Rediscovering Progress: The Fading Philosophy of Economics
“The economist, like everyone else, must concern himself with the ultimate aims of man.” (Alfred Marshall, Principles of Economics, 1890)
The relationship between economics and philosophy is a long, winding one. Though economics was conceived at the junction of moral and political philosophy (Adam Smith was chair of moral philosophy at Glasgow University), it’s since revolted, as an angsty child does from its parents, towards something of an objective, value-neutral, “dismal science”.
But segregating philosophy and economics does little more than numb us to the philosophical underpinnings of a capitalist mentality born and bred during centuries bearing little resemblance to our own, thereby promoting values no longer serving collective social interest. By severing economic decisions from philosophical inquiry, we merely substitute thoughtfully chosen values for blindly adopted market values. The absolute dichotomy between subjective and objective disciplines, exemplified by the economics/philosophy divide, is a false one. All methodologies are united in their service to that perennial question: How to live?
Though the philosophical quest — how to live, enquiring into the depths of identity and probing the nature and potentialities of experience — remains relatively taboo in the public sphere, notions of ‘progress’ abound. Rising GDP (though, by this point, thoroughly debunked as an indicator of desirable progress), decreasing unemployment, heightened productivity, and greater efficiency; these have all found themselves atop the altar of modern day progress. Society is generally considered on the right track if the economy is growing. But are such markers truly ends in themselves? Does anyone derive wellbeing from merely finding a job? In most cases, no. Jobs are not a holy grail; they are means to greater ends. Wellbeing is derived mostly from the goods or services purchased with the income received from work, rather than work itself. But economic literature is now enforcing the common sense notion that the wellbeing derived from purchasing additional goods or services tapers off after a certain threshold. Nobel Laureates Daniel Kahneman and Angus Deaton found this satiation point to be approximately $75,000 per year. More on that study to come.
In his refreshingly frank essay, “On the Phenomenon of Bullshit Jobs”, David Graeber, professor of anthropology at the London School of Economics writes:
“In the year 1930, John Maynard Keynes predicted that, by century’s end, technology would have advanced sufficiently that countries like Great Britain or the United States would have achieved a 15-hour work week. There’s every reason to believe he was right. In technological terms, we are quite capable of this. And yet it didn’t happen. Instead, technology has been marshalled, if anything, to figure out ways to make us all work more. In order to achieve this, jobs have had to be created that are, effectively, pointless. Huge swathes of people, in Europe and North America in particular, spend their entire working lives performing tasks they secretly believe do not really need to be performed. The moral and spiritual damage that comes from this situation is profound. It is a scar across our collective soul. Yet virtually no one talks about it.”
To accept economic progress as indicative of progress itself is to provoke this already gloomy situation. This begs the question: what is progress? Ludwig Von Mises, eminent Austrian economist, writes that progress requires a given framework of goals to mean anything at all:
“The notions of progress and retrogression make sense only within a teleological system of thought…Without reference to some agent’s action and to a definite goal both these notions are empty and void of any meaning.”
~ Ludwig Von Mises, Human Action (1949)
Digging deeper into the relationship between economics and ‘ultimate ends’, Von Mises elaborates:
“It is true that economics is a theoretical science and as such abstains from any judgment of value. It is not its task to tell people what ends they should aim at. It is a science of the means to be applied for the attainment of ends chosen, not, to be sure, a science of the choosing of ends. Ultimate decisions, the valuations and the choosing of ends, are beyond the scope of any science. Science never tells a man how he should act; it merely shows how a man must act if he wants to attain definite ends.”
To consider economic growth as good in itself, without referencing that growth to a rubric of chosen ends emanating from beyond economics, is to render the notion of progress impotent. Economic progress, if it is to be meaningful, cannot be self-referential. It cannot internally supply the measures of progress that would redeem its own worth.
