Economics of Good and Evil This page intentionally left blank Economics of Good and Evil The Quest for Economic Meaning from Gilgamesh to Wall Street Tomas Sedlacek 1 1 Oxford University Press, Inc., publishes works that further Oxford University’s objective of excellence in research, scholarship, and education. Oxford New York Auckland Cape Town Dar es Salaam Hong Kong Karachi Kuala Lumpur Madrid Melbourne Mexico City Nairobi New Delhi Shanghai Taipei Toronto With offi ces in Argentina Austria Brazil Chile Czech Republic France Greece Guatemala Hungary Italy Japan Poland Portugal Singapore South Korea Switzerland Thailand Turkey Ukraine Vietnam Copyright © 2011 Tomas Sedlacek. Published by Oxford University Press, Inc. 198 Madison Avenue, New York, New York 10016 www.oup.com Oxford is a registered trademark of Oxford University Press All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior permission of Oxford University Press. Library of Congress Cataloging-in-Publication Data Sedlacek, Tomas, 1977– [Ekonomie dobra a zla. English] Economics of good and evil : the quest for economic meaning from Gilgamesh to Wall Street / Tomas Sedlacek. p. cm. Includes bibliographical references and index. ISBN 978-0-19-976720-5 (cloth : alk. paper) 1. Economics—Philosophy. 2. Economics—Moral and ethical aspects. 3. Good and evil. 4. Civilization—History. 5. Literature and morals. I. Title. HB72.S36513 2011 174—dc22 2010030271 978-0-19-976720-5 (cloth) Editor of the Czech original: Jirˇí Nádoba, Co-editors: Martin Pospíšil, Lukáš Tóth Translation: Douglas Arellanes Illustrations (inside): Milan Starý First published in Czech as Ekonomie dobra a zla, 2009, by 65. pole Publishing, Konevova 121, Praha 3, Czech Republic. 9 8 7 6 5 4 3 2 1 Printed in the United States of America on acid-free paper This book was translated into English with the kind support of C ˇ SOB a.s., a member of KBC Group. To my young son Chris, who I feel understands more than I ever will, as perhaps I also did long ago. Anyway, may you one day write a better book. Know then thyself, presume not God to scan The proper study of mankind is man. Placed on this isthmus of a middle state, A being darkly wise, and rudely great: With too much knowledge for the sceptic side, With too much weakness for the stoic’s pride, He hangs between; in doubt to act, or rest; In doubt to deem himself a God, or beast; In doubt his mind and body to prefer; Born but to die, and reas’ning but to err; Alike in ignorance, his reason such, Whether he thinks too little, or too much; Chaos of thought and passion, all confus’d; Still by himself, abus’d or disabus’d; Created half to rise and half to fall; Great lord of all things, yet a prey to all, Sole judge of truth, in endless error hurl’d; The glory, jest and riddle of the world. Alexander Pope, The Riddle of the World vii Contents Foreword by Václav Havel ix Acknowledgments xi Introduction: The Story of Economics: From Poetry to Science 3 PART I : ANCIENT ECONOMICS AND BEYOND 17 1 The Epic of Gilgamesh: On Effectiveness, Immortality, and the Economics of Friendship 19 2 The Old Testament: Earthliness and Goodness 45 3 Ancient Greece 93 4 Christianity: Spirituality in the Material World 131 5 Descartes the Mechanic 171 6 Bernard Mandeville’s Beehive of Vice 183 7 Adam Smith, Blacksmith of Economics 193 PART II : BLASPHEMOUS THOUGHTS 213 8 Need for Greed: The History of Want 215 9 Progress, New Adam, and Sabbath Economics 231 10 The Axis of Good and Evil and the Bibles of Economics 251 11 The History of the Invisible Hand of the Market and Homo Economicus 259 viii Contents 12 The History of Animal Spirits: The Dream Never Sleeps 275 13 Metamathematics 285 14 Masters of Truth: Science, Myths, and Faith 299 Conclusion: Where the Wild Things Are 319 Bibliography 325 Index 341 ix Foreword Václav Havel I had the opportunity to read Tomas Sedlacek’s book before it was pub- lished in the Czech Republic in 2009 under the same title, and it was obvious that it was an unconventional view on a scientifi c discipline that—as the general belief has it—is exceptionally dull. Of course I was taken with the book, and I was curious about the kind of interest it would provoke in other readers. To the surprise of both the author and publisher, it immediately drew so much attention in the Czech Republic that it became a bestseller within a few weeks, and both experts and the general public were talking about it. By coincidence, Tomas Sedlacek was at that time also a member of the Czech government’s National Economic Council, which, in its behavior as well as its views on long-term goals, stood in sharp contrast to the quarrelsome political environment, which usually doesn’t think further than the next election. Instead of self-confi dent and self-centered answers, the author humbly asks fundamental questions: What is economics? What is its meaning? Where does this new religion, as it is sometimes called, come from? What are its possibilities and its limitations and borders, if there are any? Why are we so dependent on permanent growing of growth and growth of growing of growth? Where did the idea of progress come from, and where is it leading us? Why are so many economic debates accompanied by obsession and fanaticism? All of this must occur to a thoughtful person, but only rarely do the answers come from economists themselves. The majority of our political parties act with a narrow materialistic focus when, in their programs, they present the economy and fi nance fi rst; only then, somewhere at the end, do we fi nd culture as something pasted on or as a libation for a couple of madmen. Whether they are on the right or left, most of them—consciously or unconsciously—accept and spread the Marxist thesis of the economic base and the spiritual superstructure. It may all be related to how economics as a scientifi c discipline frequently tends to be mistaken for mere accounting. But what good is accounting when much of what jointly shapes our lives is diffi cult to calculate or is completely incalculable? I wonder what such an economist-accountant [...]