speak for his client. Just because Hannington did not agree, does not mean that Penn is held liable. Hannington thus had no right to proceed to trial against Penn, since Penn was acting on the apparent authority assumption of Hannington’s relationship with his attorney.

Reference:

“Apparent authority". (1997). The National Public Accountant, 42(10), 6-8. Retrieved from http://search.proquest.com/docview/232353633?accountid=12085

Melvin, Sean P. and Katz, Michael A. (2015). The Legal Environment of Business: A Managerial Approach: Theory to Practice, 2^nd Edition. McGraw-Hill Education LLC.

The Bible. KJV. Retrieved from www.biblegateway.com

Webster, G. D. (1996). Apparent authority. Association Management, 48(7), 147. Retrieved from http://search.proquest.com/docview/229293862?accountid=12085

Income Smoothing - A Question of Right and Wrong

Since I am a junior accounting student, I'm going to bore you all with an accounting research paper on income smoothing. (Also because it's my blog and I can.) I hope you find it somewhat interesting, because I certainly did. 

One of the most important functions of an accountant is his or her ability to accurately report financial information. A vital characteristic of that function is what is defined as “earnings quality,” or “the ability of reported earnings (income) to predict a company’s future earnings” (Spiceland, Sepe, & Nelson, 2013). Important decisions about the prospects of a company are based on its financial reports, such as the income statement, statement of cash flows, and the statement of owners’ equity. External users of this information, like outside investors, look at these reports to determine how well the company is doing, whether or not to continue investing in its stock, and to make their own financial decisions based upon this reported data. Internal users of the information also make important decisions about the future of their company using these financial statements, such as whether or not to expand in certain sectors, whether or not they should adjust their business methods, and where changes need to be made. If this vital financial information is understated, overstated, or distorted in any way, it is considered dishonest financial reporting. Although GAAP (Generally Accepted Accounting Principles) sets high standards to ensure that financial information is reported as accurately and honestly as possible, managers have still found ways under GAAP to slip through the cracks.

Among several of the methods for doing this is a managerial tactic known as “income smoothing,” a form of income manipulation. As CPA Larry B. Godwin points out in The CPA Journal, managers have a strong incentive to manipulate income because it minimizes uncertainty in the eyes of the investing public about the future performance of the company. He states correctly that, “A company whose progress is predictable is capable of attracting capital more easily than one that moves forward by fits and starts” (Godwin, 1977). Investors and creditors are not looking to invest their money or credit in a company whose income seems to vary wildly from year to year – they are looking for “safe” investments in companies that are stable and have relatively comparative profits and losses from year to year. C.R. Beidelman expounds on this in the “Accounting Review” as well, explaining that smoothing represents an attempt on the part of management to reduce “abnormal variations in earnings” as far as they’re allowed under accounting guidelines (Beidelman, 1973). According to Beidelman, there are three relevant questions one must ask regarding income smoothing: is it desirable for management to have smooth earnings? If desirable, can management create the appearance of smooth earnings? And thirdly, if desirable and possible, do firms succeed in their attempt to normalize reported income? (1973).

However, the most important question does not seem to be whether or not this tactic is desirable, possible, or feasible, but simply, whether or not it is right. Income smoothing has been a controversial topic for many years, and it is one that’s still under debate today. As Spiceland et al. point out, many believe that manipulating income in this way reduces an important aspect of financial reporting – earnings quality (Spiceland et al., 2013). This is because it can mask permanent earnings. The former Chairman of the SEC, Arthur Levitt, Jr., criticizes income manipulation by managers rather harshly by claiming that, “In the zeal to satisfy consensus earnings estimates and project a smooth earnings path, wishful thinking maybe be winning the day over faithful representation” (as cited in Spiceland et al., 2013, p. 178). He goes on to say that because of this obsession with “smooth” income, the accounting world is witnessing an erosion in the quality of earnings, and therefore, the quality of financial reporting – “managing maybe be giving way to manipulation; integrity may be losing out to illusion” (2013).

These are rather powerful charges to bring against managers who are simply trying to make their companies look more stable by evening out profits and loss. And yet, when the actual methods of income smoothing are analyzed, Levitt’s harsh words and calls for accounting reform seem justified, by all ethical standards. There are two main methods of manipulating, (and therefore smoothing) income. These are income shifting, and income statement classification. Income shifting is when the recognition of revenues or expenses before or after they’ve actually occurred. Income statement classification manipulation, (also referred to as “big bath” accounting) involves the inclusion of recurring operating expenses in special charge categories such as “restructuring costs.” These “restructuring costs” cause reductions in income that might appear as normal operating expenses in future years (Spiceland, Sepe, & Nelson, 2013).