From where, then, can we derive notions of progress? This loss of existential vision, of teleological narrative, is among the more dire consequences of severing economics from philosophy. The greats of the economic discipline, beyond grasping the mechanics of markets and institutions, all imbued their work with a guiding vision of human destiny. They did not bend economic sciences to the “choosing of ends”, but employed economics within a greater context of “the ultimate aims of man”. Robert Heilbroner, the late, great economic historian of the New School for Social Research, writes of two such economic philosophers — Adam Smith and John Stuart Mill:
“Smith’s whole worldly philosophy was shaped by his view of human history as a stagelike process in which societies progressed from one level of material and cultural achievement to another until humankind finally realized the conditions needed to achieve a society of ‘natural’ liberty…Mill, too, projects a vision of human improvement as the fundamental teleology of history: his view of a society of self-realizing individuals is more radical than that of Smith, more conservative than that of Marx.”
~ Robert Heilbroner, The Worldly Philosophers (1953), Sixth Edition
Whether “natural liberty” or “self-realization”, the economists’ whose thought endures amidst changing times and cultures are those whose economics espoused a larger vision, a “worldly philosophy”, with philosophically envisioned ends applied to economics means.
Can the same be said of today’s economics? Do we see today’s economists as trusted visionaries of humanity? Or computer-bound statisticians? Towards what ends do American policy and economic thought aspire? Freedom? Perhaps the most common answers are those found in the Declaration of Independence: Life, Liberty, and the Pursuit of Happiness. When a public official declares his purpose to defend or promote the liberty of the American people, we happily nod along, as if there is any agreement on what liberty is. On closer inspection, is there any agreement on any of our three foundational principles?
There is no agreement on “life”, evidenced by the hostile debate on abortion; disagreement on “liberty” is evidenced by the vast chasm separating conservative and liberal economics; and the chaos in what is understood by “happiness” is evidenced by the unwillingness of the statistics — largely the drivers of public policy (other than rhetoric) — to even engage with the subjective idea. We’re a nation founded on, united by, the inalienable rights of life, liberty, and the pursuit of happiness — but don’t agree on any. Shouldn’t this occupy center stage in public debate? Not that unanimity is expected, nor even desirable, but spirited dialogue on our country’s guiding values certainly is. What is liberty? Happiness? How can we get there? Neglecting these ends, we narrow societal vision and debate to end-less means. But we’ve already found that economics cannot be a self-referential discipline if it is to further ‘progress’.
Reciprocity Between Philosophy and Economics
This is the potential of philosophy; to deliberate — first individually, then collectively — upon the purpose of our own lives, and the role of economics in facilitating each person’s own trip. The purpose of economics could be to enable philosophy. Forming a kind of reciprocal, hot-potato relationship that looks something like this (a rough sketch):
Philosophy does not become readily available until one’s economic house is in order. Until one is relatively assured of health, security, and shelter, the practice of self-enquiry rightfully recedes in face of survival pursuits. We aren’t concerned with cultivating an understanding of “liberty” when we aren’t sure how to feed our own children, much less ourselves. The “economic problem” — creating sustainable methods of human subsistence — is the paramount task of the human race (Until, of course, it isn’t).
This suggests that the first phase of a life’s trajectory is to ascertain the economics for survival. Whether one is graduating University, and for the first time responsible for generating their own income, or if circumstances require a child to drop out of high school to work and help support a struggling family — among the first necessities of life is to seek out an income to cover the array of basic needs. Many folks are stuck in endless cycles of meaningless work — Graeber’s “bullshit jobs” — to sustain this mere subsistence level of existence; the first red line of the graph.
