Meaningful economics
Human beings mean. We just do. Human beings contemplate the importance or significance of everything, be it a person or a place, an action or a consequence, a possession or an idea, a relationship or our well-being, an experience or our connection to something greater than ourselves. If it can be some kind of thing, we value it, inevitably and instinctively. Human life is imbued with meaning, and our conduct is guided by values and purpose. Economics is no different. It’s steeped in meaning.
Meaningful economics? The question is whether economic science is as much about purpose and human values as it is about describing and predicting the “what is” of economic events. Is economics in fact full of meaning? And what do meaning and value and purpose have to do with traditional talk about economics?
If there is something that almost all economists agree on, it’s that economics is about cost-benefit analysis, not moral human conduct. But why? Why must we separate economics and ethics such that never the twain shall meet? Both are about adjusting our actions to fit with everyone else’s in the everyday business of life. Economics and ethics, I contend, are two sides of the same coin, and, moreover, we can study both sides at the same time.
Since the late 1960s and the 1970s, economists have posed the fundamental question in the study of economics as a problem: “Economics,” they say, “is the study of how society manages its scarce resources,” or “how to arrange our scarce resources to satisfy as many of our wants as possible,” or “how agents choose to allocate scarce resources and how those choices affect society.”
In 1932, the British economist Lionel Robbins shifted the focus of economics from the study of wealth or economic welfare to examining how individuals make choices under conditions of scarcity. But the great Scottish moral philosopher Adam Smith posits a different axiom in The Wealth of Nations: “the certain propensity in human nature . . . to truck, barter, and exchange one thing for another.” It is from this other self-evident starting point that he expounds upon the nature and causes of wealth of nations. Trade makes specialization possible, and together they are the cause of a “universal opulence” that “extends” to and of a “general plenty” that “diffuses” through all ranks of people.
Perhaps the human mind is the foundation for the study of economics.
What’s at stake from adopting Robbins’s axiom as opposed to Smith’s in economic science? For Robbins, the exchange of things is “subsidiary to the main fact of scarcity.” The exchange relationship between two people is “a technical incident;” it derives from its connection with scarcity.
Perhaps the human mind is the foundation for the study of economics. But must it be? Perhaps there is something else going on behind the rudiments of scarcity. Perhaps that something is the human mind. Perhaps the human mind is the foundation for the study of economics.
A meaningful economics would be about understanding human action in its origin rather than exclusively in its outcome. As a complement to the study of economic consequences, a meaningful economics would explain the roots of conduct, and not merely its economic effects, by going to the human capacity for moral sentiments that prompt human beings to act.
If there is something that almost everyone agrees on about the modern age, it’s that commerce is built on self-interest, if you’re being generous, or selfishness or greed, if you’re not. The credit or blame for the observation is almost universally attributed to Adam Smith in one of the most famous passages in economics:
“It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.”
But the evidence is not there to support such a reading, or emendation, of “self-interest,” neither in Smith’s most famous passage specifically nor in The Wealth of Nations more generally. Smith says people act in “their own interest,” not their own self-interest. The difference means that the wealth of nations is not built on a disregard for others as we pursue our own interest or advantage, which is what self-interest meant in the eighteenth century and still means now.
In the very first sentence of his first great book, Smith famously sets the tone for The Theory of Moral Sentiments, saying:
“How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.”
There is no exception for economics, even when, or just because, we receive something in return when we truck, barter, and exchange. If economic science is about human conduct, then it is as much about purposes and human values as it is about incentives.
Featured image by CHUTTERSNAP on Unsplash.