The Occupy Wall Street movement and the Tea Party are both recognizing that Western capitalism has become a zombie, a body separated from its soul. Excerpt from the program on October 18, 2011.

TOMAS SEDLACEK, National Economic Council, Prague; Lecturer, Charles University; Author, The Economics of Good and Evil; Advisor to Vaclav Havel

 

Why is the book called Economics of Good and Evil? The title itself is a provocation, because economists are not supposed to talk about good and evil: the first rule of economics is, You do not talk about good and evil.

We’re sort of trying to get back into the Garden of Eden, before Adam and Eve did the fruit thing and started talking about good and evil, but before they had no knowledge of good and evil, and this is something that we try to do in economics. Consequently, Milton Friedman said once in his famous article, “Essays in Positive Economics,” there’s a famous quote. The argument goes that economists should not have normative judgments; we should only speak of positive things. In other words, we should not be value-laden; we should only describe things as they are, not the way we want them to be. So let me here quote the master himself: “Economics should be a positive science.”

Now is that a normative or positive statement? That’s a normative statement. Milton’s values happened to be that economics should be value-free – which is by the way a huge value, especially to us economists. He was describing economics not as it is, but as he wanted it to be. This is fine, but let’s not pretend there are no values in economics.

What I tried to do in the first part of the book [is] look on economics. I look for the economics in myth, religion, theology, philosophy, the belief systems, only to find a lot of that. I was actually expecting to find very little. There is tons. In the Epic of Gilgamesh – which is the oldest epic or story that we have, way older than the Bible, for example – there is the very first protest in the history of mankind. It had also something to do with the wall. You know, we have Occupy Wall Street? In Gilgamesh we had the first revolt of people, [which] had something to do with the wall, because Gilgamesh the king of Uruk was forcing his people into slavery, building his wall around this city. People were complaining to gods, going around with all these signs, and then God punishes Gilgamesh by sending this wild beast called Enkidu.

In the second part of my book, to be fair, I try to look in modern economics for belief systems, myths, religion, theology, philosophy, [and] again [I found] a huge amount of that.

 

Zombie capitalism

Let’s start, for example, with this story that we all know, which is in the Old Testament, the story of the Garden of Eden and the original sin. Now, how to read this economically? I will try to show that it is actually not difficult to read it economically, and, in fact, it is impossible to separate the two. When you separate economics from philosophy, ethics especially or other humanities, it stops making sense. This, I think, ladies and gentlemen, is exactly what we’re witnessing today, with the Occupy Wall Street movement. Isn’t the complaint there? “We don’t know what’s wrong exactly, but something’s wrong with it, and you fix it.” Now, a lot of commentators are very critical about this and they go, “They don’t know what they want.” But isn’t this what we do in our daily lives all the time? “My computer doesn’t work; I don’t know what’s wrong with it; something’s wrong with it; you go and fix it.” It is not their responsibility to come up with the answers; they are, let’s say, customers of the system.

It is our responsibility as economists and humanity students [to come up with answers]. Let’s take an example from modern pulp culture, the horror genre. What happens when you separate a body from the soul? What do you get? You get a zombie. An instrument like a body is supposed to serve the soul – I hope my soul, or whatever spirit or whatever it is in me – is telling my hands to wiggle around in a very funny manner and they do. So the body is listening to the impulses of the soul. When you remove the soul from the body, you get a zombie, which is an inhuman human; looks like a human, but it isn’t human.

That’s the complaint of the Wall Street protestors: We’ve lost the soul. The question here, the debate here, isn’t whether economics or markets or capitalism work or not. I think they do very well. The question is whether they work the way we want them to work. Suddenly there you have a normative statement. You can’t really duck it.

Does capitalism work the way we want it to work? The answer is, of course, not absolutely. In many cases, yes; some cases, no.

So you get a zombie. This, I think, is easy; but you also get a ghost. If you separate the body from the soul, you get two elements, one of them is a zombie that attacks you. The other one is a ghost, sort of a psychological super ego that blames you. What does a ghost do? Ghosts don’t really attack, ghosts stare; they have this deadly stare, they scare you. I think this is exactly what happened. If you divide what always was together and is supposed to be together – and I’ll put some arguments to support that thesis – you get ridiculous moral standards or requests of the market. In this I think the Tea Party people and the Occupy Wall Street people are similar, in [that] they both overestimate the value of the market. One blame it for every evil in the world, that human beings are stupid and egoistic; well, OK, what does that have to do with capitalism? And the Tea Party movement overestimates the power of the economics, because they think that unregulated markets is an answer to every trouble that we have. So in this they could both shake hands.

