Economics of Good and Evil: For and Against

The Czech version of Tomáš Sedláček’s Economics of Good and Evil was published in 2009. The first edition disappeared from the shelves in just two weeks. In its first year of publication, the book sold more than 30 thousand copies. This made it one of the top-selling titles in the country. Yes, for many months, Sedláček was doing even better than Dan Brown. And now Oxford University Press, one of the world’s premier publishing houses, has published his take on morals and economics in English.

It is easy to see why the book is such a hit with publishers. This is an era in which mainstream economics is increasingly questioned. This summer the Prague Archbishop Dominik Duka even stated that he thinks that “the era of economists is over”.

Enter Sedláček. He boasts the title of “chief macroeconomic strategist” at ČSOB, one of the leading banks in the Czech Republic. He has also been a member of the Czech government’s economic advisory body, NERV. Yet, he certainly does not look like a typical bank analyst. Donning a big red hairdo, looking relaxed, Sedláček does not lose much time on technical language or data when giving his macroeconomic advice. And he often talks about morals.

In fact, many doubt he could be called economist at all, given his education history and professional output. But that’s a point we can save for later.

The book introduces its subject matter as the story of economics. Sedláček asserts that “all 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.” (p. 6). His book, he goes on to say, is about meta-economics; he wants to describe something he terms the “economic ethos” (p. 8).

And so he sets on his journey, highlighting passages from the Epic of Gilgamesh and the Bible which deal with production or with the distribution of resources. He mentions the ancient Greeks, who came up with economics as the science of household management. He then whizzes past Christian and Enlightenment philosophers and Keynes to end the book with musings on the fallibility and infallibility of economists.

The text suffers from the occasional vacuity (“people feel more natural in an unnatural surrounding: the city,” p. 25). Some assertions sound downright silly: Sedláček laments that “there is no economic literature on the Epic of Gilgamesh” despite this “being a text of such great importance” (p. 20). The exclamation “how well the epic would have served Karl Marx, who could have easily used it as a prehistoric example of the exploitation and alienation of the individual from his family and himself” (p. 21) could only come from someone who is unaware of the difference between the common usage of “exploitation” and the process of appropriating surplus value in capitalism, which was Marx’s subject matter.

More worryingly, it is difficult to ascertain the book’s subject matter and line of enquiry. We are simply repeatedly reminded that “economics had become a mathematized and allocative science, full of graphs, equations and tables, with no room for ethics” (p. 183), and that the “construct (mathematical equation, principle, law) according to which the world ‘behaves’ does not rest in the world itself, but rather within us” (p. 301).

If this is supposed to be an overview of the history of economic thought, it cannot compete with the classics in the field, such as Ekelund’s and Herbert’s A History of Economic Theory and Method. Neither does the book give us any anthropological insights. Here, the reader is much better off with the recent Debt: The First 5,000 Years by David Graeber. This history of economic behavior challenges many neoclassical precepts. Mainstream textbooks, for example, portray the emergence of money as physical currency as something that replaced barter, while virtual money emerged much later. Graeber is able to illustrate that this sequencing is wrong. Ancient societies often relied on elaborate records of who owes whom, much like modern banking. One can find parallels to this in other fields of anthropology. People often assume, for example, that language developed when humans started breaking silence by formulating sounds. Yet, as anthropologists remind us, the prehistoric caves were full of inarticulate noises, from which chains of sound signifiers and ultimately language developed. But economics is more prone to spreading misconceptions about human behavior than other social sciences since in its modern version it often confounds thought experiments with empirics.

Yet, anthropology is not Sedláček’s terrain. Nor does he question the ontology of modern economics, which, as many critics point out, is a “social science” actually evacuated of social relations, whose subject matter is the lone individual pre-endowed with skills and preferences. He does not attempt to differentiate between mainstream economics as a semi-ideological complex, and its alternatives. Neither does he distinguish between economics as a simple science of dealing with resources and its variant applications. All he seems to be saying, in so many words, is that “economics” has too much mathematics in it.

The Czech version of the book was to be Sedláček’s PhD thesis. However, it was rejected on the basis of lack of scientific substance. There was some sniggering around Prague about this. Sedláček has not been involved in much academic or professional research. He started his public life fresh out of school, working in the office of the then President Václav Havel. He then spent a few months at Yale University on a short-term fellowship. While he was there, Yale’s student magazine ran an article entitled “Five hot shots in economics,” which included Sedláček. He capitalized on this handsomely. Back in Prague, the local media hyped this up to mean that Yale University considers Sedláček “one of the best young economists in the world.” His celebrity career was assured.

Yet his critics often regard him as not much more than a pretty boy for the government’s reform plans. In that role, he never deviates from the given line: cut spending, privatize pensions, and so on. Others are simply jarred by the little institutional and distributional insights in his comments. And his frequent moralizing is seen as not much more than the mumbo jumbo of a fairground mystagogue.

