Economics as an Unorchestrated Orchestrator
by Tomas Sedlacek
Van der Leeuw Lecture
Dear audience,
I would like to present to your critical examination the following thesis in which
I am trying to carry on a work of some thinkers who have carried their work
before me. I want to focus on the ideology, mythology and ethical teaching of a
field which presents itself as an analytical, value-free and technical discipline,
completely outside of good and evil.
ECONOMICS AS NORMATIVE BACKWARDS
For a long time, there has been a quest to introduce ethics into economics, as if
economics was void of ethics, as if, somewhere in the center of economic a black
hole existed, in the middle of the (coldly-rational) technical analysis, that needed to
be filled. This was the quest for new paradigm – a hope for a sort of a “Messiah
theory” of sorts that would make the theory whole, make it human, give it a heart or a
soul, because the heart and the soul are missing where only the mechanics
remained.
1
2
But, economics does have ethics, a very strong ethics, ethics of its own. Economics
is normative backwards, that is to say, you are not to insert your values upon it, but in
exchange, it will insert its values upon you. You will not guide it, it will guide you. In
other words, just get used to the implicit fact, that you will not be in control over it, it
will be in control over you.
Needless to say, each system of ideology has ethics of its own. I would like to use
the word “ethics” as a set of generally accepted rules according which those under
the influence of particular ideology practically protect abstract values that are held in
high importance for a given ideology. So there was nazi ethics and racist ethics to
protect the higher values of that ideology (higher race) as there was communist
ethics. Just because a system has a set of ethics, it does not mean that this ethic is
moral or justifiable when judged from outside of the embeddings of ideology.
3
So the task is more complicated, this “vacuum” is full of values and beliefs, full of
normativeness, so to speak. The case is not that values need to be merely inserted
into economics, into some vacuum-waiting-to-be-filled. There is no such thing as an
ethical vacuum. “Economic ethics” - this new moral school - already exists, is very
strong and we feel uncomfortable with some of its implications. This moral school,
that I will here call “economic ethics”, is implicit, in-build and unexamined. If there is a
task to replace some of the ethics – or even to talk about it, the old values need to be
conscious, they must be realized and fully exposed. The greatest trick that the
economy ever pulled was to convince the world the it had no ethics, that it was
neutral, scientific, value-free, mathematical, objective, unquestionable.
DECONSTRUCTING ECONOMICS
I want to deconstruct economic imagery, beliefs, stories and myths which we employ
for the whole field to be possible in its current form. The second task is to focus on
the method of how it happened, that economics silently turned into source of ethics,
how it became sort of a religious and an ethical beacon. For economics is not outside
of ethics, outside of good and evil – as it often likes to present itself. On the contrary,
economics creates ethics - ethics of its own, it is the epicenter. That economics is in
fact an ethical discourse fought with very hard, mechanical weapons against their
ideological enemies from other fields who are equipped with soft-arguments only.
Such a battle would look like an army of supersonic jet-planes fighting against a
crowd equipped with sticks and stones. Instead of potatoes and stones, we can now
throw nuclear bombs on our opponents - people who advocate different ethics,
different responsibilities, different behavior for businesses (or politicians or anybody
in any situation and field of life).
We have a new school of ethics: economic ethics.
THE ETHICS OF ECONOMICS
Whether we like it or not, economics has ethics of its own, even without us knowing
it, we are buying it, behaving according it, without a confession, without a cognitive
reflection. And that is the ultimate home run of any ideology - not to look like ideology
at all. To appear so natural and self-evident as if it were outside the realm of itself.
Mainstream economics does not enter the debate whether human beings are egoistic
or not, it states it, or assumes it. But this, as I will try to show later – is of a
surprisingly small difference. How such a worldview was chosen is not entirely clear,
but as of today, almost all textbooks state, that human beings are rational utilitymaximizing egoists. Economic textbooks and teachers (often without knowing)
actively promote such world-view: it is not only that egoism is tolerable or legitimate
life-stance or opinion, it states that such a view is not merely an option or an opinion,
philosophy or moral school, it states that this is the only sensible (rational) way, how
to look at a human being. Any other behavior is not rational. The assumption that
human beings are egoists is one of the cornerstones of economic ethics.
