The Economics of Good and Evil
By Robert H. Nelson, published in EH.net in 13-07-2011
“Economics of Good and Evil is a fascinating and provocative read...Works of such scope and ambition rarely come along in economics... For those economists interested in probing the deepest foundations of their own professional discipline, this book is highly recommended.”
Economics of Good and Evil was originally published in Czech in 2009. To the admitted surprise of its economist author, Tomas Sedlacek, it sold more than 50,000 copies and was turned into a popular play with sold-out audiences at the Czech National Theatre in Prague. Sedlacek served as an economic advisor to the first Czech President, Vaclav Havel (who contributes a Foreword), writes a popular Czech newspaper column, and is a member of the Czech National Economic Council. He adapted the original Czech version to English so this new Oxford University Press edition is not merely a translation. The best-selling status of Economics of Good and Evil is perhaps best understood as reflecting an ongoing Czech search for a new national religion to replace socialism and communism. Any new faith likely to command wide assent in Czech society today will probably have to be, as was Marxist communism, itself a secular religion, perhaps again also grounded in economics. As Havel writes in the Foreword, a main purpose of the book is to ask: at a fundamental level “what is economics? What is its [deepest] meaning? Where does this new religion [of economics], as it is sometimes called, come from” and where ideally might it be heading? As an economist, Sedlacek is a throwback to the tradition of Adam Smith, John Stuart Mill and Karl Marx. There is no mathematics. His scope of concern extends to the full state of the world and his method is to analyze the historic interactions of religion, economics and culture as they have come to shape modern economic thought. He traces the beginnings of current economics as far back as the ancient Sumerians, then moves on to the Israelites of the Old Testament, the ancient Greeks, the Christian world, and finally comes to the modern age. Economic concerns have always been a central part of western civilization, and have been prominently addressed by leading thinkers of each era. Modern economics, Sedlacek finds, is less distinguished by its new economic ideas than by its new outward manner of presenting economic insights that actually are in many cases of even ancient origin. Economists today, however, are themselves often unaware of the original roots in the history of western thought of their own ways of thinking. Sedlacek explains that even the teachings of modern “scientific” economics have a significant underlying religious and cultural message. He draws in this regard on the writings of Deirdre McCloskey who has contended for thirty years now that the formal economics of today is actually often metaphysics in disguise. The scientific claims of mainstream economics are best understood as an imperial claim for religious authority, a new way of reasserting longstanding economic values, myths, and ethical creeds of the West in a deceptively “modernist” and therefore supposedly newly authoritative cloak. Sedlacek begins the exploration of such topics in Chapter 1 with an analysis of the ancient Sumerian Epic of Gilgamesh -- believed to be the first mythical story ever put into written form. In the Epic, he writes, “the harlot was able to recast wild evil into something useful,” thus offering 4,000 years ago a “first seed of the principle of the market’s invisible hand,” an economic principle that had in fact “its predecessors as early as Gilgamesh.” The organized city is seen in the Epic favorably as a place where individuals can master specific skills and thus collectively maximize their total outputs -- or, as Sedlacek writes, as early as Gilgamesh -- the first important writing in human history -- we see a portrayal of “the phenomenon of the creation of the city, [where] we have seen how specialization and the accumulation of wealth was born, how holy nature was transformed into a secular supplier of resources” for human benefit. Sedlacek turns in Chapter 2 to the economic messages of the Old Testament. Two thousand years before the Protestant Ethic, “for Hebrews, when a person does well in the (economic) world, it is frequently understood as an expression of God’s favor.” The rule of law is sustained because for the Jews “the Lord unequivocally preferred the judge as the highest form of rule.” Long before modern science, “Hebrew culture laid the foundations for the rational examination of the world. ... [which] has its roots, surprisingly, in [Old Testament] religion.” Unlike the Greeks and most other ancient peoples, Sedlacek comments, “the Jewish understanding of time is linear -- it has a beginning and an end. The Jews believed in historical progress, and that progress is in this world.” These ideas, as Sedlacek says¸ set the original stage for the much later worship of economic progress as the modern path of the salvation of the world. Indeed, the Old Testament offers a brand new “perception of economic anthropology and ethos” that has survived to this day (if now in outwardly much altered forms) and played an important “role in the development of modern capitalist economics.” In Chapter 3, Sedlacek describes the writings of the Greek poet Hesiod who “examined such things as the problem of scarcity of resources, and, stemming from that, the need for their effective allocation” -- and therefore may appropriately “be considered to be the first economist ever.” The Greek philosopher Epicurus develops a view of human behavior grounded in “hedonism ... that would later receive a more exact economization at the hands of J. Bentham and J. S. Mill.” Sedlacek quotes Karl Popper approvingly to the effect that Karl Marx is a modern heir to Plato -- they both “offered a vision of apocalyptic revolution which will radically transfigure the whole social world” and thereby bring a new heaven on earth. The ancient Greek philosopher Xenophon, a contemporary of Plato, Sedlacek ranks as “a brilliant economist, who among other things dealt with the issue of utility and the maximization of yield.” He also “deals in detail with specialization, offers a lot of advice on both the micro and macro level, examines the favorable effect of incentives for foreign investors, and so on.” Although few current economists have ever studied -- or maybe even heard of -- Xenophon, Sedlacek writes that “to a certain extent, it could be said that his economic scope is wider and in many ways deeper than Adam Smith’s considerations.” Sedlacek moves in Chapter 4 to the economic messages of the New Testament and the Christian world. He notes that “of Jesus’s thirty parables in the New Testament, nineteen (!) are set in an economic or social context.” More broadly, “Christianity builds a large amount of its teaching on economic terminology” and in the process renders a surprisingly wide range of ethical economic judgments. In the theology of Augustine, in contrast to the Old Testament, “the world appears evil, unfair, transitory, unimportant” -- yielding a newly ascetic outlook that significantly influenced European civilization during the