The first method of income smoothing, income shifting, is clearly at odds with one of the most fundamental principles of accounting – the matching principle, which states that expenses must be reported on the income statement in the same period as revenues. The motivation behind this principle is the same behind all financial reporting guidelines – to ensure transparency in financial reporting. It is not so much the technical violation of the matching principle that matters in income shifting. Rather, it is the fact that the underlying reason of implementing the matching principle in the first place is being violated when income is shifted in such a manner to “even out” gains and losses.

“Big bath accounting” is not much better in terms of ethical motivation. In the Journal of Business Finance and Accounting, Walsh, Craig, and Clarke state that, “Big bath accounting has been used to describe large profit reducing write-offs, or ‘income-decreasing discretionary accruals’ in profit and loss statements,” and furthermore that, “particular companies are reported to have cleansed their corporate souls by engaging in the practice” (1991). It is called “big bath” as a reference to cleaning up company balance sheets, and is simply another way to even out a business’ costs in order to make it look like they weren’t higher or lower in one year than in another (Spiceland et al., 2013).  

Aside from these two prominent income-smoothing tactics are several others, as outlined by Godwin in The CPA Journal: the most obvious one is switching up accounting principles to even out profit and loss. Another involves changes in accounting estimates. A more flexible smoothing device involves timing of sales investments. Yet another method of smoothing involves timing of shipments of products at the end of an accounting period (Godwin, 1977). Obviously managers who manipulate income using these tactics have discovered multiple means of bending the rules and working in the gray. They may not be expressly violating any GAAP rules – but they are violating the spirit of honest financial reporting that led to these regulations being set in place. 

As mentioned above, Levitt expresses a call for change by standard setters to “improve the transparency of financial statements” – not to eliminate necessary flexibility in financial reporting, but to make it easier for financial statement users to “see through the numbers” (as cited in Spiceland et al., 2013). It should be easy for any user, whether it is an employee looking for financial information about his company, or an investor looking for a return on his capital, to look at a company’s income statement, balance sheet, and statement of cash flows and “see through the numbers.” This is the entire purpose of lucid, accurate financial reporting. When income is shifted and balance sheets are “cleaned up,” it becomes difficult to muddle through the numbers and attempt to interpret the data correctly. This in turn can lead to misconceptions about the company’s actual financial standing, and to bad decisions on the part of both external and internal users.

One would think that managers would want to manipulate income by maximizing it to make it look higher than it really was, but this is not the primary incentive to managers who utilize income-smoothing tactics. Rather, their main purpose is implied in the name – to smooth income so that profits and losses appear to stay consistent from year to year. “Smoothing,” explains Ronald Copeland, former assistant professor at Pennsylvania State University, “moderates year-to-year fluctuations in income by shifting earnings from peak years to less successful periods” (Copeland, 1968). This lowers the peaks and lifts the troughs, effectively creating an even income stream and making earnings fluctuations less volatile. According to Chambers in The Accounting Review as cited by Copeland, managers have more choices than they perhaps realize when it comes to their methods of financial reporting – he calculated that “it is possible to measure a given firm’s income as any one of 30,000,000 figures, all determined according to generally accepted accounting principles” (as cited by Copeland, 1968). This is a wide scope of responsibility indeed. Even under GAAP, managers have considerable leeway when it comes to their methods. This leeway, as lamented by individuals such as Levitt, can lead to dabbling in less-than-honest income manipulation methods when managers try a little too hard to make their company look, not merely profitable, but stable.

In conclusion, income smoothing is a tactic utilized by company managers to shift profits and losses and make their company appear to be a safe investment. While flexibility in reporting is not necessarily dishonest, as any manager should have the option of deciding his own accounting methods, this type of manipulation is, for Hashem states unequivocally that, “The L-rd detests dishonest scales, but accurate weights find favor with Him…The integrity of the upright guides them, but the unfaithful are destroyed by their duplicity” (Proverbs 11:1-3). 

References:

              Arthur Levitt, Jr., “The Numbers Game,” The CPA Journal, December 1998, p. 16.

             

              Beidleman, C. R. (1973). Income Smoothing: The Role of Management. Accounting Review, 48(4), 653-667.

Chambers, R. J. (1966). “A Matter of Principle.” The Accounting Review. 41 (July 1966). P. 443-57       

Copeland, R.M. (1968). “Income Smoothing.” Journal of Accounting Research. Vol. 6, Empirical Research in Accounting: Selected Studies 1968 pp. 101-116. Published by: Wiley on behalf of Accounting Research Center, Booth School of Business, University of Chicago. Retrieved from http://www.jstor.org/stable/2490073

Godwin, L. B. (1977). Income smoothing. The CPA Journal (Pre-1986), 47(000002), 27. Retrieved from http://search.proquest.com/docview/211776350?accountid=12085

Spiceland, J. D., Sepe, J. F., & Nelson, M. W. (2013). Intermediate accounting (7th ed.,combined ed.). New York: McGraw-Hill Irwin.

