Economics of Good and Evil: The Quest for Economic Meaning from Gilgamesh to Wall Street, by Thomas Sedlacek, explores the path dependency of modern Western economics through mythology, religion and fables. I wish the book had been published and influential forty-five years ago when I was a freshman economics major.
When I was an undergraduate student in economics we started with the moral/political arguments of Adam Smith, Thomas Malthus, Karl Marx, David Ricardo, J.S. Mill, and Alfred Marshall. I was so delighted with my chosen major that after the first semester, I signed up for sophomore year economics classes, which for us meant Samuelson.
What a disappointment to learn the “truths” in that second semester of college I would have to parrot back to be successful in mainstream economics. Invisible hands, rational individuals seeking only to maximize their own benefits, the predictable model of robotic behavior of homo economicus didn’t ring true to me. These assumptions, where service to others and the natural bonds between people were totally discounted didn’t appear scientific to me. Other social sciences sought to measure actual behavior, rather than make assumptions known to be untrue.
I dropped out out of college. When I later resumed my studies, I focused on the sociology of knowledge, in part, to decipher how/why we could go so wrong in such an important field. Why were many of the most important “findings” based on shaky assumptions dressed up with mathematical formulas?
These questions mostly rattled around in my head but Sedlacek actually took the time to explore a substantial portion of the historical paths that have led us to where we are today. Unlike a watch or other cultural product, we can’t easily deconstruct economics, since so much of it was built “unconsciously, spontaneously, uncontrolled, unplanned, not under the conductor’s baton.” The most successful and larger portion and book follows Sedlacek’s search for economic thought in ancient myths. Toward the end he also spends some time looking for myths in today’s economics.
In the 4,000 year old Epic of Gilgamesh, Sedlacek sees the power of friendship. Eilgamesh moves from “maximizing, efficiency seeking,” while Enkidu moves from “wild, animal-like, unpredictable,” both converging somewhere in between where both are more human. Here we see the beginnings of market specialization in the city.
The more sophisticated a given society is as a whole, the less its members are able to survive on their own as individuals… the more a person has, the more developed and richer, the greater the number of his needs…
Just as a side note: people in the United States have the highest level of anxiety, according to a World Mental Health Survey conducted in 18 countries in 2002. All our stuff appears to make us more, not less, anxious. We seem to have maximized both efficiency and our animal instincts, instead of moderating both.
In Gilgamesh we see that great acts usually involve friendship that elude the economic understanding of quid pro quo and we see the precursor to the “invisible hand of the market.” Instead of fighting Enkidu, Gilgamesh indirectly shaped him to greatly benefit humanity.
In the Old Testament, Sedlacek sees the origins of the concept of progress, through constant growth toward a paradise on Earth. Yet, it wasn’t growth for the sake of growth they were after but growth so that on the Sabbath we could find rest, accomplishment, joy.
We see how reality is co-created by man as God brings each living creature to man so that man “gave names to all the livestock, the birds of the air and all the beasts of the field.” We cannot think of something that has no representative symbol in our mind. Reality itself is constantly being re-created.
In the story of the Jewish nation we also encounter the first notion of economic cycles. The pharaoh’s dream of seven fat and seven lean cows was the first “macroeconomic forecast.” Joseph interprets the pharaoh’s dream and through taxation saves one-fifth of the crop in good years to be used in bad. Sedlaeck also takes note of “jubilee” years in which debts were forgiven and, in less frequent cycles, something like an estate tax ensured the “sins of the fathers” did not fall heavily on sons and daughters because land that had been taken was returned.
In ancient Greece we see the first stand-alone micro- and macroeconomics textbooks by Xenophon who exhorts Athenians to maximize the state’s treasury by expanding trade, seeking the goodwill and loyalty of alien businessmen, taking into account their desire for feeling exceptional. Here we see the development of concepts such as “value in use” and “value in exchange,” division or labor, the relationship between employment and price, innovation, and state infrastructure investment. Unlike us, Sedlacek contends, the Greeks didn’t take their myths literally. They were acknowledged as myths but held valuable lessons. Economic world-views were still very much in flux between Stoics and Epicurus.