HOW ECONOMISTS BELIEVED THEIR OWN MYTHS
One can immediately object that economics does not claim that human beings are
egoists, but that it assumes it. There is nothing wrong with assumptions per se, the
as-if logic is a classical way how science tries to trick reality in order to understand it.
It tries to discover how reality is by the method of as-if.
Homo economicus is a key belief without which most of microeconomics would not
make any sense. This is a self-created image which we economists have made,
created, artificially constructed – which is fine. The problem is, we do not take it as a
model, we take it as a truth.
Here is how the story goes. In the morning a couple of economists get into the lab
and say, what shall we do today? Let's make a model. OK, how? Well, let’s assume
that human beings are so and so (rational, they know their utility, they try to maximize
it, they care of their self-interest etc.). Assumptions are not important here (we could
have also assumed that human beings like yellow socks on their left leg), what is of
importance is the myth component. In the morning these are technical assumptions
of a model. So far so good, assumptions can be as absurd as possible, as Milton
Friedman so proudly proclaims. So we know these assumptions are not real,
representative or (least of which) true (if they were, we would not have to assume
them in the first place). Then they run some mathematics, etc. etc. until the result
yields something interesting. And even, let's say for a while, realistic.
But then something goes wrong. The economists walk to a tavern later on in the
evening and, while they sit with their friends philosophers, anthropologists,
psychologists and theologists. They say: you know what we discovered today? That
human beings are rational, utility maximizers who care for their own interest only.
What happened here? Instead of sticking with our morning rhetorics, that such an
approach with these absurd technical assumptions could be useful, we don't say we
assumed human beings are summarisable by homo economicus, but we believe they
are summarisable by homo economicus. In other words, as we walked to the tavern,
we started to believe our own assumptions. Even more starkly, we started to believe
our own myths.
There is a huge difference between saying “let's assume human beings are rational”
and saying “human beings are rational”. Just like between claiming “lets
imagine/assume I have one million dollars” and “I have one million dollars”.
This comes in an interesting moment, when we believe that we live in “postideological” times (free from ideologies). While instead, nothing can be further from
the truth as Slavoj Žižek likes to point out. We live in the most ideological times, we
are not even aware of our own ideologies. Ideologies that we have ourselves crafted,
created and moulded.
The problem of course is that we are too close to our beliefs, too close to our own
myths and fantasies. So close, we no longer see them as beliefs. Anybody who is too
close to his or her beliefs becomes dangerous. We use the word fanaticism when
there is no distance applied from the possibility of our beliefs. All belief systems, are,
in the end, possibility systems. We cannot swap belief for reality.
4
Why are we so careful, as we should be, of brain washing our children at schools by
religious or political ideologies, but are not worried by an economic one? Should not
all be thought as a possibility system?
OTHER EXAMPLES
For example, we are taught and trained not to think about the consequences of our
deeds, we are taught that only reasonable behavior of a firm is profit maximization –
anything else is harmful. Also notice here how limited understanding of rationality we
have in economics: by rational we mean profit maximizing.
The key moral teaching of economics is that the role and meaning of human life is to
maximize one's own utility. As noted by Jacques Lacan, the moral imperative of our
age has become: you must enjoy!
Other moral teaching of economics is that it is rational only to have regard for one
own self and show kindness only to those that show kindness to you. In other words,
invest only where some return is probable. The invisible hand of the markets teaches
us at large, do not care about the impacts of your (business) actions on others
(invisible hand of the market will take care of it) (Brewer Magazine). Rational
behavior means profit maximizing behavior (as Joseph Fogl points out) and vice
versa – in fact these two terms are freely interchangeable. Any other behavior is not
rational. Any other behavior is harmful.
Another strong philosophical belief of mainstream economics is that the world can be
described and approximated by mathematical models and so can human beings as
well as an interaction among them. We are taught only to respect values that have
economic sense. In other words, only respect values that you can gain from or that
are marketable.