Walsh, P., Craig, R., & Clarke, F. (1991). “ ‘Big Bath Accounting’ Using Extraordinary Items Adjustments: Australian Empirical Evidence.” Journal Of Business Finance & Accounting, 18(2), 173-189.

Othello: Shakespeare's Aristotelian Tragedy

The great fourth-century Greek philosopher Aristotle described a tragedy as “an imitation of an action of high importance, complete and of some amplitude: in language enhanced by distinct and varying beauties…by means of pity and fear effecting its purgation of these emotions” (qtd. in Kennedy & Gioia 856).  He may very well have been describing the epic Shakespearean drama, Othello.  William Shakespeare’s famous play concerning the downfall of a Moorish general interweaves jealousy, suspense, intrigue, murder, and suicide to create a magnificent tragedy of the highest Aristotelian order.  Aristotle prescribed three main ingredients for a tragic drama recipe: hamartia, or a tragic flaw in the tragic hero’s character that brings about his downfall; katharsis, or a purgation of the audience’s emotions so that they feel that they have learned something from the play; and anagnorisis, or the character’s revelation of some fact not previously realized (Kennedy & Gioia 856-857). Shakespeare’s protagonist Othello fulfills all of Aristotle’s requirements for a tragic hero, as Othello is a character of noble status who falls from that position of power to one of shame because of his hamartia. Moreover the plot of Othello contains a powerful katharsis through its climax and conclusion, and an anagnorisis when Othello realizes that Iago and Desdemona are not who they seemed to be.

            First of all, Shakespeare’s protagonist, the Moorish general Othello, fits Aristotle’s definition of a tragic hero.  According to Kennedy and Gioia, Aristotle states that a tragic hero must have three dominant qualities: he must be a person of high estate, he must fall from that position into unhappiness, and his downfall must be brought about by his hamartia, or his tragic flaw (856-857).  Othello is not only a successful general in the Venetian army but is also well respected, admired, and well liked.  Contrary to common assumption, “high estate” does not mean that the tragic hero must be royal or even noble; it simply “gives him a place of dignity to fall from and perhaps makes his fall seem all the more a calamity” (Kennedy & Gioia 856).  Since Othello enjoys a position of power and happiness at the beginning of the play, this status makes his downfall from beloved general to despised murderer infinitely more tragic and moving (Kennedy & Gioia 857-858).

            According to Aristotle, however, the tragic hero’s collapse cannot be a simple deterioration from success to misery.  The most distinctive feature of the Aristotelian tragic hero is hamartia; his downfall must be brought about by a character flaw or flaw in judgment that leads to his destruction.  “In Aristotle’s theory of tragedy,” explains The Cambridge Guide to Literature, hamartia is “the mistake or failing which brings about the hero's downfall.  ‘Tragic flaw’, the usual English translation, can mislead by its concentration on moral weakness - encouraging readers to view Hamlet's fate as a condemnation of his uncertainty, or Othello's as a condemnation of his jealousy - since hamartia can also be a matter of ignorance or mistaken judgment” (“Hamartia”).  Thus hamartia is more than a moral weakness; it is a crucial mistake on the part of the tragic hero that causes him to plunge from greatness to grief.  Othello’s mistake as a tragic hero is believing Iago’s treacherous lies about Desdemona’s unfaithfulness.  Instead of investigating the matter further, Othello rashly jumps to the worst conclusions about his wife and believes every lie that Iago whispers into his ear. Although the villain Iago is certainly to blame for bringing about Desdemona’s murder and Othello’s suicide, Shakespeare makes it quite clear throughout the play that Othello’s impulsive behavior and irrational naïveté are the main cause of his miserable end, as Iago himself states at the beginning of the play: “The Moor is of a free and open nature, / That thinks men honest that but seem to be so, / And will as tenderly be led by the nose / As asses are” (1.3. 376-379).  Iago recognizes that he can use these weaknesses of Othello’s to hasten his downfall. Therefore Othello fits Aristotle’s description of a tragic hero who has descended from high estate to destruction because of his hamartia.  

But the tragic hero is not the only element required by Aristotle for tragedy. Neither is it the only component of Othello distinguishing Shakespeare’s play from a comedic drama.  A true Aristotelian tragedy also contains what the Greeks called a katharsis, or a purgation that leaves the audience feeling justified and uplifted.  As Kennedy and Gioia point out, this purgation is not necessarily always a positive one (857).  In a tragedy like Othello, where almost all of the characters wind up dead, the audience is certainly not expected to feel happy or cheerful about the play’s conclusion, but they do feel a sort of justification at the lessons learned by the play’s characters and satisfaction in the villain’s punishment.  Elisa Galgut states that, “The concept central to Aristotle’s theory of tragedy – katharsis – has been the subject of much debate, and the traditional readings are modeled on some type of cleansing, medical purging or religious purification” (14).  Moreover, these interpretations assume that the fear and pity aroused by tragedy is purged throughout the play, resulting in the state of katharsis. The overall idea behind katharsis, she concludes, is that tragedy effects some sort of transformation in the audience’s emotions, leaving them with a feeling of justification (15).