We can even see the beginnings of Maslow’s hierarchy of needs in Aristotle’s hierarchy of good. As needs are met, “the more pleasant activity drives out the other… e.g., in the theatre the people who eat sweets do so most when the actors are poor.” Instead of maximizing utility, Aristotle maximizes “good.” Both use the logic of tautology, but the good is more explicitly identified as value laden than is utility, so one can more easily recognize bias. Aristotle also favored temperance, something I think we see far to little of as a cherished value today.
The man who indulges in every pleasure and abstains from none becomes self-indulgent, while the man who shuns every pleasure, as boors do, becomes in a way insensible; temperance and courage, then, are destroyed by excess and defect, and preserved by the mean.
Mainstream economics appears to follows the hedonist approach, equating goodness with utility.
As Sedlacek examines Christianity he sees a religion that “shifts justice to another world, to the world beyond.” However, this liberation comes “at the cost of sacrificing the World.” James, chapter 4, verse 4: “Anyone who chooses to be a friend of the world becomes an enemy of God.” No wonder it is so hard to address global climate change. The key term of Christianity–redemption–referred to purchasing a slave to set them free. The word sin meant debt in Greek, so it is interesting to hear the Lord’s prayer as “cancel our debts,” instead of “forgive us our sins” in the pleas from the leading banks in the crisis of 2008. Justice for the rest of us is delayed until Heaven.
Descartes gets a chapter in which we see his method to rid the world of traditions and prejudices actually establishes them even more firmly but hidden. Like Samuelson’s promise of economics free of metaphysics, morals and personal convictions, when we look at Descartes assumptions we see his methodology is all based on a dream.
We then come to Bernard Mandeville’s The Fable of the Bees: or Private Vices, Publick Benefits, which seems all to be an all too accurate description of our own economic pathway. His poem tells the tale of a once prosperous society where bees adopted honesty and virtue. Instead of greater prosperity, bees lost their jobs by the swarm. Society didn’t recognize how many were employed because of crime, luxury and gluttony.
Vice is not the problem; hypocrisy is, according to Mandeville. Human needs are unlimited; our economy depends on newer and newer temptations and vices for continued growth. Gross domestic product, as a measure, is just that, gross. We obviously need a better indicator of overall health.
In his final chapter of searching for economic thought in myths, Sedlacek turns to Adam Smith and shows how he tried to distance himself from Mandeville. Smith renames “self-love as “self-interest” and didn’t see it as a vice.
Smith managed to draw from the logic of Mandeville’s argument without having to face derisive criticism… Mandeville’s scornful “self-love” becomes the virtuous “self-interest.”
Sedlacek is drawn to Smith’s Theory of Moral Sentiments where the governing principle of human behavior is loving benevolence, fondness; man is not a rational actor but is primarily led by emotion.
In part two, Sedlacek shares some of his “blasphemous thoughts” regarding the current state of economics. His timing is good, since we are most likely to reflect on deeper meanings and make substantive changes during times of crisis. However, seeing the myths in today’s economics appears to be much more difficult than seeing how economics developed from myths.
Sedlacek reflects on the Garden of Eden, the story of Pandora and others where the moral theme is that our exercise of choice is a burden in a world of natural scarcity. Greed was perhaps our original sin; discontent the engine that drives progress. Satisfaction is like the pot of gold at the end of the rainbow–ever over the horizon.
We thought that consumption leads to saturation, the satiation of our needs. But the opposite has proven to be true. The more we have, the more additional things we need… It’s easy to go up the consumption ladder but asymmetrically more unpleasant to go back down.
The implication is that economics took a wrong turn in embracing greed as good. While we don’t want to stifle knowledge seeking (a possible subset of greed), we do need to find a way to minimize the environmental impact of unlimited desire on a finite world. Progress among the early Jews was viewed as a spiritual quest but today the concept of progress focuses on the material. Our “scientific” era is the bloodiest in history. Balance is lacking.
Those who “create” the truth and those who “appraise” it are one and the same. In the scientific world there is none of the division or power we know and carefully watch over in the world of politics.
