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?
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.
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.Continues . . .
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