Aristotle said, “The tragic pleasure is that of pity and fear, and the poet has to produce it by a work of imitation” (qtd. in Galgut 15).  This implies that to feel the satisfaction of a good katharsis in a tragedy, the drama must arouse feelings of pity and fear in the audience and then expunge those feelings through a satisfactory conclusion.   In Othello, Shakespeare certainly moves the audience to feel pity for Othello, for Desdemona, for Cassio, and even for Iago. They also fear for the fate of the happy couple, and realize their worst fears when Othello smothers his innocent wife in a jealous rage.  Once more the audience pities Othello when he recognizes afterwards that Desdemona is innocent and stabs himself in remorse. Even though the play does not end “happily ever after,” the deaths of the unhappy couple and the punishment of the villain Iago bring a sort of closure to the drama.

The ultimate purpose of katharsis in a tragedy, as Kennedy and Gioia point out, is to purify our feelings, refining them into something more ennobling (857).  The audience may not come away from a production of Othello laughing or feeling particularly cheerful, but they will certainly feel as though they have learned something important and witnessed an epic drama that has affected them morally and spiritually.  This is the purpose of tragedy – to dramatize the weaknesses, despair, and failings of the human spirit and to demonstrate how to better ourselves through this experience.  Through this emotionally charged plot filled with intrigue and conflict, Shakespeare has certainly met all of Aristotle’s requirements for katharsis. 

The last element of Aristotelian tragedy found in Shakespeare’s Othello is anagnorisis, a sort of epiphany or revelation of fact that was previously unknown to the tragic hero.  John MacFarlane states that Aristotle’s literal Greek definition of anagnorisis consists of two parts; “The first part of the definition characterizes recognition as a change from ignorance into knowledge, leading either to friendship or enmity” (367).  Shakespeare brings out this particular feature of anagnorisis towards the end of the play when Othello realizes that his trusted friend Iago has trapped him in a web of lies and has deceived him into thinking Desdemona is unfaithful.  Iago’s wife Emilia cries out before she dies, “Moor, she was chaste. She loved thee, cruel Moor. / So come my soul to bliss as I speak true” (5.2.258-259) and suddenly Othello understands that it is Iago who has misled him, not Desdemona.  This anagnorisis causes Othello to cry, “Wash me in steep-down gulfs of liquid fire! / O Desdemon! Dead, Desdemon! Dead! O! O!” (5.2.289-290), to stab and wound the villain Iago, and then to kill himself in remorse.

The second aspect of the Greek word anagnorisis is its more superficial, general connotation.  According to The Encyclopedia Britannica, anagnorisis simply conveys “the startling discovery that produces a change from ignorance to knowledge. It is discussed by Aristotle in the Poetics as an essential part of the plot of a tragedy… Anagnorisis usually involves revelation of the true identity of persons previously unknown, as when a father recognizes a stranger as his son, or vice versa” (“Anagnorisis”).  It is the simple epiphany experienced by the tragic hero as he realizes something significant, like the fact that he has killed the woman he loves for no reason.

This moment of revelation for Othello is the climax of Shakespeare’s play as everything comes together (or in Othello’s case, comes apart) before the tragic hero’s eyes and the full extent of Iago’s treachery and deceit is made clear to the him.  For the audience, the moment is especially climactic, because we have known the truth all along.  As Roger W. Herzel puts it: “When the man is Othello, a special kind of double vision comes into play: looking through our own eyes, we see the injustice of the action, but looking through the eyes of Othello we see its justice with equal clarity… In tragedy then, we witness an imitation of an action which has a terrible significance of which we are fully aware but the agent is not” (498).  The audience knows that Desdemona is innocent; thus, Othello’s baseless accusations and crime against her arouse special pity and loathing.  This makes the Othello’s anagnorisis at the end of the play exceptionally poignant.

How then does one distinguish a simple play of comedy from a great Aristotelian drama? Aristotle said three dramatic features provide this distinction: hamartia, katharsis, and anagnorisis (Kennedy & Gioia 856-858). Shakespeare’s great play depicting the downfall of a Moorish general through jealousy and deceit is such a tragic drama.   The Greek philosopher’s influence upon the sixteenth-century English playwright is evident in works such as Othello, as Sarah Dewar-Watson points out, “Discussion of Shakespeare's tragedies is still commonly framed in Aristotelian terms – the fall from greatness, the fatal flaw, the moment of catastrophe… It could be argued that Aristotle has had a hand in defining what is still generally regarded as the core of Shakespeare's tragic canon” (1). Through the character of Othello as a tragic hero with a fatal flaw, the purgation of emotion through the couple’s deaths and the punishment of Iago, and the epiphany Othello experiences at the end of the play, Shakespeare demonstrates with eloquence each and every one of Aristotle’s qualifications for tragedy. Othello is a tragic drama of epic proportions that has stood the test of time and continues to move audiences with its powerful themes of jealousy, intrigue, betrayal, faithfulness, death, and remorse.