Failure to recognize the mythological basis of economics and the fact that it may be no better in predicting the future than the oracles at Delphi increases the risk of peril. Sedlacek speculates that in a world of abundance and safety we demand shortage and danger. Drawing only from one side of Keynesian theory, our deficit economics places us constantly at the edge of overheating or bankruptcy. We spend more than we earn in both lean years and fat. “We should make an effort toward gratitude and satisfaction.”
Is it time to institute a reboot, where all debts are forgiven? Bringing back a much higher estate tax could be one step in that direction, as would increasing the capital gains tax.
If the United States had devoted the technological development of the last twenty years to saving time, instead of growing our standard of living (which for most of us didn’t grow), Sedlacek estimates we would now have a three day work week, “exactly as Keynes forecasted seventy years ago.” That would give us the time Aristotle sought to build moral character but it is hard to imagine Americans trading consumerism for contemplation.
Using Joseph’s rule of thumb from the Old Testament, Sedlacek argues a functional fiscal rule would be something like the following:
if your economy grows by 6 percent, you must have a budget surplus of at least 3 percent. If your economy shrinks by 3 percent, you can have deficits as large as 6 percent of GDP.
Sedlacek sees mainstream economics as reducing everything to self-love and calculus. Economics has evolved into Bernard Mandeville’s system of thought. It is time that questions of ethics were once again debated and egoism moderated. We need to learn to control our dreams.
We also need to get away from the false notion that the more mathematical a given problem or answer is, the more real, exact or better it is. Math is “pure tautology.” It leaves out the soul, love and values. Human behavior is often badly predictable. Scientists too often forget the assumptions and qualifications of their arguments, if they ever recognized them. “Rationality is nothing more than hardened emotion… Our language is nothing other than ‘lingual rounding off’ of subjective emotions to the closest term available.”
Sedlacek’s exploration of the roots of economics and its basis in myth is, to my knowledge, unparalleled. He provides a better picture than any author I know of just how the norms built into mainstream economics got there. Yet, the subtitle of his book implies his tour de force will continue from Gilgamesh all the way to Wall Street. Instead, it is more like from Gilgamesh to Keynes. His only mention of Wall Street is in a parenthetical expression. In discussing the importance now placed on economists, Sedlacek notes:
They are expected to perform interpretations of reality (as if capricious Olympus has been replace by capricious Wall Street), give prophetic services (macroeconomic forecasts), reshape reality (mitigate the impact of the crisis, speed up growth) and, in the long run, provide leadership on the way to the promised land.
Even if it is like complaining that Van Gogh didn’t also paint Edward Hopper’s Nighthawks, I still wish Sedlacek would have lived up to his title. Inside Job, for example, pointed to the failure of academic economists to disclose their funding sources and to how the corrupting influence of those conflicts of interest helped bring down the economy. For example, the film cites a paper written by Columbia University economist and former Fed Gov. Frederic Mishkink providing a rosy forecast on Iceland’s banks.
Former head of President Bush’s Council of Economic Advisers Glenn Hubbard is also aggressively confronted making $250,000 a year as a board member of MetLife and being on the board of Capmark, a major commercial mortgage lender during the bubble, which went bankrupt in 2009. More importantly was Alan Greenspan’s refusal to regulate derivatives based on his belief in free markets. Many academics appear to share an ideological fixation with free markets and lack of regulation, as well as the notion that disclosing conflicts of interest — or better yet, avoiding them — doesn’t appear to be a duty they subscribe to. It would have been great to see Sedlacek delving into these issues or delving into alternatives to greed, such as conspicuous conservation — or competition to do good.
Capital Offense: How Washington’s Wise Men Turned America’s Future Over to Wall Street, by Michael Hirsh did a good job of examining the failure of mainstream economics as did a number of other books I listed in my review of that volume. Even better, as a book by a journalist focused on how mainstream economic theory went astray, is How Markets Fail: The Logic of Economic Calamities by John Cassidy. Still, Sedlacek has done an outstanding job of tracing the path of mainstream economics through its development, originating in ancient mythology and I found it a great read.
Watch a talk by Sedlacek.