The Beginning of Economic Wisdom

The Beginning of Economic Wisdom

Mini Teaser: Two primers on economics reveal a lingering philosophical divide in the intellectual imagination of our time.

by Author(s): Michael Novak
 

Since they affect to work scientifically, economists usually insist that the vast majority of the propositions in their writings report what virtually all other economists would report; principles and facts rule, and virtually all concur on "the basics." Experience shows, however, that reading John Kenneth Galbraith and Milton Friedman are two qualitatively different experiences, both in regard to the principles involved and to the facts observed. Robert Heilbroner and Israel Kirzner, again, seem to live and move in utterly different economic universes.

Still, it must be granted that this particular affectation adds a certain civility to conversations among economists. They do not treat each other as badly, say, as analytic philosophers still treat continental phenomenologists or metaphysicians who lived before 1920. Furthermore, economists who strongly disagree seldom engage in direct confrontation; they rather tend to act as if proximity might end in mutual exasperation. Sometimes we non-economists positively burn to know just how Y would answer the arguments of X--especially those dramatic arguments that have the sound of aces slapping on the table.

This avoidance of direct confrontation forces the rest of us to line up the arguments as best we can and work out a philosophy of economics for ourselves. To my mind, sound economics is best characterized as one of the three interdependent institutions that constitute a free society. Furthermore, I incline to divide economic questions, like Caesar's Gaul, into three realms.

As for the first trinity, the three systems that constitute a free society are a free polity, a culture of liberty and a free economy. The aim of the first is to free humans from tyranny and torture; of the second, to enable humans to seek truth, beauty, justice and community by liberating them from their own ignorance and self-destructive appetites; and of the third, to enable humans to contend with scarcity and, by initiative and invention, slowly to free themselves from poverty. The dependence of the economy on the rule of law and good institutions of government is clear enough. So, perhaps, is its dependence on certain cultural and moral habits, especially those of work, initiative, social trust and honesty.

As to the second trinity, the three realms into which questions about economics tend to fall are these: (1) Perennial questions of all human economic life such as scarcity and constraints of other kinds, supply and demand, prices and risk; (2) questions involving comparisons between or among economic systems; and (3) questions regarding particular institutions within economic systems. The latter includes corporations, inventions and individual initiatives (within capitalism), national planning boards (within socialism), and laws and customs affecting land ownership and relations within and among families (within feudalism).

The very notion of economics as a discipline abstracted from politics is relatively new. Until, say, the 13th century, kingdoms were on the whole small and fragile polities. Cities were walled, and the wealthy (and titled) lived in fortified castles out of fear of marauding strangers. Law and order were in short supply, and troops to enforce both in the countryside were seldom in evidence. Such international order as there was in Europe sprang from the papacy and the international ecclesiastical courts, sometimes in concert, sometimes in conflict, with shifting imperial powers (first Roman, then Byzantine, then Gallic, then Germanic). To establish political and civil order over an illiterate, multicultural, passion-bound and fractious maelstrom of displaced and insecure tribes occupied every available political energy. From the time of Plato's Republic and Aristotle's Politics, through Aquinas on The Rule of Princes, Dante's De Monarchia and Three Political Letters and Machiavelli's The Prince, intellectual energies were riveted on the uncertainties and vagaries of politics. Thought about economics was pushed to the margins.

For centuries, too, economies had been almost wholly agricultural, at the mercy of the weather and roaming armies. Biblical words seemed to sum up economic reality: "There shall be seven fat years, and seven lean", and there wasn't much humans could do about it. By 1776, however, new inventions were changing industry and new settlements across the Atlantic had opened up virgin possibilities. In these circumstances it fell to Adam Smith to ask, more systematically than had anyone before, What is the cause of the wealth of nations?