References

Anagnorisis. (2013). In Encyclopædia Britannica. Retrieved from http://www.britannica.com/EBchecked/topic/22338/anagnorisis

Aristotle. (2010). Poetics. In X. Kennedy, D. Gioia, X. Kennedy, & D. Gioia (Eds.), Literature: An Introduction to Fiction, Poetry, Drama, and Writing (p. 856). New York: Longman.

Dewar-Watson, S. (2004). Shakespeare and Aristotle. Literature Compass , 1 (1), 1-9.

Galgut, E. (2009). Tragic Katharsis and Reparation: A Perspective on Aristotle's Poetics. South African Journal of Philosophy , 28 (1), 13-24, 12.

Hamartia. (2000). In The Cambridge Guide to Literature in English. Retrieved from http://www.liberty.edu:2048/login?url=http://www.credoreference.com/entry/cupliteng/hamartia

Herzel, R. W. (1974). "Anagnorisis" and "Peripeteia" in Comedy. Educational Theatre Journal , 26 (4), 495-505.

Kennedy, X., & Gioia, D. (2010). Literature: An Introduction to Fiction, Poetry, Drama, and Writing (6th Compact Edition ed.). (X. Kennedy, & D. Gioia, Eds.) New York: Longman.

MacFarlane, J. (2000). Aristotle's Definition of "Anagnorisis" . The American Journal of Philology , 121, 367-383.

Shakespeare, W. (2010). Othello, the Moor of Venice. Literature: An Introduction to Fiction, Poetry, Drama, and Writing (6th Compact Edition ed.). (X. Kennedy, & D. Gioia, Eds.) New York: Longman.

       

A Brief Explanation of Capitalism

            I wrote this informative speech for my communications class last semester. Thanks to this blog, it was relatively easy to put together: I had already done most of the background research and expressed most of my views on this topic in my Classical Student posts. (That brilliant butcher analogy of mine might sound familiar.) Simplifying Capitalism But I thought a more comprehensive post that summarizes my personal definition might be interesting to read as well.

Nobel-prize winning economist Milton Friedman said, “What kind of society isn’t structured on greed? The problem of social organization is how to set up an arrangement under which greed will do the least harm; capitalism is that kind of a system.” So much for capitalism’s purpose. But what is capitalism exactly?