This is the message: Outside of the economy, outside of the intent of a rational
calculation, everything is an externality. Outside of economical, nothing makes
sense. Other than economic motives are not reliable. As for society and humanities,
outside of economics, nothing is real science. Outside of economics, there really are
no values, no values that we can count with or count on, higher values are an
illusion, values of the non-economic have no (real) value (how long did it take
economists to realize that there is a value in culture (we now call it culture capital),
value in societies (social capital) and even emotions (emotional capital) – mark, by
the way, how we need the word capital to give these (otherwise “nonsensual”
notions) some economic meaning.
A large part of economic argumentation is based on the value of freedom. Freedom
is one of economics biggest values. This is to say that not all values of economics
may be foul and contra-intuitive, that is not at all the point of this argumentation. The
point is that economics is a value system, an ethical school. A value system that
happens to value freedom more than other social values.
Economics is a field which suppresses all it cannot count. We all know that there are
many values in life – some of them have a number (a price) and some do not. No
matter how good or precise our mathematics will be, the results will always be
leaping on one leg, because some values will never enter the equation. It is fine to
calculate, it is wrong to give the resulting numbers the fetishized power which they
possess in today's argumentation. It is like asking for a bill when we know the exact
prices of all the side-dishes, when the price of the main course is unknown. Any
resulting price will only be an approximation, a fuzzy number, although it may appear
precise.
TO BELIEVE LIKE AN ECONOMYST
The key thing that you can find in textbooks of economics is to teach the novices to
think like an economist. This sounds very noble, but immediately a question comes to
one's mind: OK, but which one? To think like Smith? Or like Veblen? Or like Marx?
Or Weber? Or were Marx and Weber proper economists?) Or like Keynes or… which
one? Surely, if you would put all of these into one room the least of what they would
all agree would be what Samuelson claims to be the common denominator.
Surely Paul Samuelson did not mean to say that he wants to teach us to think like
Paul Samuelson, doesn't he? But exactly this would be the honest thing for him to
write and promise in the textbook. Or, to be more accurate, what Paul Samuelson is
saying is: I want to teach you to believe like I believe, to think like I think. Unintuitive
things are made intuitive – that is called economic education.
The basic trick of Economics (as first noted by Robert Nelson) is to spend 8 pages on
some small petite mathematical proof and then swallow a huge assumption, without
any proof or discourse. For example that human beings are free and rational. But in
order to prove that, one would need to go through thousand pages of philosophical,
theological and psychological texts (even if it would be possible to prove such a
thing. But the result looks like God-given divine QED truth. And the effect is: that we
believe it. Without a doubt. We strain out a gnat but swallow a camel.
5
BELIEVER OF LAST RESORT
Good example of this can be seen in the activities of the European Central Bank
which became in 2011 a creditor of last resort. Credo in latin means to believe, so
one way of reading this new role is Believer of Last Resort. In a situation when
nobody believes (in the markets, currency etc.) the Believer of Last resort must
believe in the stead of the markets. And that belief needs to be ostentativ and even
conspicuous. Žižek frequently talks about machines that "pray in our stead" and
movies that "laugh in our stead" so also these institutions "believe in our stead".
6
7
This “herding for hope” around a symbol of institutionalized belief (although or exactly
because the belief no longer functions outside its symbol) is quite common. In final
stages of attack, the inhabitants of the city (specially the helpless ones) ran to
churches for protection. This was done despite the fact that their faith/God was not
able to protect the inhabitants against the attackers. But when the outer defense
walls are breached, there is no time to change beliefs; the only hope is to cling to
them.
8
In the situation of Faith/Credit Crunch we are not left churchless.
MODELS OF MODELS
The matter of interest is not so much the models themselves, but models of models.
In other words, what are the models modeled after?
For no other reasons than historic and fashionable, models in economics are
modeled after physics. Intuitively, economics could be much closer to models of
biology, or political studies or moral philosophy. Nevertheless, the model for
economic models was physics – a method that fits well the study of dead objects.
