Economics Isn’t

Name the man and the denomination of the US currency.

Name the man, and the denomination of the US currency on which he is portrayed.  (Scroll to bottom for answer.)

Economics has long been called ‘the dismal science.’  I question whether it is truly a science.  That’s not a knock on economics, but on science.  Science often takes on a fundamentalist approach, one which assumes that reality – and therefore Truth – must be universal, it must be valid at all times, and to all observers.

When we consider science from that viewpoint, we can immediately see some problems.  For instance, the truly (irony intended) important things in life are only sometimes true, and only to some observers.  Such inconsistent things – family, education, public policy, biology, and yes, economics as well – are major topics of this blog, and strongly suggest limitations to the scientific method.

My area of research in organic behavior frequently pulls from economic models.  That isn’t surprising when we consider that human investors are driven to solve the same problems that challenge plants and other animals:  how to invest resources and maximize the rate of return.  The problem is that humans face additional concerns, concerns that present challenges to economic approaches.

In fact, I suggest that economics isn’t.

The word ‘economics’ comes from the Greek  οἶκος (oikos, ‘house,’ from which we also get ecology) and νόμος (nomos, ‘rule’), which taken together mean the management of the home.  It does not mean the management of the marketplace.  We recently considered how home, market, and democracy define very different educational goals.  Here I wish to expand that consideration.

When business speaks of economics, they are referring to cold hard cash,1)Today we think of ‘cold hard cash’ as paper money, but that is a modern retooling.  ‘Cash’ is from the French caisse, a strong box, and ‘cold’ and ‘hard’ refer to metal.  So ‘cold hard cash’ refers to precious metals, preferably gold. which creates a philosophical crisis as we actually look at how people behave.  What good homemaker ‘manages the home’ by only looking at the budget?2)Which, by the way, largely means ‘the purse strings’:  the word ‘budget’ is related to the word bag, or purse.  What parent only looks at, or even first looks at, financial cost and monetary return?  Well-raised children definitely create a profit, but most of that accrues to the grandchildren and to the community as a whole.  Such an external distribution of profit flies in the face of best business practices.

Granted, corporations make charitable donations, and lawyers are even mandated to accept pro bono cases, but the financial sharp carefully calculates those efforts to increase the bottom line.  Face it: when the idealist pursues quiet, faceless change, she is an admirable person, but a poor business woman.

Which is exactly the problem.  How do we explain ‘economic’ decisions about family and life that fly in the face of good business practices?

Continued below

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I propose that there are at least three non-fungible axes in the management of the home, and of life.  In addition to money, there are esthetic concerns, and salvational concerns.  Let me be quite clear, I am not advocating either at this point, I am merely looking at how people invest/divest their money and time, in ways that largely escape economic analysis.

As noted, the first economic axis is the bio-financial, the biological and monetary.  These are the realm of traditional economics, the study of the competition to acquire and invest resources.  Animals and human finances readily share concepts and analytical approaches:  mathematical, statistical, and game theoretical.

The second, the salvational axis, is an attempt to reach some definition of Paradise.  People such as Augustine of Hippo, Thomas à Beckett, and Katherine Drexel gave up their fortunes in pursuit of Paradise, and many people even give their lives in the same pursuit, from religious martyrs to radical terrorists.  Further confusing the picture, there are a wide range of valuations of Paradise:  there are some such as the aforementioned who give everything for salvation; there are those who simply tithe; and finally, there are religious adherents who believe salvation to be free and universal.  Such varied valuations, from the willingness to sacrifice one’s life down to universal access, completely escape economic analysis.  Economics is feckless here, because we can’t determine who gets to Paradise, we can’t even prove it exists, and no two people assign the same value to it.  And of course, if we ignore the embarrassing behavior of many religious institutions, we are taught that no amount of money can buy one’s way in.