       Today you are going to come away from my speech with a full grasp of the definition “capitalism”. I will demonstrate, first of all, the literal definition of the term capitalism, along with a real-life example of what this system would look like on a practical level. I will also relate a brief history of capitalism, and finally contrast and compare capitalism to its opposing economic system, communism.    
      Capitalism has always been an interest of mine since my dad read George Orwell’s Animal Farm to us when we were young, and I’ve been studying the contrasting economic systems of Animal Farm’s socialism and its opposing system capitalism every since. I’ve also explored the topic through my writings on my blog and in my personal reading. I’m fascinated by its basic principles of free choice, non-intervention, and individual initiative.
      One way to understand a concept is through its definition. We will look at a definition of capitalism by Milton Friedman, a real-life example, and an alternative explanation.
      Nobel Prize-winning economist Milton Friedman defined capitalism and its role in society when he said: “The role of competitive capitalism is the organization of the bulk of economic activity through private enterprise operating in a free market – it is a system of economic freedom and a necessary condition for political freedom” (Friedman, 1962, p. 4). Wow... these words are all very grand and imposing, but what does this definition look like on a day-to-day basis? What is the practical picture behind this fine-sounding economic jargon?
      Well, picture me as the owner of a butcher shop. You need meat, so you come into my butcher shop. I provide you with the resources, (meat,) and skills, (preparing and packaging the meat,) that you cannot provide for yourself, because you don't have the resources, skill, or time. In return, you give me money, which I can then use to provide for myself the things I need. I go to the bakery and buy bread with that money, because I don't have the resources (flour, ovens, bakers, etc.,) or the time, or the skills, to bake bread myself. Thus you have provided me with something I don't have, and I have provided you with something you don't have. That is a mutual exchange. This is capitalism in its purest and most basic form. 
      Maybe another butcher opens a similar shop down the street. Maybe he has a larger variety, or cheaper prices, or better quality of meats - so you go to him to buy meat instead. That's free choice. You can decide which butcher you like better. I want more money so I can buy bread for my family, so I lower my prices to bring in more business. That's competition. Does this competition hurt you, the customer? On the contrary, it lowers prices and improves quality/quantity for you, which is very beneficial for you. These laws - the laws of mutual exchange, free choice, and competition - are the basic tenets of capitalism. Adam Smith called these natural laws "the invisible hand" of the market.    
      Now that you have a clearer picture of what capitalism looks like on a daily basis, let’s look at an alternative definition from Robert P. Murphy, Ph. D. and author of The Politically Incorrect Guide to Capitalism. He summarized capitalism this way: it is a system where people can use their property however they want – it’s also known as the free enterprise system because people have the freedom to choose their own jobs, the products they want to buy, and the products they want to sell (Murphy, 2007, p. 1).   
      But we can’t fully understand the definition without understanding where it came from – entire economic systems do not come out of a vacuum. Capitalism had a definite history, beginning with the end of the feudal system and the rise of the middle class, and continuing into the pages of today’s modern economic story. To better understand capitalism we will take a look at its brief history.
      The basic tenets of capitalism go all the way back to the Torah, where hard work, individual initiative, and private property were valued components of God’s economic system. God commands us in both Exodus 20:9 and Deuteronomy 5:13, “Six days you shall labor and do all your work” and as Rabbi Spero pointed out in his Wall Street Journal article, with work a person becomes comes to understand that he has to be productive, and that success is not just an entitlement (Spero, What the Bible Teaches About Capitalism, 30 Jan 2012: A.15). (I recommend you read the full article, as it's excellent - here.) This is a fundamental principle of capitalism as well. Of course, as Spero says, the Bible “has nothing to say about financial instruments and models such as private equity, hedge funds or other forms of monetary capitalization.” But it does demand “honesty, fair weights and measures, respect for a borrower's collateral, timely payments of wages, resisting usury, and empathy” for those less fortunate than ourselves (Spero, What the Bible Teaches About Capitalism, 30 Jan 2012: A.15) 
      So capitalism’s principles were laid down in ancient times through the Torah – but modern capitalism was introduced into the world by Adam Smith. The popular economic system of the day was mercantilism, which he challenged in his revolutionary book The Wealth of Nations, published in 1776. “It was Adam Smith who noticed that mercantilism was not a force of development and change, but a regressive system that was keeping the world from advancing. His ideas for a free market opened the world to capitalism” (Beattie, The History of Capitalism: From Feudalism to Wall Street, October 14^th, 2011). After Adam Smith popularized “laissez-faire” (“do what you want”) economics now known as capitalism, the era of the industrial revolution dawned. As Beattie stated, this new industrial capitalism was the first system that carried benefits for all societal levels instead of just for the nobles. The standards of living were raised which led to the formation of a middle class that grew larger and larger as more people from the lower classes rose to prosperity (Beattie, The History of Capitalism: From Feudalism to Wall Street, October 14^th, 2011). 
      Today’s version of capitalism is quite different from the Biblical models of Moshe and also quite different from Adam Smith’s “laissez faire” economic system. But the basic principles are the same. Modern capitalism still emphasizes the ideas of individual initiative, working hard to receive rewards, and getting to keep those rewards – Americans believe that these are inherent rights and American capitalism is a reflection of those basic beliefs.
      Yet another way to understand a concept is to contrast and compare it with something else (Foreman, 2013, p. 10). Let’s take a look at capitalism’s nemesis, communism.  
      A basic definition is that communism is a form of society in which the means of production and sustenance belong to the community (O’Leary, Communism, 2007) Communism, which puts the power into the hands of the state, stands in stark contrast to capitalism, which generally gives the state the role of referee, rather than player. Communism votes for working for the common good of the whole community sharing both labor and profit – capitalism relies on individual initiative and personal rewards for an economy to run smoothly. (On a side note, it is obvious form the examples of Russia and China that communism often leads to totalitarianism while capitalism generally promotes free trade, free enterprise, and political freedom in general – but that’s a topic for another speech.) As economist Milton Friedman said, “There are only two ways or coordinating the economic activities of millions. One is central direction involving the use of coercion… the other is voluntary co-operation of individuals – the technique of the market place” (Friedman, 1962, p. 13). Communism vs. capitalism.

       Through the literal definition of the term “capitalism”, a look at a simple form of capitalism in practice, the history of capitalism, and a contrast/comparison of another economic system besides capitalism, you now have a basic understanding of this very important and influential economic system.

      Capitalism’s literal definition is an economic system that promotes individual initiative, free trade, free choice, minimal governmental interference, (except to enforce rules), mutual exchanges, competition, personal profits, and personal property. To borrow, yet again, Friedman’s way of expressing capitalism; its central feature is that it prevents one person from interfering too much with another – the consumer’s protected from coercion by the seller because there are other sellers with whom he can deal – the seller is protected from the consumer because of other consumers with whom he can deal. Moreover, the employee is protected from the employer because of other employers for whom he can work (Friedman, 1962, pp.14-15). This is how capitalism is supposed to work on a practical level in our daily, economic lives.

