The Rise of the Science of Economics and the Idea of Gain

by Mordecai Plaut

There are two kinds of Jews with Western antecedents ("Ashkenazim") living in Israel: Yerushalmis (Jerusalemites) and everyone else.Yerushalmis have been in Israel even well before the advent of political Zionism in Europe. Those who are now properly considered the scions of that stock maintain a mode of life that is strongly reminiscent of the style and substance of previous times despite the assimilation of modern technology and, in some cases, even modern knowledge.

There are two kinds of Yerushalmis: those who study Torah intensely and those who don't. (Comparable groups in Western society divide themselves into those who study and those who work.) Although they tend not to subsist on charity, those who do not study nevertheless are no more involved in any regular work than in regular study. They typically dabble at a number of pursuits. Among their activities, those that supply their sustenance are not necessarily the most prominent ones, often being shunted aside in favor of a more satisfying task such as performing an act of kindness for someone. Even when they work regularly, they rarely exert themselves at their work. When they study, however, they often display remarkable achievement. Why does this ability not carry over to their work? Why the lack of industry? And, most maddening to a Western sensitivity, why, at least, do the not worry about making a living?

If we would understand at least something of the Yerushalmi approach to life, we must understand more about our Western one. In particular, we must consider the following question: Why is there no science of economics before the eighteenth century? The situation in economics is not to be confused with that in other sciences such as physics and chemistry. Although those disciplines did not exist in anything like their present forms in earlier times, yet they still had antecedents stretching at least to the ancient Greeks. In those areas, the questions were not new, just the type of answers which people began to give. In the case of economics even the questions themselves were new: What is the true value of a commodity? How are the means of production in a society "best" organized and managed? What controls and ensures that everyone gets the resources he needs and uses for his body?

To be sure, societies and individuals had always been "practicing" economics. In all ages peoples' needs were provided through one mechanism or another. In most times there was even a surplus left over for such nonessentials as public works, monuments and wars. However, this aspect of life, the production and distribution of material goods, was never considerd a subject for serious thought or discussion. Goods were always used by theoreticians, but they were seldom mentioned. People usually had what they needed, but those who thought, thought about other issues.

Though it was not completely unprecedented, The Wealth of Nations, published by Adam Smith in 1776, is generally reckoned as the beginning of economics as a science quite aside from the particulars of its approach. It is well known that there were many profound changes in science and industrial art over the last two to three hundred years. Few of these changes are as profound as that which is indicated by the founding and practice of the science of economics. Few changes have worked so fundamental a reorientation of our picture of the world as the introduction of the idea of gain on a broad scale. An indication of the fundamental nature of the change is the fact that we rarely realize that the issue of gain is an issue anymore. We assume it to be a constant of human nature. Evidence of this assumption is the fact that we are surprised that economics had its origin in the eighteenth century and not with the earlier great thinkers. We wonder why they had not already considered these questions. Finally, few changes have been more narrowminded, shortsighted, and just plain wrong than this introduction of this idea of gain as the common motivator of humanity.

It is often said that modern man is excessively concerned with things for his flesh. It is a fundamental fact about man that he has a body as well as a spirit. This body has always had material needs and has always used material things. Nonetheless, the modern approach has found a way to be innovative in this area too. Materialism figures prominently in the modern intellectual space, but it also defines it. Not only does materialism permeate the space of the being of modern man, it actually defines the bounds of that being. This is new. Naturally, man has material needs and these must be given their want and due. This side of man has no less Divine potential than his spirit. However, in order for all of man's potential to be actualized, each of his parts must be allowed--but restricted to--its natural function, using its own natural tools and abilities, and in its own natural area.

Before discussing the content of the science of economics, some further remarks are in order on the fact of its foundation. We reiterate that economics was founded in the eighteenth century and has virtually no history in any form prior to then. While the physical sciences date back to the Greeks under the title of Natural Philosophy, no one before the time of Adam Smith had thought it proper to think about the production and distribution of the needs and wants of the body. It was maintained that if one were to think, he should not think about the body. If man is to use that part of him which transcends his body and in general sets him apart from the rest of the physical world, he should not use it merely to enable him to better satisfy his physical wants.

