The age of chivalry is gone. That of sophisters, economists, and calculators has succeeded; and the glory of Europe is extinguished forever.–Edmund Burke, Reflections on the Revolution in France
On July 2nd, the residents of Lakewood Colorado were asked a very simple, yet consequential question:
“Shall the City of Lakewood limit residential growth to no more than one (1) percent per year by implementing a permit allocation system for new dwelling units, and by requiring City Council approval of allocations for projects of forty (40) or more units?”
To the surprise of many (including myself), the measure passed with 52% of the vote. This despite the fact the opposition had a war chest of over $300,000 and not a single interest group, newspaper, or major Colorado politician endorsed the issue. In fact, every major public figure in the state actively worked against the passage of the residential limit.
After the results became final, a litany of accusations arose against those of us who voted for the measure, most notably that the “yes” voters were economic illiterates who failed to understand the basic economic impacts of the measure, citing forgone revenue and lost investment opportunities that the city would lose by capping residential growth.
In the face of these accusations of economic ignorance and illiteracy, I am going to make the exact opposite argument. Despite the use of sophisticated economic techniques to survey the potential impacts, and all the policy and business “experts” saying the cap was a bad idea, I am going to argue that those of us who voted yes on the measure have a deeper understanding of the actual meaning of the word “economics” than those who voted no, and that our deeper understanding of the word and its connotations ultimately prevailed over today’s shallow understanding of “economics.”
The standard definition of economics you will find in most modern textbooks is the study of scarcity and choice, at least that is what I wrote down in my first economic class. The more technical definition of economics (according to Merriam Webster) begins, “1.a. A social science concerned chiefly with description and analysis of the production, distribution, and consumption of goods and services.” Look through any dictionary and you will find definitions very similar to this one, all regarding the production and exchange of goods and services, using our scarce resources to satisfy the needs of a society that has unlimited wants, and promoting the general material welfare of everyone.
Before the election, a comprehensive economic study was put out by the Common-Sense Policy Roundtable showing the impact of voting “yes” on the measure. The study, titled “Building Gated Cities-Policy Brief Understanding the Impacts of 1% Growth in Lakewood,” estimated the average taxpayer burden would increase by $527 to $790 per year if home prices increased 20% due to supply constraints. The report also concluded that the city could lose between $4.1 million and $15.7 million in construction taxes over the next decade and forgo any additional revenue that could have been collected from new residents in sales taxes.
This report fits the dictionary definition of economics to a T then. It focuses on the fiscal significance of the project by portraying negative results, projects negative economic conditions for those who would have to live through the effects of the measure, and analyzes the fiscal costs and forgone opportunities of limiting growth.
So, if the detractors from the measure understand the definition and application of economics, how can they have a shallow understanding of it?
Well, the simple answer is that this is not true economics according to the Greek roots of the word, but instead chrematisike.
The idea of chrematisike (literally a verb meaning “making money”) is first articulated by that most excellent philosopher Aristotle in his musings on what constitutes a good or bad practice of exchange from a moral perspective. Needless to say, chrematisike is not his ideal. In A Treatise on Government, he condemns it in no uncertain terms: “there is also another species of acquisition, which they particularly call pecuniary, and with great propriety; and by this indeed it seems that there is no bounds to riches and wealth.”
Chrematisike, then, is an unnatural, unbounded acquisition of coin and/or property (Robert L. Heilbroner’s Teachings from the Worldly Philosophy quoting Monroe). This side of the economic coin is obsessed with money: how it is made, multiplied, and leveraged. Aristotle is careful to note that money in itself is not bad, but when used as a means of gain over just a medium of exchange, then it transcends the natural to become unnatural:
For which reason the art of money-getting seems to be chiefly conversant about trade, and the business of it to be able to tell where the greatest profits can be made, being the means of procuring abundance of wealth and possessions; and thus wealth is very often supposed to consist in the quantity of money which any one possesses.
Sound familiar? This is exactly what the report by the Common-Sense Policy Roundtable tries to explain in their analysis. Their theory is that we will be giving up money, and so we will be worse off for it, equating wealth exclusively with the acquisition of coin. Knowing that there would be those who would not only disagree with him that the unlimited acquisition of money was bad, but who would embrace it as a virtue, Aristotle says, “thus in the art of acquiring riches there are no limits, for the object of that is money and possession; but economy has a boundary, though this has not; for acquiring riches is not the business of that, for which reason it should seem that some boundary should be set to riches, though we see the contrary to this is what is practiced.”
True economics, then recognizes limits to growth and has a concept of healthy boundaries between just and unjust as well as natural and unnatural acquisitions of wealth. Chrematiske does not. Chrematiske is, therefore not just unnatural, but unjust. It is not without some gravity that Heibroner remarks that some economists have suggested economics should be instead called chrematistics.
Just as there is a bad side to economics, there must be a good side. Aristotle coined (a little bit of humor there) the good kind of economics as (you guessed it…or you read the title) oeconomia.
Aristotle contrasts oeconomia with chrematiske by saying, “the getting of money is not the same thing as economy, for the business of the one is to furnish the means, of the other to use them; and what art is there employed in the management of a family but economy.” The root word of economy is the Greek work oikos which quite literally means home. True economics, therefore, is the management of home. For Aristotle, home could mean both the household and the state.
Oeconomia then is the exact opposite of chrematiske. One is unbounded while one is limited. One focuses on necessity, one on acquisition of more and more. One is just and one is unjust. And yes, one is natural and one is unnatural.
True economy then is so much more than the mere acquisition and exchange of money. When the citizens of Lakewood went to the polls, we voted for our oikos, our home. We resisted the unlimited acquisition of wealth; we refused to simply accede to the impersonal hand of the market. We voted for our home and its responsible management. We voted for the Lakewood we know and love. It was a vote against cold economism and the idea that the unlimited acquisition of money by a few is the true definition of progress.
So what, then, was the price of place? Well, it was worth more than what the Common-Sense Policy Roundtable was willing to pay but exactly what the citizens of Lakewood were willing to pay.