Economics of Good and Evil

The book tries look for economics in ancient myths, stories, philosophy, religion and belief-systems - and in the second part, to do the exact opposite: to look for myths, stories, philosophy, religion and belief-systems in today's economics. Only to find out, that these two areas are inseparably interwoven and that there is no easy way to be “value-free”, “positivistic” or without opinion, i.e. without the Concept of good and evil.

The general perception of economics today, it seems to be, is that laws and mathematics are a basis of economics, and that culture, philosophy and ethics are a mere :icing on the cake", but in fact, I argue, it is exactly the opposite: mathematical apparatus and laws are a mere tip of the iceberg. Under the water, our whole field of is based on a long history of culture, philosophy and ethics. I try to show this using old and modern myths and stories, ranging from the Epic of Gilgamesh, through Bible, Greek classics all the way to Matrix and Lord of the Rings. In other words this book skips the mathematical apparatus and tries to look beyond, in a way being meta-economics, trying to discover and describe the very soul of economics.

Law vs Gr(e)ace

They key problems, that we face in economics, are moral, they are about good and evil. So, practically speaking, do the Greeks deserve their bail-out, should they be saved, should their debts/sins be forgiven? Shd somebody else carry their debt/sin? Is there such a savior and who shd it be? from an internal point of view (stoic ethics), they do not deserve their salvation, yet from the perspective of what the impact wd be (external, utilitarian ethics) the answer seems to be the opposite. even here the economic question is, ultimatelly, about good and evil results of the bail-out. not to mention the striking similarity to the debate that our Christian culture is holding for millenia, that re-emerges: the law versus salvation mercy debate.

Without soul - Zombie Economics

From another take: the real question in economics is not whether the economy works or not, but the true question is, does it work the way we want it to work. if the economy looses its soul, or if it is neglected, then we can come up into a situation which reminds of a zombie, ie. body (which is effective and works well, perhaps too well) without a soul (tenderness, meaning, regard for non-calculable, soft etc.). Again, of this we are warned against in many old and modern myths and stories: something that was supposed to serve us, gets "a life of its own" and starts to control us. Lets mention Matrix trilogy here - we created the robots to serve us, but at the end of the day, we have been enslaved by robots which use us for their ends. Or take Aladdin's lamp and many other stories of old. Even the Ring of Power was too strong for even the strenght of Gandalf, Galadriel or Elrond - this is the reason, they never even touched the ring, knowing fully well, that it could enslave them and turn the good in them to evil.

Interest(ed)

A fine example of this is the thousand year old debate over the usage of the interest rate. Take any wise man of the past, starting from Moses, Aristotle, Babylonian codexes and Koran - all the way till Tomas Aquinas: they all warned us against the usage of interest rate. their argumentation was often not clear but one thing unites them all, it is as if they were saying: we do not really understand it, its a very powerful instrument, avoid it as much as you can. today, however, we have made it the cornerstone, a pillar of our societies. We thought we understand it, that we can control it, count it, master it, but in fact we do not. it is clear today that, say the Greek interest rates, should have been much higher and - from the benefit of hindsight, we now now that we have miscalculated it grossly. And that something, in not just European but global scale, that we thought is a fine servant (debt and interest rate) producing a huge part of growth of the last generation, can very swiftly get "a life of its own" and turn into a cruel master, one we cannot master, which dictates to us now what to do and leads to a bankruptcy of sovereign countries and threatened to destroy even more, euro notwithstanding.

Oldest and newest business cycle in history

The current crisis brings us to the oldest business cycle known in the written history of mankind. it comes from Genesis 41, the well known story about Pharaoh's dream about seven thick and seven lean cows. This Joseph interpreted economically, technically this thus being the first macro-economic prediction (14 years in advance) in history: seven good years will be followed by seven poor years. now, the advice that Joseph gives to Pharaoh was, in a way Keynesian: in good years do not eat everything that grows, but save a portion of it and use it during the bad years. quite contrary to this ancient wisdom, which a seven year old is able to grasp, we behaved contrary to this wisdom. We did not decrease our indebtedness, let alone create surplus budget reserves on the level of our governments, only to be surprised a couple of years living off debt, that our store houses are empty, making the crisis much more harsh than it had to be.

Not depressed, mania-depressed

There is a wrong diagnosis of our situation: we think that we are in a depression. But in fact, we are not depressed, we are manic-depressed. if one needs to treat a manic-depressive patient, one must first address his or her manic stages. stages that the patient enjoys the most. here they believe that they are immortal, spend much more money than they can afford, are very creative and, alas, even highly effective, and believe good times will last forever. This is the core problem, the problem of Ireland (not of Greece) and, ultimately the problem of America. If those highly efficient bankers worked half the time they actually did, US and Ireland would probably have half the problem they have today - or none at all. the depression came from mania, and manias we have to thus treat first. And also the medication is different: a depressed patient is treated by anti-depressants, and it is good news when he gets his happy mood back. a manic-depressed patient, however, is treated with mood stabilisers (decreasing his mood-swings, decreasing his energy in manias and adding life-energy in depressions). And, alas, if a manic-depressive patient is getting his good spirits back (GDP growth returns), this is not necessarily good news. A relapse to new mania is often close.

In other worlds, this book tries to take a look at our current situation from an non standard with and tries to seek new areas, where answers might be found.

About the Author: Tomáš Sedláček (1977) is a Chief Macro-economic Strategist at ČSOB. He served as a non-political expert advisor to the First Deputy Prime Minister and Minister of Finance of the Czech Republic, with special responsibility over fiscal consolidation and the reform of the tax, pension, and healthcare systems. He also served as an economic advisor then-president of the Czech Republic, Václav Havel.