With the promise of enough income for food, shelter, and a minimum of activities, what is the next teleological narrative — purpose — that will give meaning to economic activity? This is entirely idiosyncratic. To some, it will remain desirable to pursue greater levels of income. Nicer accommodations, more possessions, greater means to more expensive ends, these are all things that some will decide are important enough that they are willing to devote additional labor hours to acquire. Others may be content to live with basic accommodations, devoting all further time to artistic, creative pursuits that may or may not be remunerated. Some may pursue more vibrant social time. Some may toil endlessly at this stage, with neither the creative expression to redeem their modest situation nor the ability to pursue greater income that may enable further pursuits. These varied existential tracks are the work of philosophy to unearth. To remain indebted to economic means beyond the threshold of individual subsistence, without deciding to do so of one’s own volition for the purpose of greater ends, is to squander this window of vital philosophic contemplation on how to live one’s life. This period represents the “philosophy for survival” portion of the graph.
Life’s ‘basic needs’ is not a stagnant term. What is considered basic today could’ve been luxurious just a few decades ago. To many, a basic life today may include: a cellphone, Wi-Fi, means of transportation, a laptop, air-conditioning/heating, and the purchasing power to eat healthier than the cheapest options around — fast food, chemical preservatives, and so on. This rising conception of what a basic life entails is somewhat like inflation for living standards. To meet these needs, further economic activity is called for. Let’s call this threshold “basic comfort”; this, too, is a highly idiosyncratic scale. For some, an annual income of $35,000 may do the trick, while for others, upwards of $70,000 may be required to furnish their conception of a good life.
To give this threshold something of a benchmark, Returning to the study of two Nobel Laureates in economics, Kahneman and Deaton, provides insight. The two ran an experiment to explore the big question: does money buy happiness? They define happiness as well-being, which they break down into two types, emotional well-being and life evaluation:
“Emotional well-being refers to the emotional quality of an individual’s everyday experience — the frequency and intensity of experiences of joy, stress, sadness, anger, and affection that make one’s life pleasant or unpleasant. Life evaluation refers to the thoughts that people have about their life when they think about it.”
They found that while life satisfaction rises consistently with increasing income, emotional well-being ceases all income-associated gains after ~ $75,000 per year. So what’s going on? Our actual, real-time experience of life derives no further improvement from money beyond the cutoff, but our ideas about how our lives are going continue to rise. We think our lives, on the whole, to be better even if our experience doesn’t follow suit. Interpret that as you will, but it provides an anchor to set the end of the “basic comfort” economic phase at ~ $75,000.
Again, the question arises: beyond this marker, what’s next? How to contextualize further pursuits once finances no longer contribute to the quality of your existential experience? Once more, the necessity for philosophy emerges. Economics cannot provide the answers here, and continuing to pursue economic motives without stopping to reflect entraps us to the empty service of means blind to their ends.
Where to Live, Red or Blue?
Spending a life stunted in the context of economic pursuit (a red line) is an empty, unfortunate scenario. Living in the context of philosophy (blue line), at least, offers an invitation to partake in the confrontation with the unknown that marks the uniquely human experience. To take a stab at ends, rather than spend an entire life amidst means.
Though we don’t really know how to live in the blue lines, that’s the fun of it all. Living within the context of philosophy calls upon creativity, imagination, and wonder. Not that economics isn’t a field of creativity and imagination, but when these acts transpire within the economic context, they’re being performed because you need something else, not for their own sake. This is why serial-entrepreneurs continue to innovate even after their first million-dollar deal. They find stimulation in the very act of innovating, of creative problem solving. This may become one’s philosophy of life, and it’s an incredibly rewarding one (for both the individual, and those who reap the benefits of their innovations).
It’s the ability to choose one’s own vision, to live a life in service of an autonomous narrative, as opposed to one of necessity, which the American principles of Life, Liberty, and the Pursuit of Happiness could embody. The purpose of economics is to render itself irrelevant. That economic concerns will progressively cease to usurp the existential stage, and make way for the creative, imaginative, or even quaintly mundane modes of existence chosen by each individual seems the backbone of any collective truly interested in liberty. Economics is not the ultimate stage of humankind’s life, as Heilbroner writes:
“…the wide spectrum of its underlying visions implies that economics itself is not a final, irreducible level of social understanding…At the root of the matter lies man, but it is not man the ‘economic’ being, but man the psychological and social being, whom we understand only imperfectly. Economic understanding is a marvelous chapter in humankind’s autobiography, but it is neither the first chapter nor the last.”
