June 24, 2011 5:02 pm

Economics of Good and Evil

Economics of Good and Evil: The Quest for Economic Meaning from Gilgamesh to Wall Street, by Tomas Sedlacek, Oxford University Press, USA, RRP£16.99, 384 pages

It would be a great pity if potential readers of this book were put off by the word “economics” in the title. Many people regard the subject either as dry and technical or, worse, as an abject failure because of the inability of its practitioners to anticipate the recent financial tsunami and prescribe effectively for its aftermath. But Tomas Sedlacek’s Economics of Good and Evil, an unlikely bestseller when it was published in Czech in 2009, is none of these things.

For Sedlacek economics is not – or at least not merely – a science with its roots in the north-western fringes of Enlightenment Europe; it stands, rather, at the heart of every philosophy and religion since the first civilisations arose on the Mesopotamian delta. His book, accordingly, is effectively a critical history of western thought. The author, a prominent Czech commentator who was an adviser to Václav Havel when he was president, uses the attitudes of various cultures towards getting and spending as a thread on which to link his reflections. Moreover, unlike most books with large pretensions, this one is beautifully written and at least for the first two-thirds I could not put it down or turn my mind to anything else.

He starts off with The Epic of Gilgamesh, the oldest known piece of literature, dating from around 2000BC. In the poem Gilgamesh is a demi-god who rules from the city of Uruk in what is now Iraq. After numerous adventures, immortality eludes him. “The end of the story,” writes Sedlacek, “returns to where the epic began – to the song in praise of Uruk’s wall”. He takes this as a defining statement of a static view of human destiny. There is much change and turbulence but no real progress. “Time was cyclical and humanity was expected to make no historical motion.”

The author then turns to the Old Testament. “As opposed to Christianity the concept of an extraterrestial paradise or heaven was not much developed in Hebrew thought.” This chapter is a crucial reminder for those of us who were brought up in the Jewish tradition of ritual, prohibition and painful word-for-word translation of sacred texts. For the author, the important thing is the Jewish welcome for material progress, combined with a very firm view of its limitations. Examples include not only the Sabbath but also ideas such as a “year of rest” every seven years and a Jubilee every 49th year, in which all debts were forgiven and land returned to its original owner. It is a matter of speculation whether the Jubilee was ever instituted in practice; I wish, even so, there had been some discussion of whether there are equivalents in the modern world.

The discussion leads on naturally to Aristotle’s eudaimonia, often translated as “happiness” but in reality a much more sophisticated concept than mere pleasure or the economist’s notion of utility. Aristotelian ideas of the good life stand in contrast to those of Plato, who distrusted a material world that he regarded as in some sense unreal. Plato was also a thorough-going egalitarian – not for the whole population but for the chosen “guardians”. He carried this idea to its logical conclusion by ordaining that the children of guardians should be brought up communally rather than in families.

This tension between the Platonic and Aristotelian views continued in the Christian tradition. While the basic teaching was renunciation in favour of the world to come, there were important nuances. Anyone curious about the difference between Saints Augustine and Thomas Aquinas could do worse than look at Sedlacek’s account. While Augustine wanted to deny all bodily pleasures, “Aquinas turns the pendulum and the material world gets attention and care”. The author even has an illuminating chart showing the varying attitudes to the pursuit of pleasure: Kant is the most censorious while satirist Bernard Mandeville stands at the opposite pole.

When it comes to later centuries Sedlacek, like many other central European authors, disputes the prominence given in western political economy to Adam Smith. (Incidentally, he rightly insists, contrary to most Anglo-Saxon critics, that there is a tension between the espousal of self-interest in The Wealth of Nations and the espousal of benevolence in the same author’s Theory of Moral Sentiments.) He has no difficulty in showing the two basic ideas of the division of labour and the invisible hand were formulated long before. Indeed, some of them go back to the ancient Greek writer, Xenophon.

The author has some difficulty in sorting out the difference between Mandeville’s view that it is pleasure that makes the world go round and that of Smith, who denounced Mandeville as severely as any contemporary prelate. The difference surely is that Mandeville was a proto-Keynesian who saw that if we all saved and never spent economic society would come to an end, while Smith merely wanted to harness self-interest to the common good.

What moral does Sedlacek draw from this long, but necessarily abbreviated, history? Here is where disappointment begins. He has two conclusions. One is the inadequacy of contemporary mechanistic econometric models to interpret the world or to give on their own useful advice. The other is a stricture on the obsession with economic growth. The criticism is not that his conclusions are wrong but that he does little to persuade the reader who does not already agree with him. Sedlacek’s preoccupation with the evils of official debt can make him sound like a publicist for the European Central Bank or the International Monetary Fund. His one practical proposal, that of mandatory budget surpluses for countries whose annual growth exceeds 3 per cent offset by deficits when growth is less, is not a bad one in a European or US context, but would hardly do for a country such as China.

As for the limitations of the current mainstream economic approach, the author, who has advised banks as well as presidents, had a golden opportunity to demonstrate this from recent experience. Instead he is content with an a priori broadside. On a more philosophical plane, I wish he would do a little more to honour the promise of his title and analyse the concepts of good and evil – on which both Thomas Hobbes and David Hume, who figure prominently here, had much to say. Nevertheless, for anyone whose range of interest extends beyond the latest twist in the Greek debt crisis or the possibility of a double-dip recession the book is still a compulsive read, from which we have to draw our own conclusions.

Samuel Brittan is an FT columnist

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