Here you have a body that’s supposed to serve us. It no longer serves us; it does a thing of its own, and [you have a] super-ego, too critical, ethical sort of a request of the economy. We need to put this back together. Now, the whole idea that economy is a machine is something that needs to be questioned. This is one of the myths that we have in our heads; I have it in my head, I think this is quite common, that the economy is a physics-like machine that works with rules that you do not compromise, that you can’t debate. Around it we cushion it with the government, we cushion it with aid, we cushion it with NGOs, we cushion it with whatever.

This is a wrong understanding of economics, and it can lead to many errors of perception. There are so many things you can’t see if you look at one specific scientific field alone.

[The movie The Matrix featured] a machine that was supposed to serve us, but we end up serving it. If you remember, human beings become something like a battery that serves the robot. This I think is the feeling that many people express. Something that’s supposed to be an instrument gets a life of its own.

How would an economist read The Lord of the Rings? Well, the book is called The Lord of the Rings; the CEO of the Rings, we would say. A proper question is, Who is the CEO of the ring? Does he control the ring? Does the ring answer to him? The whole trilogy is about him trying to gain control. He looks for it, he seeks the ring, but he can’t exactly control it, because it’s sort of a disjointed ownership. You can go even further than that and say, “Well, how is the pecking order really organized?” If you destroy the ring, you destroy Sauron. So who owns the ring? Who is the lord of the ring? The ring, exactly. So here you see another example of a partial object: the ring enslaves. The ring has a will of its own, like Gandalf says. Why did Aragorn never touch the ring? Why did Gandalf never touch the ring? Why did Galadriel never touch the ring? The ring is in control and it enslaves. The ownership there is very, very complicated.

Now, let’s have a look at the very first ownership; here we get back to the Bible.

The original sin was always read with sort of a sexual connotation, especially in the Medieval times; something sexual must have happened in the garden. Well, we don’t read anything about any sex, unfortunately, in the garden. The only thing we read [is] that they consumed something that they were not supposed to consume. So to an economist, the reading here is easy: it was a consumer sin. It actually repeats the word consume three times in one sentence: She saw, consumed, gave the apple to consume to Adam, and Adam also consumed. Three times the word [consume], so it’s really the economic reading there [that] is much more straightforward than the sexual reading, which is unsupported. You know, to an economist, this makes much more sense.

My second point is they didn’t eat it out of hunger; they didn’t need to consume it. We have this story of the 13th chamber, the fairy tale about this rich king inviting this poor girl to his castle. [She] can do whatever [she] wants to do in all chambers – only one chamber do not open. She always does open [it], and again, she doesn’t really need to open that chamber; it’s not like she doesn’t have anywhere to put the vacuum cleaner. We always make the biggest mistakes out of unnecessity.

So [Adam and Eve] consumed something that they were not supposed to consume, and this is the reason they were thrown out of the garden, the story says. It is as if God is saying, “Because what I gave you wasn’t enough, nothing will be enough.” So Eve gets cursed, I call it a curse of demand: You will want, but you will not get, your wants will always run away from you. And Adam gets the curse of supply: You will work, but it will not be enough to satisfy her demands. There you have demand and supply right away in Genesis, chapter four, and it makes perfect sense, because you will work in the sweat of your brow, and the nature will be against you, you will loose this harmony.

We read the same topic [of lost harmony] in the story of Prometheus, when Prometheus and his other brother – whose name is really difficult to pronounce so I won’t say it – are charged with empowering all animals, including human beings. So to turtles they give the nice little shield, to tigers they give teeth, so that they can protect themselves in nature. Only, bummer, when it came to human beings, they already gave everything out. Human beings don’t have anything special. We don’t have very strong teeth, we don’t have very strong nails, we can’t really run, we can’t hide, we’re usually very pale. So Prometheus comes up with this idea, “OK, OK, OK, we ran out of gifts; let’s go and give them knowledge.” It is represented in the arts, it is represented by fire, but [the legend] actually says techne; this is translated as knowledge, from the gods to human beings, and this of course makes everybody very angry and as a punishment they send Pandora. Pandora is also the first woman created in Greek mythology, only she wasn’t created as a help but as a curse. One of her curses is also the curse of labor: what was once pleasant now becomes tedious and toilsome. So here knowledge is traded off for harmony. They lived in harmony before that; they gained knowledge – this is typical of Greeks. The knowledge in Greek terminology is technical, scientific, philosophical; in the Hebrew it is also knowledge, but it’s more moral, knowledge of good and evil.