And so, applying the view – or method – developed for science of studying the realm
of dead, no wonder that we cannot see the spirit. That is why it was so easy to
smuggle all those values, that unnoticed ethics (moral and immoral) inside.
BASIC TRIANGEL OF ECONOMIC MYTHOLOGY
The field of economics maintains an appearance of positivist value-free science, but
take away the numbers, and there is something mythical and normative going on.
Take the basic TriAngel of economic debate-space: this is embarked by tree main
gravity points: Invisible hand of the Market, Homo Economics and Animal Spirit. This
combination explains everything (and thus, in Popperian sense, nothing). Also, very
carefully mark, that all three are very mythical (they do carry mythical content, have
mythical power, and they have mythical names). Let us here today examine only the
most famous: the invisible hand of the markets.
INVISIBLE HAND OF THE MARKETS AND TEENAGE MUTANT NINJA TURTLES
My son gladly watches Teenage Mutant Ninja Turtles (TMNT). As one of the voices
says in the accompanying video, if you took all the words in English, shook them very
well and randomly took out four words you would, very likely, come up with
something that makes more sense than: Teenage. Mutant. Ninja. Turtles. It is just
that we have gotten so accustomed with the sound of the words and their meaning
that we can readily accept them without much thought. But the first time we heard it,
we thought what?
Now the case with economics is much different, of course: The Invisible. Hand. Of
the Market. This makes even less sense than TMNT, if one thinks about it. And,
above all, a very mysterious concept if you think of it. Only we got used to the usage
of it, so it sounds scientific, but if you merely think of the words and imagery of which
it is made of... Of course, Adam Smith, the originator of the term, used it in passing
only as he used other invisible hands, such as that of Jupiter and Government. So
we can even think of the invisible hand of love, hate, advertisements or anything that
is a bit abstract.
9
However it is exactly this belief, which is fundamental to economics. It is a belief, for
the only way we can ask about the invisible hand of the market is: Do you believe in
the invisible hand of the market? And the only way to answer is yes, I do believe
(and here are my reasons) or no, I do not believe (and here are my reasons). It is a
belief, at the heart of economics.
10
And one more thing. Note how absolute the answer must be. There is no in some
cases yes, in others no or the invisible (hand of the market) is mostly functional, i.e. it
does the coordination well from 68%, the rest must be a visible hand. And, while we
are at it, why is the market hand invisible (what is so invisible about it?) and not the
government hand for example? The market hand might be unintended (in doing
good) while the good of the government is intended, but, surely, this says nothing of
the invisibility.
In other words the answer seems to be that of a religious nature. When people speak
of it they say it either with pride or shame, honor or disgust. Not neutrally as we
should expect from a non-value laden field such as economics tries to be.
And while we are at the topic. I may surprise you, I actually do believe in the invisible
hand – but not of the markets, but of the whole society. The society has selfregulating mechanisms (that is why we are here), but not markets alone. Sometimes
the art-part of the society rescues its politics, sometimes politics rescues the
economy or financial sector (as happened in 2008 and whenever the economy does
not desire enough and the government has to stimulate its demand-libido by
consuming in its stead). When our civilization becomes too corporate, a generation of
hippies is born, when it is too hip we can expect a punk revival. When we start
believing too much in the power of bureaucracy, Kafka will be just finishing his
Castle. As a whole, we can regulate each other, and – with the help of others – we
can regulate our own self.
But how this wonderful self-regulating mechanism was privatized and fetishized to
markets only is a mystery, upon which the next generations of anthropologists,
religious experts and theologians will be writing volumes about and have many
learned debates. Why do we not talk about the invisible hand of the artists? Or of
politics? Or history?
And, one final comment, doesn't this market dialectics of thesis, anti-thesis and
synthesis (demand, offer, price) remind one of Hegel's Zeitgeist? And were not these
properties also privatized by the invisible hand of the markets? Aren't the markets the
component that is to lead us further on through the future of history? What are the
markets saying? (Mark that we have a priesthood of analysts to interpret the partiallyrational- partially-emotional movements of the markets who at the same time become
its spoke person.) What are their sentiments, their moods? How are the markets
feeling today? What animal(!) shall we today choose to represent them? Will it be the
irrational, hard to tame and dangerous bull (as depicted in bronze and larger than life
form in Wall Street)? Or today it will be a dove, fleeting white symbol of a peace?