References

Beattie, Andrew: “The History of Capitalism: From Feudalism to Wall Street”, October 14^th, 2011, Investopedia, http://www.investopedia.com/articles/economics/08/capitalism-history.asp#axzz2CDmqGLvC.

Brearton, Steve: “A Brief History of Capitalism”, June, 2008, “Report On Busines Magazine”, The Globe & Mail division of Bell Globemedia Publishing Inc., Canada.

Foreman, Mark: Prelude to Philosophy: Thinking Critically About Foundational Beliefs, 2012, InterVarsity Press, Downers Grove, IL.

Friedman, Milton; Friedman, Rose D.: Free to Choose, 1980, 1979, Harcourt Brace Jovanovich, New York and London.

Friedman, Milton: Capitalism and Freedom, 1962, The University of Chicago

Press, Chicago Ltd, London.

Murphy, Robert P., The Politically Incorrect Guide to Capitalism, 2007, Regnery Publishing, Inc.: Washington D.C.

O’Leary, Zina. Communism. (2007). In The Social Science Jargon-Buster. Retrieved fromhttp://www.liberty.edu:2048/login?url=http://www.credoreference.com/entry/sageukssjb/communism

Orwell, George. Animal Farm. 1945. Secker and Warburg, London.

Smith, Adam: Wealth of Nations. 1776 W. Strahan and T. Cadell, London.

Spero, Aryeh. What the Bible Teaches About Capitalism. Wall Street Journal. 30 Jan 2012: A.15; New York, N.Y.
 

Nostalgia, Regret, and Futility – Exploring the Tone and Language of Tennyson’s “Ulysses"

“How dull it is to pause, to make an end / To rust unburnish’d, not to shine in use!” (22-23) Thus speaks the aged Greek hero in Tennyson’s famous poem “Ulysses” as the king contemplates the futility of life, bemoaning the passing of his youth. Although widely celebrated as a majestic piece that exhorts us to press onward in the face of grief, “Ulysses” contains yet a deeper meaning that Tennyson suggests using both the poem’s language and its tone – underneath the surface, “Ulysses” is a lament that muses with regret upon the vanity of a life wasted chasing after adventure. As Charles C. Walcutt of Michigan State Normal College writes, “The voice which speaks is not that of a trumpet, clear-throated and vigorous; it is the mournful sighing of strings” (Walcutt, 1946). Tennyson conveys his theme of regret using the following literary tools – tone and word choice.

             Tone is a powerful element of “Ulysses” – Tennyson portrays the attitudes and overall character of his poem using the aged warrior’s expression of feeling. Throughout its development, the hero of “Ulysses” articulates a broad range of emotions, from his initial frustrated reflections on his current situation, to his final determination to experience one last adventure before death – from “Matched with an aged wife, I mete and dole / Unequal laws unto a savage race, / That hoard, and sleep, and feed, and know not me. / I cannot rest from travel” (3-6) to “ ‘Tis not too late to seek a newer world…To sail beyond the sunset, and the baths / Of all the western stars, until I die” (56-61)

In the opening lines of “Ulysses,” Tennyson paints his readers a picture of an elderly Greek king sitting by an empty fireplace, lamenting the monotony of his current life. This emotion of frustration however quickly gives way to nostalgia, as Ulysses muses fondly upon his past adventures:

            Much have I seen and known, - cities of men

            And manners, climates, councils, governments,

            Myself not least, but honored of them all, -

            And drink delight of battle with my peers,

            Far on the singing plains of windy Troy. (13-17)

Then Ulysses turns to reflecting upon his son Telemachus and upon the differences between their characters – he observes that Telemachus seems contented with his lot governing the people of Ithaca, while Ulysses still feels restlessness in his own heart; “He works his work, I mine” (43). Ulysses next passes from thoughts of his son to contemplations of death and old age. His attitude towards death is similar to that of the Preacher in Ecclesiastes: “This also is vanity. For there is no more remembrance of the wise than of the fool forever, since all that now is will be forgotten in the days to come. And how does a wise man die? As the fool!” (Ecc. 2:15-16). Likewise Ulysses exclaims, “As tho’ to breathe were life! Life piled on life / Were all too little, and of one to me” (24-25), implying that just because he breathes doesn’t mean he feels alive – in fact, he feels his death drawing near, and the thought that “Death closes all” (51) fills him with a growing sense of despair. Ulysses has come to the same realization as the Preacher – no matter how many great deeds he’s accomplished during his lifetime, death is the inevitable end of all men. There is no escape from mortality.

