“First, there wants an established, settled, known law, received and allowed by common consent to be the standard of right and wrong and the common measure to decide all controversies between them. For though the Law of Nature be plain and intelligible to all rational creatures, yet men, being biased by their interest, as well as ignorant for want of study of it, are not apt to allow of it as a law binding them in the application of it to their particular cases.” (Two Treatises of Government II.ix.124.)

I’m sure Locke didn’t have Global Warming, or the Law of Entropy, in mind when he wrote the above but he did write it with the following in mind:-

“Secondly, in the State of Nature there wants a known and indifferent judge, with authority to determine all differences according to the established law. For every one in that state being both judge and executioner of the Law of Nature, men being partial to themselves, passion and revenge is very apt to carry them too far, and with too much heat in their own cases, as well as negligence and unconcernedness, make them too remiss in other men’s.” (Two Treatises of Government II.ix.125)

Who will tell us what the State of Nature needs?

In engineering, “efficiency” is never defined by one term. An engineer must trade off conflicting goals against each other: cost, weight, speed, size, etc. Nearly every engineering problem involves both quantitative and qualitative measures. In any non-trivial engineering problem, several different measures must be used, with the elegant solution the one that covers the most features with the least effort.

Economics is quantifiable, but not reducible to quantity. Money flows through an economy are strictly quantifiable in theory at least, but the economy cannot be reduced to these flows, because money merely “stands for” real goods and services which have are otherwise incommensurable with each other. Further, goods flow in non-monetary ways as well.

No engineer can pronounce one system more efficient than another without knowing the costs of the inputs. In the presence of subsidies and externalities, this is not possible, so bad economics corrupts engineering as well. For example, the WalMart distribution system is judged to be an engineering marvel, but if the full costs of the road network were included, would it still be efficient?

To return to the subject of Mark’s essay, if thrift is measured in terms of money, then it is paradoxical, because it withdraws purchasing power from the economy, narrowing the base and reducing the size of the economy. Unless the savings can be converted to investment or spending by lending, then thrift is equivalent to hoarding. Such thrift creates poverty. But if thrift is defined in terms of use (“use it up, wear it out, re-use it”) then the very act of thrift creates wealth.

That’s a bit rambling, but its early and I haven’t finished my coffee.

Christianity does this too.

The example of developing economies was quite helpful. Can you recommend further reading on that point?

Reconsidering economics as a qualitative, rather than quantitative, endeavor is difficult for me. My education was initially focused in science and engineering. There the idea is that when the figures don’t add up, people die (say, in a poorly designed bridge’s collapse).

Similarly, there is an attitude that quantitative economic inefficiency kills people. Outsourcing one’s childrearing or speeding through a meal someone else has prepared helps one refine industry ______, which may result in X amount of measurable productivity and create more jobs down the line.

Of course, this is the universalistic attitude of Liberalism, which equates duties to hypothetical strangers with duties to self and family.

A side note: I just realized with shock that the real time strategy computer games of my adolescence reinforce this quantity-focused “productivity or apocalypse!” attitude. In some games, one must quickly acquire massive quantities of resources X Y and Z. Failure to do so will result in witnessing one’s more efficient opponents devastate your digital lands and peoples.

This counting mistake is evident in development economics. We go into economies where money is marginal and make it central by destroying all the older relationships. Then the “development agencies” say, “These people were living on less than a dollar a day, and now they have two. The situation has improved by 100%.” Well, not really. Often, we have just “developed” them from a secure subsistence economy into an economy of dependent pauperism. In the process, we have moved ourselves into pauperism. Our development has exported poverty around the globe, and in doing so has imported it to our own country.

At the risk of speaking out of turn, I think part of the point of FPR is to re-evaluate some of the external costs.

Daycare is growth . . . but is it good growth? I’ve been a stay at home dad for a few years (while winding up my mother’s estate) and I have loved being with my children. They can be annoying and bothersome, yes, but I’m there for them, I cook and wash and mow the yard.