Sedlacek’s book is not completely without merits. If nothing else, it opens up some critical perspectives on the “over economization” of public life and discourse. Essentially, the book is the antithesis of Freakonomics by Steven Levitt and Stephen Dubner, that wildly popular piece of a few years back. It tried to apply “economic analysis” to almost anything, sometimes fairly annoyingly. Yet, one cannot help the lingering feeling that at the end of the day, more or less the same people who bought Freakonomics will now run to the bookshop to buy Economics of Good and Evil. And proudly display it on the mantelpiece. Alongside Dan Brown.

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Writing Outside the Box

by Cat Contiguglia

It seems when the economy is flush and things are going well, people are quite satisfied to accept charts and graphs as a sufficient explanation for how money ends up in bank accounts. But as the global economy has gone south, “economy” has become something with a very human face: families losing their homes and jobs, hunger, uprisings and protests.

In an appropriate and refreshing response to this situation, Tomáš Sedláček has brought the human back into the equation in his book Economics of Good and Evil. He presents an earnest and well founded set of observations and arguments that seek to remind us that economics is by and for the people. This makes it difficult to simplify into models, but at the same time, makes it a science where the real causes and solutions are not found in locked rooms of ivory towers.

Overall, Sedláček achieves his goal, but only if the reader commits themselves to reading the whole book through. Where Sedláček’s purpose and his product diverge is that his book is often quite dense and sometimes difficult to grasp, particularly through large chunks of the first half where he tends to jump around a lot while trying to build the foundations of his arguments about how economics was a major force before there were really such things as economies.

It is a valid point, but it gets pretty cloudy sometimes, even in the first chapter where the reader is yanked around the Epic of Gilgamesh so Sedláček can highlight instances in the story that illustrate the economics of friendship, but also the idea that civilization exists within the city rather than savage nature, and only after this comes an instance of the invisible hand of the market. It seems disconnected, and the reader might wonder where Sedláček is heading.

But if the reader can hang on through the first few chapters, she is rewarded. As Sedláček guides her through the times of the ancient Hebrews, Ancient Greeks and Christians, what may at first have seemed like disparate points and stories start to form a larger picture. Economics has been a major part of daily human life for a very long time, and over time, some of the thinkers of the first civilizations felt this then-nameless force and struggled and argued over how to explain it. Sedláček convincingly illustrates that it was these discussions about humans and their relationships with each other and the material world that was the bedrock for the science of economics, which most say started in the time of Adam Smith.

Perhaps his most impressive argument, or maybe it just seems that way because of the prominence of Adam Smith in economics classrooms, is that which liberates Smith from the mainstream textbooks that peg him as the guy responsible for the cold idea that the real driver of human action is self interest, and that the world is steered by this unfeeling “invisible hand of the market.”

Quite to the contrary, Sedláček shows, this idea can be connected much more with lesser known Bernard Mandeville and his poem, The Fable of the Bees: or, Private Vices, Publick Benefits. Smith’s own thoughts on the egotistical nature of humans were actually sort of schizophrenic, Sedláček points out, and in reality, Smith only mentioned “invisible hands” three times in his work, and never in the same context. Smith authored The Theory of Moral Sentiments, which rejects the idea that the world is driven by self interest, and emphasizes the importance of human benevolence. After, though, came his more well-known book, Wealth of Nations, which explains for example, a butcher’s contribution to society is made through self interest and his own advantages, rather than any kind of benevolence. The books are in some ways a contradiction, but Smith cannot be boiled down to the one theory of egotism that is so tightly associated with his name, Sedláček argues.

The big treat in the book is the last third. Sedláček lets the conversation slide to a less formal register, and free of having to provide all the evidence he developed in the first part of the book, he talks about the problems with modern economics, and how it takes for granted the roots of this social science.

Sedláček isn’t writing a love letter to economics, but he isn’t lambasting it either. He appreciates the use and even beauty of modern economics and its models and mathematics, but criticizes modern economists for their dependence on such alternate realities that those models are based on. He appeals to economists to take a step back from their technical work to consider the human force in economics.

The blame, he says, doesn’t just lie with economists, but with the rest of the world that has come to expect that economists have crystal balls that can tell the future, and demand that economists tell us what is going to happen next. He argues that this fortune telling role has forced economists to build theories that cannot stand on their own, and that restrict inspiration, which takes place “in the emotive area, not in the rational,” which is then followed up by a secondary process where theories can be accepted or rejected and “hardened” into rational thought.

Both Sedláček’s discussion of the historic conversations regarding human nature and his later analysis of the problems with modern economic thought are interesting not just for their implications for the science of economics. Anyone who has studied political science can empathize that the models required in presenting a theory about war and peace, for example, often clash with the reality of the individual actors and their motivations.

But it is his appeals in the second half of the book, to step back from the rigidity of modern economics to allow for the new ideas and innovations, that can really be applied universally. Though he is speaking about economics which are in crisis, the truth is that all of us could take a page out of this book, and think about how the deadlock in many of the world’s issues, from science to social and political issues, is the result of getting shut into our well formed boxes.

About the author

Juraj Draxler teaches economics and European politics at Anglo-American University, Prague.

Cat Contiguglia is a staff reporter for The Prague Post.

published: 15. 6. 2013