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.

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  1. Great piece. In a sense all of economics has been collapsed into chrematistics. It’s as if we all believed we could judge the strengths and weaknesses of our households solely on the basis of our checkbooks and tax returns.

  2. There are a couple of points in this essay that I might want to challenge, but anybody who correctly distinguishes chrematistics from oikonomia wins applause from me. I don’t remember that distinction ever being taught when I first studied Aristotle; I didn’t pick up on it until years later, when I read Hermann Daly and John Cobb’s For the Common Good. It came as quite the revelation to me. So well done, Josh!

    • I first came across an explanation of the difference between economics and chrematistics in Daly’s introduction to Berry’s What Matters? Some of the free marketeers and laissez-faire advocates I’ve discussed it with have had considerable difficulty understanding how the two things can be considered separately, so entwined as they are in today’s understanding of “Economics.” I remember reading somewhere that today’s economics majors often only have one class in economic history, if that, and if they do, it tends to be just a survey of the biggies and nothing particularly substantial. I took two introductory economics classes as an undergrad and neither one touched much on the history of the thing,

  3. This argument makes no sense. By deliberately suppressing the supply of homes there, you will of course increase the property values, which in the short term would increase your property taxes–depending on how assessments work there–but will eventually almost certainly yield large gains to current homeowners whenever they sell their house.
    I’m sorry, I love local power, but for all your fancy philosophizing, this sounds like nothing but pure selfishness to me.

    • It’s selfish if the goal of the measure was to increase the value of current housing. But I don’t see that in the piece anywhere, and in fact it goes directly against the point of it, which is that economics (as currently understood) isn’t life.

      • I’d be a lot more convinced, and impressed, if he spent as much time, with as many italicized words, defending policies that would cause housing values to drop 20% rather than increase by 20%.

        • I’m having trouble thinking of something that would simultaneously be good for the community and cause housing values to drop that much.

          “with as many italicized words”

          Although he used them several times, I count only three.

          • A law banning franchises and big box stores would probably cause commercial real estate values to drop substantially, at least in the short term. I dunno about policies related to housing values, but I’m sure some experts in the field could come up with something. I guess you’d want something that would suppress demand from undesirable sources, so for instance if absentee owners are common in an area, requiring/incentivizing owner occupancy would work in that direction.
            The thing I recoiled against so much in the post was the message that “My support for this policy that will greatly increase my personal (monetary) wealth shows I value other things than money.”

          • “The thing I recoiled against so much in the post was the message that ‘My support for this policy that will greatly increase my personal (monetary) wealth shows I value other things than money’.”

            Hmm. I didn’t read it that way at all. The only mention of the increase in housing values is related to the concomitant property tax increases, and that’s in the report of the measure’s opponents. It may very well be that some of the people who voted for the measure did so because they believed their homes would increase in value, but I don’t get the sense that that was one of the author’s concerns.

    • Doesn’t the problem begin with government insistence (at all levels, local, state, and federal) that we and all “our” property are sources of their revenue? If that’s true, then how can I make any claim to being free? When a government rent-seeker, who had nothing to do with the transaction between the buyer and the seller, then insists on taking his cut, both during the purchase and then subsequently each and every year thence in the form of property taxes, what exactly about that transaction makes that property mine? He (the rent-seeker/zoning board/assessor/etc.) can then determine the amount of rent (aka taxes) I pay based upon what I could potentially sell my property for, regardless whether I ever have any intention of selling it. Couple this with government’s ever burgeoning marriage to Big Business, especially over the last 150 years or so, and you have exactly the predicament we’re in today.

      I understand government responsibilities – those specifically enumerated in the original understanding of the Constitution, that is, NOT the ones supposedly implied – have to be paid for, but a direct tax of any kind plays into the hands of the corporatocracy at the expense of our liberty.

  4. Just look northwest to see the impact of the Danish amendment in Boulder. There is not enough time for me to delineate the negative impacts. Next discussion? Affordable housing. We restrict supply and wonder how to house the poorer people. Well who cares about them? They don’t own real estate. We cannot put a fence around Colorado (much as we may want to) so if we restrict habitat for humanity, maybe they’ll quit coming here. So sorry to see Lakewood travel the Boulder road.

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