The Worst Sin of Mainstream Economics
promoting greed as the ‘organizing principle’ of a ‘rational’ economy
[This little essay began life as a (very belated) Reply to a Reply from Robin DuRant to another essay of mine (“And the Answer Is”) here in Medium.]
Mainstream economics seeks to explain in rational terms the structure and functioning of the existing economy (the process of producing/acquiring goods/services). In doing so it promotes the ‘rationality’ of that process. After all, how could a non-rational process even be explained? What would be the point, if it could?
Every mainstream economics textbook starts with the idea of ‘scarcity’. Scarcity will always exist because people’s ‘wants’ are infinite. Thus, a ‘rational’ economy will be one that not only recognizes, but realizes — brings to fruition — the infinite desire for ‘more’, i.e., greed.
Historically, the intellectual discipline of economics arose in conjunction with the development of Modern capitalism, starting in the late 1700’s. My preferred definition of “capitalism” is ‘mass production for sales in geographically extended markets’. That distinguishes it from small-scale production in which other elements of capitalism — private ownership of the means of production, wage slavery, etc. — are present. Also, today (through the internet) there can be global sales of products produced on a very small scale, even by a single person.
Based on that definition, capitalism has existed throughout the history of civilization. So has small-scale production using wage slavery (paying people to be used as machines, to include thinking/calculating/writing machines — or draft animals — for the financial benefit of the employer).
In Modern capitalism wage slavery was applied to mass production. Before, such labor had existed in the form of bondage slavery (where the laborers were property) and serfdom (where the laborers were not property, but were bound by the laws of the land to live their lives on the estate on which they were born).
With that, for the first time in human history money became more important than ‘real’ property. Such property cannot be accumulated indefinitely because it is not in infinite supply.
Money can be infinite — or at least completely unlimited. Money became the ultimate material form of power.
‘Excess’ money — more than what is required to procure what a person needs — can be converted to assets to store (and hopefully increase) the value it represents. The money paid for it becomes income for its previous owner, effectively furthering the amount of money in the economy in the form of income in the process,* which can then be used to purchase some other asset(s), etc. Even with a finite amount of property of any kind, the prices of its various kinds can be bid up to absorb any amount of money: ‘asset inflation’. That explains the vortex of hyper-prosperity that has developed in the global economy for those who seek and find their way into that rarefied economic stratum.
Yet, Modern capitalism did come up with a solution to the finite bounds of property: stocks. There is no limit to the amount of stocks that can be printed. Printing more of any corporation’s stock can reduce its price, but new corporations are always being created and ‘going public’, printing stocks to sell to the general public (after the initial investors and others on the inside have gotten their ‘fair share’). Also, private equity firms ‘take private’ publicly traded corporations (purchase them lock, stock, and barrel, using borrowed money) and eventually (for those that survive the ordeal) ‘take them public’ again.
So what happened to scarcity? Scarcity is for suckers: people with a ‘budget constraint’, people for whom prices have meaning. On this planet today some people and all large enterprises have transcended any notion of scarcity. The only ‘want’ any of them might be unable to ‘satisfy’ is to be the sole owner of a really large business enterprise.
Again, all of that is, according to mainstream economics, simply what a ‘rational’ economy will be. Humans are by nature rational beings and humans are by nature greedy (having infinite wants), so an economy built on greed is a rational economy.
Only, greed is not rational. Greed is a psychological phenomenon. The final consequences of rationalizing greed as the organizing principle of the economy are now becoming all too obvious to even the most non-rational people: an unmitigated environmental, social, and personal disaster on a global scale.
I do have a solution to offer: “Limiting Accumulation without limiting income/wealth.” At then end of that short (“2 min”) essay is a link to “Two Possibilities within MMT.” (Both are here in Medium, but not behind the paywall.) Enough for all would be absolutely, positively guaranteed without having to redistribute anything. The allowable limits of accumulation would be up for debate, but in this proposed paradigm (using the existing economic system) the purpose of setting limits on accumulation would be the rational functioning of the economy: withdrawing ‘excessive’ money from it. It would have nothing to do with providing a sufficient income for all (adult citizens).
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*In the famous equation PQ = MV (where P is prices, Q is the total output of goods and services, M is the supply of money, and V is the ‘velocity’ of money, the number of times the supply of money ‘turns over’ in generating ‘Q’), each side of the equation is a way of (crudely) representing total income for the economy as a whole. So increases in V generate increases in total income (increasing, if M stays the same, P or Q or both).