Transcending economics doesn’t mean the end of productivity or innovation; it means the end of slavery to means over ends. It would further apply a basic rule of economics: specialization.
The more individuals are emancipated to pursue that which is most authentic, vivifying, and animating to them, the better off the rest of us will be. It is in my own self-interest for you to be able to do that which you do best. Further, it is in my own self-interest for you to be able to do what brings most fulfillment to your life. It certainly wouldn’t be a utopia — demons follow us wherever we go, however we live. And there is essential labor that must be performed in order to maintain any society. But it’s a virtuous foundation upon which to continue probing the mysteries of existence, and cherishing the joys of life.
A Final Policy Recommendation
Taking stock of the actionable items from this survey, really, there’s just one. Notice that across the scale of life, divided in Figure 1 into four sections, only one segment has relatively universal markers. Philosophy for survival (2), economics of life (3), and philosophy of life (4) are all highly relative, idiosyncratic scales. For some, economics of life will stretch farther than others, etc. But the economics for survival (4) are nearly uniform across the board. There is no discrepancy as to the necessity of basic food, housing, health, and security. In those subsequent three realms, where preferences vary greatly, government cannot efficiently intervene, as they cannot account for this diversity of tastes and visions. But in the first segment of life’s context, the economics for survival, government can play a decisive role.
Enabling human flourishing is tricky business; this lies in the realms of the latter three segments, and is largely our own individual responsibility. But reducing human suffering resides greatly in the first, and can, theoretically, be addressed socially — politically. If there were a viable method of establishing an income floor, below which no member of society were permitted to fall, the entire first segment of life, the economics for survival — an engulfing, cyclical narrative ablaze with suffering and misery — could literally be done away with overnight.
Of course, this debate is already underway. Talks of Unconditional Basic Income (UBI) are raging, though regrettably with a more rhetorical than pragmatic tone. To move the discussion forward, we should conduct numerous, rigorous reviews of potential funding models for a UBI (Check out Scott Santens’ work on this). Shift the conversation from rhetoric, to viability. If UBI can be demonstrated a financially viable (or even desirable) social program, then the burden of proof falls upon UBI’s opposition to give good enough reasons to avoid its implementation on principle. If it cannot be demonstrated fiscally viable, then UBI must retire from the forefront, and retake its place among the currently unrealizable utopian ideas simmering on the back burners until they’re once again called forth.
Tim Ferriss writes that “…most people choose to be unhappy rather than uncertain”, and this fear of uncertainty confines us into narrow political imaginations that breed a reactive, rather than proactive, nature of political change. Echoed by Milton Friedman:
“There is enormous inertia — a tyranny of the status quo — in private and especially governmental arrangements. Only a crisis — actual or perceived — produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.”
~ Milton Friedman, Capitalism and Freedom (1962)
Heilbroner’s survey of Great economists returned not a single one who believed economics would, or should, remain a fixture of human life in the long-term. The question, then, is at what point will we collectively decide we’ve amassed enough economic ‘progress’ to move on? To renovate our cultural alter of progress, dedicating any further economic activity towards lifting everyone to the point where they, and we, can no longer rely on economics to tell us who we are, or how we should live.
Some Sources and Further Reading
- Kahneman & Deaton’s study on money & well-being
- David Graeber’s essay, “On the Phenomenon of Bullshit Jobs“
- Robert Heilbroner’s masterpiece, “The Worldly Philosophers”, the last chapter of which is among the best and most inspiring analyses of economics I’ve come across
- Rutger Bregman’s “Utopia For Realists” — a guide to the Basic Income debate, grounded in a good mix of data and philosophy