This is, doubtless, not the most economic efficient thing to do. But I grew up in a world of fathers who saw their children bright and early in the morning, and right before bedtime. My father did that. I can’t blame him, he was out working, and working hard, to provide for us. But that’s the one regret I have about my relationship with my father, that I didn’t get to spend more time with him.

I can imagine that it is much the same with mothers.

As for McDonald’s, well. It is fast, and it is cheap . . . but that’s only by disguising external costs. CAFO produced corn-fed antibiotic and hormone-pumped beef may seem to be “real food” but it’s really not. The Omega 3 and Omega 6 ratio is all out of whack (unnatural), the bun is shelf-stabilized and chock full of HFCS (corn and more corn) and people forget how to cook.

If that’s growth, it’s cancerous.

If I’m out of line, please excuse me—I’m just finding this place fascinating.

He writes of McDonalds and Daycare: “Because the functions are now monetized, it looks like “growth” from the standpoint of the GDP, but it does not, in fact, represent a growth in goods and services, and may represent a shrinkage.”

McDonalds makes food provision fast. This is a true growth in service, yes?

Daycare arguably “frees” parents from their children, allowing them greater economic productivity. Isn’t this too a growth in service? If one daycare agent takes care of ten kids in the place of five mothers, who now do other things, isn’t this a kind of true economic growth?

Did you read the book? Is it long? Maybe you can let me borrow when you are done as I am here in Orlando as well.

Brett

Keep on,
J

Good points a couple comments:

“One, the economists do, in fact, treat growth as an end in itself and regard every uptick as “good.””

Your correct here. Most economists see growth as being a positive thing in general and any growth would be a positive thing. Now if there was growth in the “poring radioactive waste on unsuspecting economists while they sleep industry” there is no question they would view this as bad. Bad for human persons and perhaps even bad for the economy. Growth is never the ONLY thing economists look at. There is such a thing as bad growth according to economists.

“Two, the failure to interpret the meaning of the numbers is methodologically incorrect from a purely scientific standpoint; it distorts the measurement of the economy.”

I agree with this again for the most part, especially your distinction between exchange and use (This being the sort of difference I highlighted between formal and informal economies). Growth is definitely growth in the formal economy and this is sometimes at the expense of the informal economy. But it works the other way too doesn’t it? I take the wages I earn at McDonald’s (In the formal economy) and spend it on smack (In the informal economy). The formal economy by and large allows the informal economy to function. Its this idea of dependence on the formal economy that makes me treat growth the way I do. Despite its shortcomings it still tells us a lot and is a net positive most of the time.

“Nothing dealing with human relations (and economics deals with such relations) can be considered “value-free,” and the attempt to do so distorts the discussion not merely on some moral plane, but on the practical and scientific plane as well.”

Absolutely! The dispute is one over whether growth is a net positive or a net negative. Both sides should realize that decisions about our attitudes to growth are moral calculations. The statistic itself however is value free (as all measurements must be to be meaningful). I have no problem with people giving evidence as to why growth is a net bad, or that growth isn’t the only thing we should consider (Again I don’t think anyone disagrees here). I have problems with blanket statements like “Quality not Quantity” used as an argument against a statistic. There are serious issues here and waxing Quixotic about how stupid it is that the government tells us to shop does not address them.

Every economy is a combination of an exchange economy and a use economy. To illustrate the point, we can say that we work to earn money to buy meat and potatoes (the exchange economy) in order to bring them home and cook dinner (the use economy). Economists deal only with the exchange economy, which leads to distortions in measurement because the exchange economy tends to be monetized while the use economy tends to be non-monetized.

To see how this distorts the numbers, consider that much of the so-called “growth” of the last 30 years has merely been a shift from the use to exchange. Meals that used to be cooked in the kitchen are now cooked by Ronald MacDonald, children that were raised at home now go to a day-care center. Because the functions are now monetized, it looks like “growth” from the standpoint of the GDP, but it does not, in fact, represent a growth in goods and services, and may represent a shrinkage.

Nothing dealing with human relations (and economics deals with such relations) can be considered “value-free,” and the attempt to do so distorts the discussion not merely on some moral plane, but on the practical and scientific plane as well. This, by the way, was the whole point of Caritas in Veritate.