... aware of this crucial role and take a broader social responsibility THE ECONOMICS OF GOOD AND EVIL All of economics is, in the end, economics of good and evil It is the telling of stories by people of people to people Even the most sophisticated mathematical model is, de facto, a story, a parable, our effort to (rationally) grasp the world around us I will try to show that to this day that story, told... role of feelings, the term “progress,” and the natural state, or the topic of the comprehensive division of labor connected with the creation of the first cities This is the first feeble attempt to understand the epic from an economic standpoint.6 First, though, let’s briefly summarize the story line of the Epic of Gilgamesh (we will develop it in greater detail shortly) Gilgamesh, the ruler of the city of. .. man’s economic understanding (Descartes, Mandeville, Smith, Hume, Mill, et al.) Our goal is to tell the story of economics In other words, we seek to chart the development of the economic ethos We ask questions that come before any economic thinking can begin— both philosophically and, to a degree, historically The area here lies at the very borders of economics and often beyond We may refer to this... refer to this as protoeconomics (to borrow a term from protosociology) or, perhaps more fittingly, meta -economics (to borrow a term from metaphysics).16 In this sense, the study of economics is too narrow and too fragmentary to lead to valid insight, unless complemented and completed by a study of metaeconomics.”17 The more important elements of a culture or field of inquiry such as economics are found... From where did economics get the concept of numbers as the very foundation of the world? Here we want to show how and why economics has become a mechanistically allocative field Why do we believe that mathematics is the best way to describe the world (even the world of social interactions)? Is mathematics at the core of economics, or is it just the icing of the cake, the tip of the iceberg of our field’s... more History of thought helps us to get rid of the intellectual brainwashing of the age, to see through the intellectual fashion of the day, and to take a couple of steps back Studying old stories is not only for the benefit of historians, or for understanding the way our ancestors thought These stories have their own power, even after new stories appear and replace or contradict them 4 We use the term... through economic mechanisms, is essentially about a good life,” a story we have borne from the ancient Greek and Hebrew traditions I will try to show that mathematics, models, equations, and statistics are just the tip of the iceberg of economics; that the biggest part of the iceberg of economic knowledge consists of everything else; and that disputes in economics are rather a battle of stories and various... on the sixth tablet Unless otherwise noted, we will use the Andrew R George translation from 1999 The story plays out on the territory of what is today Iraq 2 The oldest writings come from the Sumerians; writings from other cultures (such as the Indian and Chinese) are from newer dates The Indian Vedas come from the period around 1500 BC, as does the Egyptian Book of the Dead The older parts of the. .. look into the development of the ethos of homo economicus, the birth of economic man.” The History of Animal Spirits: Dreams Never Sleep Here we will examine the other side of human beings the unpredictable, often arational and archetypal Our animal spirits (something of a counterpart to rationality) are influenced by the archetype of the hero and our concept of what is good Metamathematics From where... 36 18 To paraphrase a key question that the Czech theologician Tomáš Halik asks, see Stromu zbývá nadeje [There is hope] ˇ 19 Polanyi, Personal Knowledge, 171 Introduction 9 Let us now attempt to examine the beginnings of economic belief, the genesis of these ideas and their influence on economics TO ALL THE COLORS OF ECONOMICS I argue that mainstream economists have forsaken too many colors of economics . Economics of Good and Evil This page intentionally left blank Economics of Good and Evil The Quest for Economic Meaning from Gilgamesh to Wall Street Tomas Sedlacek 1 1 Oxford. The History of Want 215 9 Progress, New Adam, and Sabbath Economics 231 10 The Axis of Good and Evil and the Bibles of Economics 251 11 The History of the Invisible Hand of the Market and. responsibility. THE ECONOMICS OF GOOD AND EVIL All of economics is, in the end, economics of good and evil. It is the telling of stories by people of people to people. Even the most sophisticated mathematical