Economics – good or evil?

Tomas Sedlacek’s Economics of Good and Evil: The quest for economic meaning from Gilgamesh to Wall Street looked like a good way to make the transition from work to vacation, so it was my first poolside read on holiday. It had been well reviewed by Samuel Brittan in the Financial Times. I’m also a sucker for anything to do with Gilgamesh, from the epic itself to the brilliant Australian novel Gilgamesh by Joan London.

Back to Sedlacek, whose author picture shows him to be rather stylish for an economist, and was an adviser to Vaclav Havel. The first part of the book traces certain economic concepts from ancient times to Adam Smith. Thus for example, he attributes the first macroeconomic forecast to Joseph’s dream about the seven years of plenty and famine. He sees Plato’s theory of forms as the philosophical origin of the concept of an economic model as the hidden true structure underlying reality. He discusses the differences between the stoics and the hedonists in Ancient Greece, and traces the utilitarianism of economics to hedonism. Utility is judged by results, and is judged from the point of view of the individual. By contast, the stoics judged morality by concordance with rules. Adam Smith, Sedlacek argues, was much more in favour of the latter view, emphasising the correctness of the act itself.

In this, the author joins other recent reclamations of Adam Smith from the free market fundamentalists, including Emma Rothschild’s Economic Sentiments and Nicholas Phillipson’s new biography of Smith, Adam Smith: An Enlightened Life. This part makes the book a good complement to Sandmo’s Economics Evolving, which covers the period from Adam Smith onwards.

The second half of Economics of Good and Evil turns to a discussion of the themes emerging from the historical account (a structure that actually makes for repetitiveness). Sedlacek argues that the perpetual debate in economics is a philosophical one – are humans good or evil at heart? Schools of economics differ over whether we can rely on the uncoordinated free will of many individuals to lead to good outcomes, or rather do we need for coordination from above. Does free activity lead to good or evil results?

He also asks how did economics change from being an area of moral philosophy to a mathematized allocative science, and traces this to Mandeville’s Fable of the Bees. Sedlacek writes: “I would like … to express my reservations against the belief among economists that mathematics is able to contain and describe the whole real world.” (p288). I don’t think that most economists believe this, certainly not now if they ever did (see The Soulful Science). However, it is a common trope. Sedlacek, like Richard Bronk In The Romantic Economist, would like economists to include history and philosophy and even poetry in their approach to the economy. At one level this is unarguable – economists certainly ought to know history, including the intellectual history of their own discipline, and other relevant disciplines such as the other social and human sciences. A widely read and broadly educated economist will be a better economist. However, I would argue that if economics were to ditch its own methodology for the methodology of history or philosophy, it would no longer be economics.

The author also has a rant against the focus on GDP and growth, a contemporary theme that readers of my own The Economics of Enough will know I believe to be misplaced. Who could disagree with this statement: “If we pursue happiness and happiness alone, we will never be happy. Happiness seems to come as a byproduct of doing something good, not as an end in itself.” (p222) But that is an entirely separate issue from the question about the proper indicators of economic policy and progress.

There are some terrific moments in this book. I like the author’s classification of crises into either the self-fulfilling or the self-averting – and as he points out, we never know which kind we have. I loved his description of money as a form of energy that can travel in time. “Because money is an abstract construct, it is not bounded by matter, space or even time. All you need is a word, possibly written, or even a verbal promise. ‘Start it, I’ll pay.'” (p85).

You have to like a book that quotes Leonard Cohen and refers to The Matrix. Its big theme is that economics needs to rediscover poetry and myth. The book reads like the author’s own quest to be a good man although an economist (echoes here of Deirdre McCloskey’s How to be Human Though an Economist). Economics is definitely changing, iron grip of mainstream is weakening but I hope we don’t end up throwing out the rigour of conventional economics, which is the danger of this swing of the philosophical pendulum. Sedlacek rightly points out that we teach economics oddly, teaching only the one approach and with no history of thought to put that into context. Economics of Good and Evil was a best seller in the Czech republic almost certainly because there’s a big audience now for the idea that economics, the philosopher king, is wrong. It’s an interesting book, but like many attacks on economics gives no hint of the reality of an exciting scientific renaissance in many areas of the subject, and widespread querying of the old and narrow orthodoxy.

Economics of Good and Evil: The Quest for Economic Meaning from Gilgamesh to Wall Street

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2 thoughts on “Economics – good or evil?

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