The Moral Behind All the Numbers
By Nancy F. Koehn, published in The New York Times in 03-07-2011
“Mr. Sedlacek takes mainstream economics as his clay, digging both his arms in up to the elbows in an attempt to explain the beliefs and ethical values underlying modern economics....”Link
As sophisticated and mathematical as economics has become, it is ultimately a cultural phenomenon and cannot be free of ethics. So argues the Czech economist Tomas Sedlacek, who aims to humanize this most public and powerful of the social sciences. In “Economics of Good and Evil: The Quest for Economic Meaning From Gilgamesh to Wall Street” (Oxford, $27.95), Mr. Sedlacek takes mainstream economics as his clay, digging both his arms in up to the elbows in an attempt to explain the beliefs and ethical values underlying modern economics. At the get-go, Mr. Sedlacek, who was once an adviser to Vaclav Havel, the former Czech president, and is now chief macroeconomist at the big Czech bank CSOB, argues that all of economics is, in the end, about good and evil. He adds: “Even the most sophisticated mathematical model is, de facto, a story, a parable, our effort to (rationally) grasp the world around us.” Only in the late 18th century, he argues, did today’s concept of economics emerge as a mathematical science. Before then, he says, economics lived within myths, religion, theology and philosophy. Mr. Sedlacek sets out to investigate these origins and to reflect what they might mean for the discipline today. It is a big, rambling quest, and he yanks his readers along through economic perspectives, practices and meanings in the Old Testament and early Christianity, and in the writings of Plato, Aristotle, Descartes and others. There are interesting insights along the way. Consider the story in Genesis in which Joseph interprets the pharaoh’s dream of seven fat and seven lean cows. The dream, Joseph tells the ruler, means that seven years of abundance will be followed by an equal period of poverty and famine. Joseph advises the pharaoh to store food during the boom, in preparation for the dearth. Unexpectedly, Mr. Sedlacek identifies this as the “very first historic economic cycle” and calls Joseph’s advice a form of “Keynesian anticyclical fiscal policy.” Mr. Sedlacek devotes a fair bit of attention to unpacking the origins of the “invisible hand.” This metaphor, one of the most powerful in economics, is usually attributed to Adam Smith. In “The Wealth of Nations,” Smith put forward the idea that the interaction of individual self-interest, supply and demand in a free market produces economically beneficial results for society. Mr. Sedlacek argues persuasively that this concept did not originate with Smith; its roots go back at least as far as Thomas Aquinas, the 13th-century philosopher who suggested in his masterwork “Summa Theologica” that evil things may produce larger, good outcomes “as a consequence of the providence of the governor.” In this instance, Mr. Sedlacek writes, the ruler’s guiding hand stands in for market forces in translating “unsystematic and frequently evil effort from an individual in society” into “common benefit.” I followed Mr. Sedlacek’s reconstruction this far, but I was unprepared for the leap he then made: “Economics should then mean the art of helmsmanship,” he says, adding that the interaction of chaos and free will should be considered a resource rather than an obstacle. “Instead of trying to calm the sea down and directing it by threats of violence,” he continues, one should “learn how to steer on it.” These are elegant words, but what precisely do they mean for the study and practice of economics today? The book provides no answers or other guideposts. This is hardly the only instance when the book leaves its readers on one side of an explanatory chasm while it catapults across time, disciplines and topics, more often than not without much of a consistent line of reasoning in the process. That is unfortunate, because buried deep in the book are a few very important perspectives on our world’s volatile economic system. Mr. Sedlacek’s thoughts on modern work and affluence are particularly insightful. “In our constant desire to have more and more, we have sacrificed the pleasantness of labor,” he says. “We want too much and so we work too much.” (“Amen,” I muttered under my breath after reading this.) “We are by far the richest civilization that has ever existed,” he continues, “but we are just as far from the word ‘enough’ or from satisfaction, if not further, than at any time in the distinct ‘primitive’ past.” Much of our acquisitiveness has been financed by debt. Mr. Sedlacek writes that widespread indebtedness has, in turn, served as a steroid for the pursuit of growth, measured in gross domestic product. In our obsession with expanding G.D.P., we have neglected to reserve surplus during times of plenty to see us through times of hardship, as Joseph could have told us. This is downright dangerous, according to Mr. Sedlacek. He writes that the recent financial crisis “has not destroyed us (although some countries in our civilization did go bankrupt or got near to it), but if we enter the next crisis as debt-burdened as we are now as a civilization,” the results could be lethal. Instead of viewing maximum growth as the goal of economic policy, he says, we should focus on pursuing reasonable levels of growth while minimizing debt levels around the world. As my mother used to say, this is “just plain ol’ good sense,” and even though Mr. Sedlacek does not explain how we will shift the focus of economics toward this end, it’s refreshing to hear it from a card-carrying member of the profession. IN many respects, the author has offered up a set of musings, many of which are energetic and enlightening in their appeal to the humanities. But the work’s contributions do not come cheap. Readers have to endure not only the absence of direction and analytic argument, but also frequent redundancies and narrative switchbacks. It all adds up to a worthy but exhausting journey.