Properly focused, all of a person's powers should be directed at approaching and getting closer to G-d. It has been constantly recognized that the higher faculties of man should be directed to higher ends, and that the body should serve the higher parts of man. A body is not an end in itself. However, worse than simply considering bodily gratification as an end is an inversion of the proper hierarchy to have the mind serve the body. To practice a science of economics is to do precisely this: to exert the mind to an understanding whose sole end is the benefit of the body.

This is undoubtedly the reason that thoughtful men of early times did not think about economic issues. Though the mention of morality in our jaded time usually suggests problems of a cruder sort, the project of a science of economics is one that can easily be called morally perverse. To apply the mind in an intense and disciplined manner to the contemplation of the mundane instead of the sublime is not an innocuous act. Civilized man had always considered his body an integral part of himself (at times even a dominant part of himself), but never, in all recorded history until about two hundred and fifty years ago, did he consider the provision of his bodily needs to be an object of intellectual study. Thus the questions of economics never arose in his thinking. The explanation of this lapse, which seems to us so surprising, is that he always considered the copulation of the powers of the mind and the wants of the body to be an unnatural act.

An important prerequisite to the practice of economics as a science is the isolation of its object of study. Although privately an economist may be interested in the higher parts of man, he cannot let that interfere with the practice of his profession. In the study of economics it is essential that the material part of man be conceived as a whole, but distinct from the rest of him. Such an abstraction is necessary in most modern sciences, especially the more quantitative ones. Only through laboratory-controlled experiments and theoretically abstracted objects have they been able to develop to their current state. Mechanics deals with idealized point-masses, pneumatics with ideal gases and so on. Economics is no different.

However, while there is nothing important lost in abstracting mass from a billiard ball, if one takes the body from the rest of man his most important parts are left behind. Furthermore, the very idea of applying the power of abstraction to man allows for a damaging and debilitating fragmentation in thinking about him. Man is body and soul; to think of one without the other is already a mistake. In the final analysis, it is probably impossible for man to fully abstract any one part of himself. Nonetheless, the conceit that he has done so can cause some unusual results.

Perhaps the most salient feature of the physical world is that it is obviously limited. (If it is not limited, it is only in nonobvious ways. Our perception is certainly limited.) There are definite bounds to what our bodies need, and there are bounds even to what we can want if we are to benefit physically. When Aristotle Onassis died, his fortune was estimated at $450 million, and he was far from the richest man of modern times. The richest nowadays have fortunes in the tens of billions of dollars. Those are fantastic sums. It is probably not possible for one man to spend that much money in any way in which he could get direct benefit from all of it. Even if he were to make spending it a full-time occupation, he would not find it an easy task. It would not seem to be an onerous task, but it would be a challenge. What, then, could be the motive for accumulating such vast material wealth? What motive could distinguish between $200 million and $450 million -- and $100 billion? (1)

In the realm of mind and spirit there are no bounds. Knowledge, understanding, concepts, ideas, all have no limits. There is no end to their number and no end to their depth. There is no level of learning which can be characterized categorically as enough or too much. We can, should, and must learn more and more and more. Our need for understanding is minimal, but the more we gain, the better off we are.

The proper approach to the material is to use what we need of it. The proper approach to the spiritual and the intellectual is to gain as much as possible. An approach which aims at unlimited gain is natural, appropriate, and, ultimately, possible when applied to the realm of the mind. The founding of a science of economics brought the problems of the body into the realm of the mind. The result was that the methodology of the mind--a desire for unlimited gain--was introduced into the realm of the body. Not only did economics introduce this idea and make it respectable, it made it the foundation of its system.

