The Fruits of Civilization (62) The Value of Economics

The Value of Economics

A cynic is a man who knows the price of everything and the value of nothing. ~ Oscar Wilde

Philosophers have long known that assigning value is a fraught enterprise. Economists never figured out how to incorporate value into their models. Instead, conventional economics all comes down to price. This biases perspective, renders wrong conclusions, and limits relevance.

The conclusion that individuals acting independently for their own advantage will produce the greatest aggregate of wealth depends on a variety of unreal assumptions. ~ John Maynard Keynes

Things which do not come with a price attached have been generally ignored by economists. If unpaid work was included in American GDP, its value would ascend by over 25%, and a very different picture of the economy would be drawn. The same may be said of all economies.

There have been attempts to incorporate externalities, such as pollution and other social costs, into economic models. These have been nothing more than academic exercises without consequence, as capitalism runs solely on things to which a price tag can be attached.

Turning externalities into markets, such as pollution control, have never worked well, if at all. Pinning price on something by dint of government mandate makes its market cynical: priced, but without a proper value to society.

Conventional economists axiomatically assume that price is an apt mechanism for allocating resources, forgetting altogether that there is no right to resources beyond the violence needed to enforce a claim of private property. In essence, capitalism runs on the principle of “might makes right,” which is an abrogation of morality, not its embrace.

Even nudging people to think about their choices in economic terms erodes moral conscience: they become less generous, trusting, and trustworthy. The pecuniary perspective is inherently immoral: a disease of the mind.

Economists ignore a more subtle point about price as a metric for resource allocation: money has a diminishing marginal value. The more you have, the less value an extra dollar has. Whatever joy and comfort that winners in the capitalist game reap are far outweighed by the suffering that the vast mass of humanity endures. In every economy, even the richest, the bottom 2/3rds of the population is under the continual duress of economic stress. Economic inequality is social inequity.

There are economic aspects of life which economics have not captured, let alone what is really of value in life. Economics is not a dismal science for what conveys, but for what it leaves behind.

We have forgotten that the economy is a tool to serve the needs of society and not the reverse. The ultimate purpose of the economy is to create prosperity with stability. ~ Anglo French financier and tycoon James Goldsmith