John Locke

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Schumacher: the limitations of economics to reflect reality

“I’ll post it in a few days.” A few days! I am having trouble getting back to my blog as I am being subsumed under a wave of a zillion things to do as I wrap up my job pastoring a fantastic church in rural Pennsylvania, at the same time that I have another zillion things to do preparing for a move to SE Asia.

In any event, here is E.F. Schumacher’s quote, written in 1973, regarding the short-sightedness of modern economic activity: (Well, I think this is the one I had in mind 10 days ago!)

“Economics, moreover, deals with goods in accordance with their market value and not in accordance with what they really are. The same rules and criteria are applied to primary goods, which man has to win from nature, and secondary goods, which presuppose the existence of primary goods and are manufactured from them. All goods are treated the same, because the point of view is fundamentally that of profit-making, and this means that it is inherent in the methodology of economics to ignore man’s dependence on the natural world. (Note from Todd: you can monetize wood, but when there’s no forest left, money does not equal trees anymore).

Another way of stating this is to say that economics deals with goods and services from the point of view of the market, where willing buyer meets willing seller. The buyer is essentially a bargain hunter; he is not concerned with the origin of the goods or the conditions under which they have been produced. His sole concern is to obtain the best value for his money.

The market therefore represents only the surface of society and its significance relates to the momentary situation as it exists there and then. There is no probing into the depths of things, into the natural or social facts that lie behind them. In a sense, the market is the institutionalization of individualism and non-responsibility. Neither buyer nor seller is responsible for anything but himself.

….economists have felt entitled… to treat the entire framework within which economic activity takes place as a given, that is that is to say, as permanent and indestructible. It was no part of their job and, indeed, of their professional competence, to study the effects of economic activity upon the framework. Since there is now increasing evidence of environmental deterioration, particularly in living nature, the entire outlook and methodology of economics is being called into question. The study of economics is too narrow and too fragmentary to lead to valid insights…”

E.F. Schumacher, Small is Beautiful: Economics as if People Mattered (Harper & Row, 1973, pp. 46, 54).

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The irony of modern economics

One of the most amazing ironies of modern Western civilization is, to me, that a few hundred years ago, some economists convinced all Christendom that self-centeredness and greed were actually virtues rather than vices, and would benefit society! The idea, of course, was that if I pursue making my business succeed with all speed, (in order to make more money for myself), my competitors will be doing the same to keep up, and everyone will benefit by better products, more efficient processes, and an increased economic activity in society all around.

One of the things that could be observed was that the traditional Christian virtues were a bit better entrenched in society back then (John Wesley said work as hard as you can for your business to succeed, as long as it doesn’t hurt your neighbor’s business!), but more importantly, this self-centeredness as economic driving force is neither biblical nor good, in the long run, for the world. The theory is that enlightened self-interest will serve as a brake from anyone carrying their selfishness too far… as chopping down too many trees would cut into the sustainability of their bottom-line. However, history has shown that in a world of transnational corporations, this doesn’t actually work.

The modern economy runs almost exclusively on short-term profits, and short term profits erase all notions of long-term environmental sustainability. Humanity’s footprint in the natural world was a lot smaller 300 years ago. If a farmer farmed his land the way transnational corporations “manage” our environment, he’d be looking at a desert within five years. Good farmers know there is much about nurture rather than production that needs to be taken into account, if you want that land to make food for your grandchildren’s generation. In our world today, it is, most often, the people at the bottom of the economic ladder, the poorest of the poor, who bear the brunt of the environmental damage, because they have the least power and voice in the society to make a big deal out of it and apply pressure.

Schumacher makes this point about the dysfunction of classic Western economics in ‘Small is Beautiful:  Economics as if People Mattered.’ I will post his quote in a few days.