The century following Smith brought economic reasoning to the forefront of human consciousness. This reasoning, however resolutely adversarial toward traditional religious ways of seeing things it was, in one respect remained rooted in a Judeo-Christian metaphysics. As John Stuart Mill pointed out, Asiatic consciousness was through-and-through communal. Swarms of coolies organized from on high had built the Great Wall of China. Outside the regions shaped by centuries of Jewish and Christian teaching about the self and its individual destiny, most peoples did not think of themselves as individuals, but rather as members of tribes, clans and local communities. Against that pattern, modern Western economics chose a decidedly individualistic analysis of economic action, with terms like action, self and individual playing a decisive role in it. This emphasis it owed to its religious heritage more than to any other source.

Indeed, even highly secular persons in the West experienced discomfort with this new "economic" point of view. By the mid-19th century, socialists and communists, having accused liberal economists of false consciousness, were busy erecting a system of economic thought based upon collectives, classes, the national state and ultimately the "Socialist International." The international community was to be constituted by a new, utopian state of consciousness and a new form of social organization from which the egotistical self would be banished. Beginning with the wife of John Stuart Mill and then the great Mill himself, a surprising number of economically-trained minds were captivated by this vision and its supposed moral superiority to bourgeois individualism. No longer orthodox Jews or Christians, such persons had no intellectual ground on which to base the metaphysical priority that biblical faith had heretofore assigned the individual. By 1850, the secularization of Western consciousness, at least in Europe, had deprived even highly trained minds of their confidence that the individual human being was paramount in the drama of history.

The stage was thus set for the great tragic ideologies of the 20th century. Two myths about the moral superiority of the collective to the individual swept the world: first, the myth of a collectivist economics propounded by Marx, Engels and then Lenin, Stalin and their successors; and, second, the fascist myth of collectivist politics propounded by Mussolini and then Hitler. Both took as their enemy liberal individualism, and also the orthodox Judaism and Christianity that nourished its roots, which they worked to supplant with new mythic and pagan liturgies of their own devising.

The underlying myth of socialism (even the Nazis called themselves National Socialists) intoxicated many Western intellectuals. In 1937, John Dewey's Liberalism and Social Action placed liberals in an entirely new historical narrative. In its origins, liberalism opposed the concentration of power in the State, but drawing from interpretations of Hegel and the currents of the Progressive era, Dewey urged liberals to see the State as an agent of great good. Many liberals henceforth depicted the captains of industry as "economic royalists" and the State as the agent of progressive social change. Thus was the way cleared for what came to be called "social democracy", a version of the socialist narrative of history digestible for Western bourgeois sensibilities. The essence of the matter is that for a multitude of intellectuals the accepted narrative line became: State=good and bourgeois (business, individual)=on the wrong side of history. Knowing in advance the direction of history, one had only to discover which elements strengthened the State or weakened bourgeois centers of resistance in any new circumstance in order to know which side to support.

Both Thomas Sowell and Charles E. Lindblom were indoctrinated early in the democratic socialist narrative of history. But while the former rebelled against that narrative early and decisively, the latter stayed with it longer and, on the evidence of his latest book, while he has made much progress, his emancipation from it is still a work in progress. Both men have recently written primers in economics. This gives us an unusual window on the various turnings of minds and temperaments in the wake of the Cold War and the collapse--if we may slightly mangle a title of Isaac Deutscher--of socialism armed. As anyone who has ever attempted to write a basic or introductory text knows, it is an endeavor that forces the writer persistently back toward first principles--toward philosophy. What are the basics of economics? What is the market? What does the term "enterprise" add?

Sowell has elsewhere described the experience of awakening from the democratic socialist dream as the end to a period of intellectual wishfulness. He discovered a reality principle and came to loathe the illusions in which he had been encouraged to live. In A Personal Odyssey (2000), Sowell described those illusions as a childish evasion of hard realities, limits and constraints. In The Vision of the Anointed (1995), Sowell could not wholly repress his anger at those who, while nourishing illusions that destroy, legislate how their lessers should live.

Essay Types: Book Review