Middle Ages. Yet, all through the history of Christianity there is a favorable view of work, that “labor should provide man with pleasure and fulfillment,” that “labor is even a responsibility for man: ‘If a man will not work, he shall not eat,’” as the New Testament says in Second Thessalonians. Eight hundred years later, drawing heavily on recently recovered writings of Aristotle, Thomas Aquinas reversed attention from Augustine’s inwardness toward examining the external world as a new focus of Christian theology. Aquinas saw private property as necessary, and the just price for him was in essence the competitive market price. In Aquinas’ writings, as Sedlacek explains, “reason could not have received higher recognition. If practical discoveries can be truly proven [by rational methods], the traditional explanation[s] of the Bible must defer, because that interpretation was erroneous.” For Aquinas, “revolting against reason was ... like revolting against God.” With rational analysis thereby given such a powerful new religious authority, Aquinas and other scholastics played a key role in setting the stage for the scientific revolution a few centuries later and ultimately the shaping of modern economics. Sedlacek writes that “Christianity is the leading religion of our Euro-American civilization. Most of our social and economic ideals come from Christianity or are derived from it.” Most economists today admittedly do not know much about this and would be surprised to learn, as Sedlacek argues, that much of contemporary economics still amounts to a secularized -- and thus disguised -- Christianity. In the next three historical chapters of Economics of Good and Evil, Sedlacek delves into the more recent foundations of modern economics. As he writes, “Rene Descartes had a truly breakthrough influence on economic anthropology.” In the seventeenth century, Cartesian philosophy opened the way to the vision of “economic man [who] is a mechanical construct that works on infallible mathematical principles, ... and economists are [therefore] capable of explaining even his innermost motives” through mathematical methods. For the first time with Descartes, “a mathematical equation becomes the [religious] ideal of truth.” Sedlacek’s analysis of Adam Smith emphasizes his role as a natural philosopher who recognized that “psychology, philosophy, and ethics are in reality at the core of economics.” Smith has been recast by many later economists as a value-neutral defender of the free market who saw human motivation exclusively in terms of the expression of self-interest. In reality, as Sedlacek notes, the “invisible hand” is only mentioned once in Wealth of Nations, almost in passing. Instead, Smith has a much more nuanced view of human behavior and the workings of the economic system -- “for us economists, I believe Smith’s legacy is that moral questions must be included in economics.” The final edition of The Theory of Moral Sentiments was published after Wealth of Nations and thus might be considered Smith’s final word on economics and morality. For Smith, Sedlacek writes, the appropriate ethical principles are “the key question of economics.” After the historical analysis, the concluding chapters of Economics of Good and Evil present what Sedlacek labels as his final “blasphemous thoughts.” He finds that the modern devotion to “neverending growth” is a contemporary manifestation of the old idea of religious progress but now “in different clothing -- first in religious (heaven) and later in secular forms (heaven on earth).” Revealing the true path of maximal economic progress has become the underlying “raison d’etre for economics, science and politics and is something our civilization grew up with and simply counts” as an unexamined article of faith -- as spread by the “modern priests” of the economics profession. Sedlacek believes, however, that economic progress, while overall a great benefit in the modern age, may have reached its useful limits, and any suitable economic religion of the future should better teach us to be more “satisfied with what it [mankind] has, the progress it has already made.” Admittedly, this would require a whole new methodological foundation for the field of economics. If economic progress is not a basic goal, the pursuit of “efficiency” would no longer have its current transcendent purpose -- “efficient” and “inefficient” having become the secular economic substitutes for good and evil. There might then need to be a return to earlier religious views in which satisfying “work,” not consumption, becomes the greatest object of human value. In recasting economics, Sedlacek argues, a necessary first step will be to deemphasize the role of mathematics. The use of mathematical methods in economics, Sedlacek concludes, “is useful but not sufficient. It is only the tip of the iceberg. Below the mathematics lie much more fundamental issues” of institutions, culture, and basic belief -- even of religion. These issues do not readily lend themselves to mathematical methods. Rather than exhibiting an introspective curiosity about the foundations of economics, Sedlacek thinks that too many current members of the economics profession are happily content to remain in the dark as to the true historical origins and the underlying ethical norms of their own field. This is an almost willful blindness that is perhaps best understood as itself a religious statement, part of the general religious scientism that afflicts contemporary economics. Full knowledge of the many historic antecedents of modern economics would be almost an embarrassment for current economic faith. In Economics of Good and Evil, Sedlacek draws on a wide range of literature, economic and non-economic alike (there are probably more references to Wittgenstein than to any one twentieth century economist). The book is well documented including exhaustive footnoting that often includes long direct quotes from original sources (many pages have as much content in the footnotes as in the main text). It is not possible in a short review such as this to do more than give the flavor of Economics of Good and Evil. It is also not possible to say that Sedlacek is either “correct” or “incorrect.” In a work of such broad historical scope, one seeking to rewrite the history of economic thought, a more authoritative judgment must await the test of time. A more appropriate test for a review such as this, I would suggest, is whether the book is “interesting,” “well informed and documented,” “well argued,” “accurate,” and -- in the end perhaps the most significant matter of all -- “persuasive.” These judgments are not reached by a scientific method. For this reader at least, while there are certainly areas where I would disagree in some of the details, Economics of Good and Evil is a fascinating and provocative read. Works of such scope and ambition rarely come along in economics. (Indeed, some current economists may not regard the book as legitimately falling within the scope of “economics.” They might say it really belongs to the “history of ideas,” if with a strong economic emphasis.) For those economists interested in probing the deepest foundations of their own professional discipline, however, this book is highly recommended.