“If the economists would have us honor a more encompassing view of economic growth, perhaps they could do us the favor of expressing it in larger terms.”

and earlier,

“He suggests something radical: evaluating the quality of the growth rather than merely the quantity.”

Growth is merely an economic term for a set of data on economic activity over time. True, most economists agree that growth is good for economies and by extension is good for people. No serious economist I have ever encountered thought that growth is the only criteria for economic success or failure and the only criterion for what’s good for people.

For example: If Zimbabwe were to, against all odds experience slight economic growth this year and the United States economy were to experience slight negative growth the economist’s conclusion wouldn’t be that Zimbabwe is a better economy or a better place for human persons to live. They would, unsurprisingly consider other factors when making such an evaluation.

The two suggestions by the author and a commenter suggest growth is not up to the task of telling us what’s good for human persons. I agree. Every economist on the face of the earth agrees. Growth is merely one economic statistic among a giant mass of statistics.

Is it important? Yes, because it is composed of very large sets of data that are boiled down simply in the form of how much more or less economic activity was their this year vs. last year. It’s set of data, all economic activity, is the most comprehensive available. They cannot express anything larger.

Anything larger is outside of the discipline. Discussing the quality of growth is something best discussed by philosophers on the abstract level and politicians on the practical level. There are all sorts of things we disapprove of that are not included in our definition of “All economic activity” and thus aren’t reflected in growth. Illegal drugs are one. Prostitution is another.

If you believe that certain industries and business practices and opposed to human goods, MAKE IT ILLEGAL TO PARTICIPATE OF USE THEM! Once you do they will no longer count for or against growth. They will either disappear or move into the informal economy. Growth is what you make it when you set the parameters of the marketplace. If you don’t like those parameters, change them. Don’t complain about statistics and the inadequacy of economic science. Don’t pretend that you’re trying to found a ‘new science of man’ just tell the current scientists, through the political process, what to exclude from their slide rules.

Our entire monetary system, and by extension our economy, is a Ponzi economy in the sense that it really only operates well when in expansion mode. Even a slight regression triggers massive panics and disruptions that seem wholly inconsistent with the relative change, unless one understands that expansion is more or less a requirement of our type of monetary and economic system. Without expansion, the system first labors and then destroys wealth far our of proportion to the decline itself.

What fuels expansion in a debt-based money system? Why, new debt (or credit), of course!

So now some of the arguments for growth are becoming clearer in my mind. The above quote is pulled from The Martenson Report, specifically The Shell Game – How the Federal Reserve is Monetizing Debt. One of the things that frustrates me about economics in general is how anti-intuitive it is. Depending primarily on Dr. Mitchell’s summary of Schumacher, I can grok Schumacher’s argument. It makes sense to me. It fits into my experience of the world. On the other hand, as I dig into how both our actual economy and that part of it we call the monetary system work, I am perplexed by just how skewed from a natural ordering of things it seems. It makes no sense to me that the system is unable to handle non-growth, but from the quote above, I begin to get an inkling of how that might be.

Incidentally, there is a tie here to Dr. Deneen’s post, Constitution as Regime, in the sense that the economy, along with the Constitution, doesn’t do what we want it to do, but does what it was designed to do.

Given that, it seems that moving to a more human-centered economy ala Schumacher will necessarily involve rather massive pain and suffering because it must work against the very thing that the current economy needs to function well at all. Keeping the system as it stands will involve rather massive pain and suffering because it is unsustainable and is running up against hard limits to expansion. Rock, meet hard place. Hard place, meet rock. It looks like we are well on the way to the day where we find ourselves compelled to learn its lessons by dint of hard necessity. What a mess….

— — —

Sorry for the extensive commenting on this post. I am in the process of really coming to comprehend our position. Stuff I’ve given intellectual assent to for many years is finally becoming real to me (slow learner, I know), and it isn’t exactly a pleasant process, involving, as it does, a fair amount of tilting at windmills and swinging wildly in the dark.