In the Epic of Gilgamesh, there is also a story [about] how animals become human beings. The lion gained reason, and animals ran away from him. Again there’s harmony with nature we’ve lost because of knowledge.

There’s also a beautiful story about this in the Book of Genesis. I will try to argue ethics and economics [are] inseparable; [in the story], the first ownership of mankind was what, it was the leaf, which later became skin. We read in all textbooks that human beings started dressing because they were cold. Why did Adam and Eve cover themselves? Shame. Here you see the reason for ownership wasn’t necessity but it was psychology, [a] moral feeling of inferiority that we try to cover up by covering literally up our most sensitive and most intimate parts.

This is the moment where economy is born, because if you become what I call naturally unnatural, since then we feel much more natural when we are unnatural; this is true psychologically, and from other aspects as well.

Let’s take a very stupid example. This [auditorium] is warm enough for all of us to sit here naked. In other words, to be natural, the way we were born – you don’t really see me, you see my face and my palms but that’s it. But if we sat here naked, we would feel very, very unnatural because we feel more natural when we are unnatural. In other words, I feel much more Tomas Sedlacek when I am in the skin of [clothes]. This is the engine of economics. This is the very reason we want an external thing, because of some internal disbalance, the book of Genesis tells us.

  It’s useful to take a look at the very first business cycle in the history of mankind: the story of Joseph. Pharaoh has a dream. He dreams about seven fat cows and seven thin cows. He doesn’t know what to make of it, so he calls upon Joseph and [asks him the meaning of the dream]. Joseph says “Congratulations, Pharaoh; you just had the first-ever macroeconomic prediction – 14 years ahead of time – in a dream.” We usually get it wrong two years ahead of time. He got it right 14 ahead. In other words, you will have seven very good years and seven very bad years. [Joseph says], “In the good years, do not consume everything that grows, but save. In the good years, do not eat everything that grows, but save one fifth of it and create grain houses, so that in the bad years you can invest and you will not die of hunger.”

In other words, translated into economics, in good years, create budget surpluses so that you can run budget deficits in the bad years. Take the energy from the good years and teleport it, so to speak, into the bad years.

  What are the lessons from that story? First of all, the first sign of the future was revealed in a dream. The question is, why was it revealed to Pharaoh and not to the Hebrews? That’s a different question. Also [it shows] the value of information. Egypt enslaved all the nations, because of this piece of information.

So today what reveals the future of the economy today? Models. [Models and dreams] aren’t really that far from one another, because how do you construct a model? You close your eyes.

 

Question and answer session

QUESTION: You’ve just been talking about one of my favorite topics, which is the illusion of control. We have it wherever we turn and therefore. If you wish to comment further, I would be happy to hear it, but there’s something else. At the Hoover Institution, we have a very interesting scholar named Thomas Sowell, and he made an observation a year or two ago: There are no solutions, there are only trade-offs. Would you give us your observation of that?

SEDLACEK: Yes. The basic trade-off is, for example, freedom and specialization. We are – and this is again the image of control – we feel one of the highest values of America and also of Europe, more so I think in America because you have freedom fries, is freedom; we don’t have freedom fries. I think French wine will be soon called freedom wine, maybe.

Here is the image that you can be independent of a society. Well, the more specialized a society is, the less independent you are. In fact, how many of you sit here in a piece of cloth that you made yourself? Somebody, forget about money for a while, somebody gave you that cloth. Do you know his name? Do you care? No, of course not. But you consider it your own. How many of you can find sources of fresh drinkable water? How many of you can hunt, I suppose, here? I love beer, but I don’t know how to make it.

I’m relying for 99 percent of my needs on somebody else while I’m paid for – this is what I tell to my son, it’s always difficult to explain to kids what it is exactly that we’re doing, especially when we’re economists – so I say that I tell fairy tales for adults.