What do the markets want (from us)? In what way have they become a measure of
us, our moods, outlooks, optimism and pessimism? What can we do for the markets?
What are we getting in exchange? Where are they leading us?
Thus markets became the unorchestrated orchestrator. They lead us into the future,
they coordinate us, they connect us. You are not allowed to orchestrate them, they
will orchestrate you. Laissez-paszes, laissez-faire, let it be (“let it be, oh let it be!”), let
it work. Don't ask questions, no need to meddle! Economists know, we understand.
We economists see the future, we know what is good (for the markets) and what is
good for the markets is good for everybody.
Until the prayer of the blind leading the blind abruptly changed in 2008 when it
became: please meddle! Please work it out (in our stead)! Please do something, we
have no idea what is happening.
But the situation is worse. When the blind are leading the blind, at least the blind
knows that he or she is blind – and acts accordingly. We live in a world where the
blind leading the blind thinks that he or she sees.
Markets are not divine, as we believed some time ago. It’s all human. Human, all too
human as Nietzsche would put it. There are no invisible hands, there are just our
hands – and they can do can do evil and can do good.
Dear ladies and gentleman, our mythical deity, the omniscient, extra-rational and
omnipresent markets, the god of our globalized world, our divine unorchestrated
orchestrator – does not exist.
1 In this, even those who do not believe in positivist economics have bought in the positivist-analytical character
of economics and merely wanted to add a “missing ingredient” (like in the movie Fifth Element) which
would make the whole system work fine.
2 "Europe has conquered the world, and on a scale more vast than any of its wars. The Euro-American way of
life has spread across the whole of the globe, assuming the status of the first planetary culture in human
history. Yet this enormous achievement seems to strike no chord in our emotions. Like the technology on
which it rests, it seems to have no soul." Luigi Zoja, Growth and Guilt: Psychology and the Limits of
Development (New York: Routledge, 1995), p. 3.
3See Nazi Ethics: Perpetrators with a Clear Conscience: “SS members were told that granting human rights to
everyone would amount to the irresponsible promotion of the weak at the expense of the strong. SS-men in
particular were trained to ignore, deny, and overcome their personal feelings if they contradicted the attitudes
… If such feelings threatened to hinder or slow the extermination process, the perpetrators reminded
themselves to whom they should grant their feelings of humanity. As long as they had a chance to express
feelings towards their wives, children, relatives, and others close to them so that they could be good
husbands, caring fathers, and loyal friends, they were able to live double lives as merciless killers and decent
men. … Nazism was sustained by a very strict, almost puritanical, ethical code.”
4This is meant not as ant insult to thosedeeply believing. On the contrary, a deep belief is one that has been
shaken by doubts and other possibilities. To start with, no-one can claim that their faith is strong and doubt
free (perhaps for a moment of spiritual ecstasy, when one feels the belief directly, but this only lasts for a
moment, it is not a modus vivendi of life) and needs no further improvement. All great persons of faith have
expressed their lack thereof, and their doubts (think of St. Paul, Augustine, Aquinas or st. Theresa). This
notion was perhaps best expressed by a Czech theologian Tomas Halik: “Whatever doesn't shake is not
solid”.
5Mathew 23:24
6 While this was happening ECB was building a new building, which the employees bragged was taller
and more impressive than the nearby church-cathedral. The similar role of these two temples could
not have been shown in more obvious manner.
7 The example he uses is that of buddhist prayer wheels, which are moved automatically perpetuated
by water stream and thus prayers are uttered while the believer can devote his or her time to other
things
8One clings to the fetish even though the fetish does not play its role or exactly then the fetish does not play its
role
9For specific examples see Economics of Good and Evil page 199.
10Also mark, that, in a way, we are asking, in an absurd abrevation: “do you believe in the invisible?”