The idea of the "invisible hand" as the regulator of economic activity through the marketplace is well known. Less well known, and even more poorly understood aside from economic historians, is the mechanism that Adam Smith articulated as the driving power of the economy, namely, individual self-interest. What is to motivate each individual to produce, is his own economic interests. The economic resultant of these separate pursuits will be the production of the full complement of goods needed and wanted by everyone when they are all regulated on a grand scale by the invisible hand of the market. Smith writes: "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from regard of their self interest. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our necessities, but of their advantages." (2) Nor, we might emphasize, of their necessities, but of their advantages. It is not just the introduction of self-interest, but of the definition of self-interest in terms of advantage and gain that marks this passage. "The great chariot of society . . . now found [that] transactions, transactions, transactions, and gain, gain, gain provided a new and startingly powerful motive force." (3)

There are two coordinate mechanisms here: the free market to regulate production and individual gain to motivate people to produce. Though neither originated two hundred years ago, both were assigned new roles and vastly expanded areas of application and power. Neither is universal in humanity or in human society.

Free markets, in the formal sense of a centralized area in which suppliers and consumers meet for the purpose of exchange, have long been present in human society. However, their purpose and function was not as an organizing institution for economic activity. As Karl Polanyi notes: "Market economy is an institutional structure which, as we all too easily forget, has been present at no time except our own." (4) The sole purpose of markets, up until our time, was to serve as a mechanism for the distribution of goods from producers to consumers. They had only minor effects on what was produced and how much. Smith, and many others following him, wrongly projected the existence of market-controlled economies into the past, and, as Polanyi puts it, "no misreading of the past ever proved more prophetic of the future." (5)

In their new role as the regulating mechanism for the production and distribution of all material goods, the markets were to be based on the idea of individual gain. The efficient regulation that the market provided was the emergent result of the private pursuit of gain of all the participants. Individuals were to be motivated, not by the compulsion to fill their needs nor by a desire to use things. Rather they were to be driven by the effectively unbounded possibility of gain. Investors were to use their capital in the way most advantageous to them, regardless of their need for that advantage or even the possibility of its use. Gain was to be pursued, material wealth to be accumulated, with the voracious energy derived from the compulsion shared by all bodily creatures to fill their needs. The end was merely greater and greater gain. This goal, natural and appropriate in the realm of the spirit, is expropriated for the realm of the body as the fuel and lubricant of the economy. People were to be driven by the fear or the reality of material want toward no end but gain, gain, gain.

It is important that the participants in a self-regulating market which is to function effectively be motivated by gain to provide the extreme flexibility such a system demands of the factors of production. Everyone must be, more or less, willing to do "anything for a buck." If there is undersupply in one area, all resources must be willing to switch there for the increased profit that will result. One who makes pins, for example, must be willing to shift his production to needles if that would increase his profit, even if his needs are already fully satisfied from his work in pins. If the lure of higher profit is not sufficient to move him from his position of sufficiency, there will be a chronic undersupply of needles. This would be failure of the system. If it occurred on a broad scale it could easily cause widespread dislocations and serious problems.

To put it in a general way, all factors of production must remain within the market in order for it to function properly. If the pin maker is unwilling to shift his production from pins once they supply him with what he needs, then he has, in effect, removed his capital from the market. It is no longer "for sale." Clearly the market cannot regulate productions if the productive means are withheld from it. If the participants are driven mainly by their needs for material goods or even mainly by a desire to use material wealth, they will reach the limits of these motives and withdraw their land, labor, or capital from the control of the market. Only the motive of gain can ensure that factors will not be withdrawn, because it has no limits.

It is important to realize the novelty of this mechanism of a self-regulating market and the ubiquitous pursuit of economic gain.

Earlier economic systems in the West, and existing systems of more primitive peoples who live in isolation, do not show markets in any prominence and hardly use them at all as the method of organizing production and distribution.

More common mechanisms were reciprocity, redistribution, and householding. Exchange was often made on the expectation of reciprocity. One supplied another's need for fish knowing that his needs for agricultural produce eventually would be forthcoming. No accounting of equality of supply is made. What is important to both sides is just equality of satisfaction. Also, the compulsion to exchange is not just the ultimate economic reciprocity, but the immediate fulfillment of social, political, and religious obligation.

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