The third, the esthetic axis, is the attempt to derive enjoyment from life.  The economist can assign a value to such things based on what the average person will pay, but the norms and trends go well wide of anything resembling ‘knowledge’ or universality.  For instance, I myself have traveled to France many times, in part for the cuisine; but I have friends who find French cooking largely inedible.  For some, fine art is a waste of canvas, wood, and paint, while others will give fortunes – and occasionally their lives – for a work of art.  Finally, I have known people who spend a great deal of money traveling abroad to listen to opera, while I know other people who would pay good money to avoid opera, giving the same item both a positive and negative value, completely independent market factors.  And in all of these, once consumed the experience has absolutely no monetary value, nor obvious return on investment.  So while the economist can calculate production costs and average prices for these things, there is certainly nothing resembling universality, there is no ‘science’ here.

And the esthetic axis and salvational axes are equally non-fungible.  We have missionaries and hermits and zealots, people who deny themselves enjoyment and esthetics (inesthetic ascetics, as it were) in the belief that they are serving God and working toward an after-life.3)Note, there are also those who pursue asceticism for spiritual awareness; this is traditionally grouped with salvational concerns, but I would argue that the pursuit of knowledge, wisdom, and awareness can be completely esthetic.  Again, while the economist can assign a cost to such activities, he can assign no profit, nor anything approaching the sorts of values and consistencies we see in the marketplace.

The point to all of this is, economic calculations may have some value to the producer, but they are of absolutely no use to the purveyor, they are useless for making intensely personal decisions about how to manage the home, and how to live one’s life.  So all observers do not see the same Truth.

Then there is education.  There are some who see education as vehicle for profit; there are some who see it as a way to reach heaven; and yet others see it largely as a servant of esthetics, a tool to living more happily, more powerfully, and more enjoyably.  The title of the blog suggests to which camp I am partial, but that does not negate the other two.  But to the point of this essay and to other topics in this blog, economics is useless for determining the value of education.  Even the monetary value:  real education produces thinkers, thinkers produce innovation, and the value of innovation that does not yet exist is, obviously, incalculable.

My point is that strict monetary policy, traditional economics – and therefore science – can’t help much with managing our homes and our lives, nor our futures.  The best science can do is provide an historical, post facto analysis:  this is what item or activity x was worth to people previously, even recently, and this is the profit that strategy y produced.

Which leads to another problem: economics and science are only of value when they are applied, when they can help us build the future; unless of course we view them as ‘pure’ pursuits, as many scientists insist they are.  But in such a case economics and science become an esthetic activity, at which point their value becomes incalculable, and they become uneconomical and anti-scientific.

These considerations are becoming acute.  We live in vast wealth, and those who wish to collapse all three dimensions into a univariate view of life, who would map all three axes onto one axis alone – those for whom money is not just gold, but also salvation and entertainment, and therefore the complete meaning of home, family, and the existence of us all – they use the profits from their dysfunction to gain access to all aspects of life, including government and education.

It is critical that those of us who have a healthier, more holistic view of human existence, neutralize the ruthless, greedy, and unscrupulous.

We need to isolate them in their counting-houses with their gold, so that the rest of us may pursue our lives, and manage our homes, unmolested.

10 Grand 600

Salman P. Chase graces the $10K bill, and is one of several non-presidents who are portrayed on US currency.  He served as Secretary of the Treasury and Chief Justice of the Supreme Court; as Secretary, Chase introduced the first federal paper money.  Chase Manhattan is named for him, although he had no affiliation with the bank.

$10,000 bill courtesy of Wikimedia.

Footnotes   [ + ]

1. Today we think of ‘cold hard cash’ as paper money, but that is a modern retooling.  ‘Cash’ is from the French caisse, a strong box, and ‘cold’ and ‘hard’ refer to metal.  So ‘cold hard cash’ refers to precious metals, preferably gold.
2. Which, by the way, largely means ‘the purse strings’:  the word ‘budget’ is related to the word bag, or purse.
3. Note, there are also those who pursue asceticism for spiritual awareness; this is traditionally grouped with salvational concerns, but I would argue that the pursuit of knowledge, wisdom, and awareness can be completely esthetic.

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