Small is Beautiful: Part 1

This summer I am reading through a number of classics in the economic tradition. A post about this project can be found here. This is a part of my independent study examining the assumptions great economists have made about the nature of humanity, how they have implicitly and explicitly answered questions like “What are people for?” and “How then Shall we Live?”. 

Chapter One: The Problem of Production.

Argument: 1. Our sense of having achieved limitlessness, come of age, and solved the problem of production, is an illusion. 2. Therefore the idea that if we can just develop a perfect political system so that human wickedness disappears and everybody behaves well no matter how much wickedness is in them, is bunk.
–> I agree with this. I concur that the implicit liberal view that the world will achieve perfection when we have created the perfect system is false, but I think this truth stems from more than the idea that we have not solved the problem of production. 

Argument: “The modern industrial system lives on irreplaceable capital which it cheerfully treats as income.” We are counting the world’s natural resources as income instead of capital, and are using it up. “If we treated them as capital items, we would be concerned with conservation.” But we don’t, so we see these resources as expendable.

Chapter Two: Peace and Permanence.

Argument: 1. It is not the case that universal prosperity would be the soundest foundation of peace. One of the attractions of the idea that prosperity –> peace is that it bypasses the question of ethics: no need for sacrifice – on the contrary. The message to the poor and discontent is to be patient, or else kill the goose that will assuredly in time lay golden eggs for them. 2.  But more prosperity means a greater use of fuel. And so these arguments must be questioned on the basis of whether the basic resources are available for the universal and limitless prosperity implied in this argument.

Keynes argued that economic progress is solely obtainable through harnessing the drive of human selfishness. But if human vices of greed and envy are systematically cultivated, the inevitable result is nothing less than a collapse of intelligence, happiness, serenity, and thereby peacefulness of man.

Thus the expansion of needs is the antithesis of freedom and peace. It is chimerical to build peace on economic foundations that rest on the systematic cultivation of the very forces that drive men into conflict: greed and envy.

Argument: Small scale operations (no matter how numerous) always minimize harm to the environment because their individual force is small in relation to the recuperative forces of nature. Additionally, men organized in small units will take better care of their bit of land or other resources than anonymous companies or megalomanic governments which pretend to themselves that the whole universe is their legitimate quarry.

Chapter Three: The Role of Economics.

Question: What sort of meaning does the method of economics actually produce?
Argument: Out of all the aspects in real life that must be seen and judged together before a decision can be taken, economics supplies only one – whether a thing yields a money profit to those who undertake it or not. This is a fragmentary judgement. Moreover, these judgements are methodically narrow. They give more weight to the short than the long term, and they are based on a definition of cost that excludes free goods, which is to say the entire God given environment, except for those parts of it that have been privately appropriated.
–> To this I would argue that he gives an economic analysis of cost the short stick. First, economic cost takes into account opportunity cost, which should account for the things he would like to be accounted for. Second, the economic conception of utility is designed to take into account noneconomic values.
To this second point he responds:
To press noneconomic values into the framework of economic calculus, economists use the method of cost/benefit analysis. This is a procedure by which the priceless is given a price, and to undertake to measure the immeasurable is absurd. It is but an elaborate method of moving from preconceived notions to foregone conclusions.

Argument conclusion: It is inherent in modern economics to ignore man’s dependence on the natural world.

Argument: The total suppression of qualitative distinctions, while it makes theorizing easy, at the same time makes it totally sterile. In economics, growth of GNP is always a good thing, irrespective of what has grown and who, if anyone has benefited. The idea that there could be unhealthy growth is a perverse idea not allowed to surface. The concreteness of quantitative differences is beguiling and gives them the appearance of scientific precision, even when this precision has been purchased by the suppression of vital differences of quality.

Argument: There are differences between various categories of goods which cannot be disregarded without losing touch with reality. There are four categories: primary:non-renewable, primary:renewable, secondary:manufacturers, and secondary:services. The market knows nothing of these distinctions and equates five pounds pol to five pounds wheat to five pounds shoes, to five pounds hotel accommodation.

Chapter Four: Buddhist Economics.

Argument: It is an assumption in economics that work is a cost, to be minimized. The consequences that flow from this view are endless. To organize work in such a manner that it becomes meaningless, boring, stultifying, or nerve-racking for the worker would be little short of criminal. Equally, to strive for leisure as an alternative to work would be considered a complete misunderstanding of one of the basic truths of human existence namely that work and leisure are complementary parts of the same living process and cannot be separated without destroying the joy of work and bliss of leisure.
–> YES.

Whereas the Buddhist sees the essence of civilization not in a multiplication of wants but in the purification of human character, the economist’s fundamental criterion of success is simply the total quantity of goods produced during a given period of time. From a Buddhist point of view, this is standing the truth on its head by considering goods as more important than people and consumption as more important than creative activity. Since consumption is merely a means to human well-being, the aim should be to obtain the maximum of well-being with the minimum of consumption. In contrast, the modern economist measures the standard of living by the amount of annual consumption.

Chapter Five: A Question of Size.

Argument: Default towards bigness –> people do not produce the essentials of life near them –> all structures are threatened and there is social breakdown –> the result is a dual society without any inner cohesion, subject to a maximum of political instability.

Argument: In the affairs of men there appears a need for both freedom and order. We need the freedom of lots of small autonomous units and the orderliness of large scale unity and coordination.

Argument: The economic calculus as applied to present day economics, forces the industrialist to eliminate the h man factor because machines do not make mistakes, and people do. Hence the enormous effort at automation and the drive for ever larger units. This means that those who have nothing to sell but their labour remain in the weakest possible bargaining position.

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