The last emotion expressed by Ulysses in this poem is one of renewed, grim, and almost reckless determination to experience one final adventure before death overtakes him: “Come, my friends, / ‘Tis not too late to seek a newer world” (56-57). Tennyson enforces the despairing tone of his poem with this dramatic conclusion, in which Ulysses exhorts his fellow-mariners to join him once more on a sea-voyage. He cries,

            Tho’ much is taken much abides; and tho’

            We are not now that strength which in old days

            Moved earth and heaven, that which we are, we are (65-67)

The reader is never told whether or not Ulysses actually carries out his plan for a journey – he may have simply been dreaming of one last glorious adventure before death. As Walcutt states, “The effect of the poem is nearer to being an evocation of the state of mind of an aged warrior who dreams of former glory than it is to being the actual beginning of a new heroic quest” (Walcutt, 1946). The 16^th century Italian poet Dante describes Ulysses’ final journey in his poem The Inferno, and according to Dante’s version, Ulysses and his crew perish a watery death because of the wrath of Zeus: “The poop rose and the bow went down / till the sea closed over us and the light was gone” (130-131). Whether or not Ulysses actually set out on this final adventure and was lost at sea is not revealed in Tennyson’s text, but the expression of Ulysses’ emotion is the same – he senses the futility of his life and is frustrated with the impotence of old age. His solution is to turn to glorious visions of battles and adventures, which he thinks will bring him the happiness he lacks.

            Throughout the poem “Ulysses,” the aged Greek warrior gives voice to a wide array of emotions, ranging from discontentment to nostalgia to hopelessness to grim determination. Tennyson sets the tone of his poem through this expression of attitude, but he also conveys the poem’s deeper themes using word choice and language. There are two specific passages in “Ulysses” where Tennyson’s word choice particularly strengthens the sense of futility and hopelessness of this poem.

            First of all, Tennyson employs the use of metaphor when describing Ulysses’ feelings of helplessness. Ulysses compares himself to an old sword that has seen great deeds in battle but now sits abandoned and rusty with disuse (22-23) and uses the adjectives “dull”, “unburnish’d”, and “gray” to describe his sense of feebleness and age (23-30). He yearns “to follow knowledge like a sinking star” (31). Ulysses’ language and choice of adjectives in this particular passage strengthen the poem’s sense of regret and its message of life’s meaninglessness.

            Towards the end of the poem, Tennyson once again employs an implied metaphor when his hero describes the ending of the day, signifying the closing of his life:

                        The lights begin to twinkle from the rocks;

                        The long day wanes; the slow moon climbs; the deep

                        Moans round with many voices. Come, my friends,

                        ‘Tis not too late to seek a newer world. (54-57)

Ulysses realizes that, like the long day waning, his life is also drawing to a close. This realization seems almost to frighten him, and he grasps for comfort at the only thing he knows and loves – adventure. Instead of examining himself and apprehending the futility of the things he has spend his life chasing after, his conclusion is that, though “death closes all; but something ere the end, / Some work of noble note, may yet be done, / Not unbecoming men that strove with Gods” (51-53).

         

  The ultimate message of Tennyson’s poem “Ulysses” is a deep and powerful one, similar to the final conclusion of Ecclesiastes; “Let us hear the conclusion of the whole matter: fear God and keep His commandments, for this is man’s all” (Ecc. 12:13). The pursuit of anything else in place of God – whether it be money, power, fame, glory in battle, or adventure – is fruitless and devoid of meaning. A life wasted chasing after these things is one that will end in regret and despair, as Tennyson’s Ulysses comes to partially realize. Tennyson conveys this message using his hero’s attitudes, expression of feeling, and choice of language – without God, our lives are meaningless. Without God, we have nothing to turn to when our end draws near and we begin, like Ulysses, to sense the futility of our life’s pursuits. And without God, the prospect of death is a frightening one indeed.

Sources

Dante, A. (2003). The Divine Comedy: The Inferno, the Purgatorio, and the Paradiso. (J. Ciardi, Trans.) New York, New York: New American Library.

Lord Tennyson, A. (1950). Ulysses. In P. R. Lieder, R. M. Lovett, & R. K. Root (Eds.), British Poetry and Prose (Third ed., Vol. 2, pp. 445-446). Cambridge, MA, United States: The Riverside Press.

Walcutt, C. C. (1946). TENNYSON, Ulysses. Explicator , IV (28), 3.

My most recent posts are the products of my freshman college assignments - in lit. class this week we had to analyze a particular poem's themes and the poet's methods of communicating those themes. I was pretty excited when I saw that Tennyson was one of the choices. (Because of reasons.) I hope it was as enjoyable to read as it was enjoyable to write. 

I have one more big drama paper due which I would like to share as well... and then I promise I will stop posting my college assignments on my blog. (Maybe.)