What is the principle question economics seeks to answer? That question to be answered has changed over time as the world economy has evolved. It is morphing even now.
I recently finished James Halteman and Edd Noell's excellent new book Reckoning with Markets: Moral Reflection in Economics. I like the following historical summary they offered as they contemplate the future.
… Again a great deal of subjectivity is involved in entertaining this topic [asking the right question], but it is no secret that the most fundamental questions in economics change from one era to another. As discussed in Chapter 2, in the ancient world the level of production was thought to be limited to the subsistence level in the long run. This belief was sustained by the perpetual struggle for survival that followed civilization into the seventeenth century. With stagnant technology and fairly constant resource and population base, the economic concerns centered on how society would be organized to see that distribution was fair within some notion of what constituted the good and virtuous life. The fact that the Greek philosophers, Jesus, and the medieval scholastics raised strong moral questions about the acquisition of wealth made perfect sense in their contexts. The key questions were distribution related, and the answers were found in moral philosophy and social ethics. Because the welfare of the soul and one’s eternal destination were of more concern than ones present economic state, the most important question of the time was how material desires could be kept from corrupting the soul.
When production technology slowly began to change and surplus beyond subsistence became a reality, social analysts started turning their attention to production and its possibilities. Adam Smith used the term universal opulence to characterize the kind of social order he envisioned. But such a social order needed a new method of organizing production, a new morality, and a new theory of distribution. The key questions were production based, and technology had to be encouraged. Adam Smith’s achievements in the Theory of Moral Sentiments and The Wealth of Nations are best seen in light of this need to view social organization in a fresh way so that new concerns could be addressed. However, when production exceeded basic human needs, egalitarian ethics seemed less important and distribution issues were slowly integrated into production theory. Distribution was now dependent more on one’s productivity than on some entitlement based on social standing or the need for subsistence. The questions had changed, and economic thinking changed with them. It has evolved from the vision of Smith through the classical economists to the neoclassical theory of today. Along the way, the focus changed from the satisfaction of life’s needs to the fulfillment of wants, from steady-state existence to progress and growth.
During the last half of the twentieth century, a new challenge was emerging for economists. The increased speed of technological change brought unprecedented economic growth, but it also created disturbing gaps in the distribution of income with the developed societies and between the developed world and the less developed world. Talk of a new economy began to surface where ideas rather than physical capital drove progress and where increasing returns to production replace the standard diminishing returns constraint. In such a world, the problem of production is thought to be manageable and the economic questions are changed again. While it may never be true that the problem of production is solved, it is possible that it will cease to be the dominant concern in the provisioning of human needs and wants. Distribution and its connection to unemployment, energy availability, and environmental issues may well become center stage or at least join production in importance. Congestion in time and space will make allocation issues more controversial. These issues require increased interaction with the moral and ethical disciplines and other social sciences. For example, if parents can pick the gene combinations of their children at a very low cost, how will the preferred combinations be allocated or can everyone be granted their optimal choice? Of course the choice could be left to the free market where the demand for the preferred genes would increase the gene price lowering its net return. Such a system would require considerable change in how people think about income distribution.
If technology advances as projected and competes with the human mind as an efficient producer, then output will be less a function of human input and the marginal productivity theory of distribution will needed to be reworked or discarded. The impact of technological advance on economic theory could be enormous as it alters the key questions that economists entertain. Because of these trends, narrowly focused rational choice methodology may be inadequate to deal with the coming realities. It is important now to recognize that a considerable amount of recent work has been done to broaden the scope of economics and make it more relevant to the world as people observe it. Outcomes that do not conform to rational choice analysis are becoming increasingly apparent and interesting.
So far the analysis of rational choice has focused on issues raised in past decades. These methodological discussions have continued since the logical positivism debates of the early twentieth century. The resistance to interdisciplinary research is rapidly breaking down. By engaging in experimental practices and exploring neurobiology, psychology, sociology, the efficiency of law, cooperation, and the nature of trust behavior, economists have opened the door to moral issues that were not thought to be relevant to positive analysis. … (143-145)
I love this book. Halteman and Noell are making the case that homo economicus, the idea of human beings as nothing more than rational utility calculating machines, while possibly useful in some applications, is woefully inadequate for addressing emerging problems. Other anthropological and moral issues are becoming increasingly important. Amen.
But one of the problems not addressed in this book is how much of the theological academy is stuck in the first paragraph of this excerpt. They are intellectually living in the era of inalterable productivity, in a zero-sum world where "the issue" is how to equitably distribute a fixed pile of goods across society. They live in a world where God has created a world of abundance and where there would be no scarcity if everyone shared, as though goods drop to earth like manna from heaven, only needing to be equitably distributed.
In fact, God created the world with an abundance of natural resources but those resources have to be transformed into usable goods. Apart from air and sunlight, virtually everything we use requires human beings to transform matter, energy, and data from less useful forms to more useful forms ... in other words, production. Without production there is a near absolute scarcity.
Economists, by and large, are big on abundance. They want to know how goods become more abundant. In fact, if there is anything that betrays the idea of economics as a purely value-free enterprise, it is the widely held value that the purpose of an economy is to make goods and wealth more abundant.
Yet theologians routinely caricature economics as being about scarcity. It's a bit like saying oncology is the science of dying from cancer. Certainly onocoligists study cancer but their objective is health, not death. Likewise, economists begin with self-evident reality of scarcity and seek understanding about how to create abundance. The theological blindness to the revolution in production and simplistic appeals to abundance will not create the dialog we need.
It continues to amaze me how so many conservative Christians who continue to reject evolution, an old earth, and abandonment of patriarchal gender roles, find proto-capitalism in Jesus’s teaching. Equally amazing to me are how many progressive Christians, who seemingly embrace every scientific qualification of the Bible, readily embrace redefined social roles, and see a progressive movement of God in the world, become the equivalent of six-day creationists when it comes to economic issues, morally reasoning as though the economic revolution of the past two centuries either did not occur or should not have occurred, the fixed-sum world of ancient order being the desired state of affairs.
Haltemann and Noell have done a great job and setting the stage more fruitful discussion. I hope to come back to this book at the Kruse Kronicle in the future.