The Economic Mythol-Gap

Capitalism is too important and complex a subject to be left to the economists...” --Jerry Muller

Yesterday we were discussing Lee Harris’ important piece on Why Socialism Isn't Dead. In it he makes the key point that socialism’s irrationality is its greatest strength. Since it isn’t operating in the realm of logic, it is therefore impervious to being logically disproved. Although it fails time and again, its failure proves nothing, as failure is simply transformed into a step along the way to inevitable success.

This leads to the startling conclusion that “the whole point of the socialist revolution is not that human societies will be transformed in the distant future, but that the individuals who dedicate their lives to this myth will be transformed... in the present” [emphasis mine]. Paradoxically, the purpose of socialism is not to achieve socialism; rather, “the myth of socialism is a useful illusion that turns ordinary men into comrades and revolutionaries united in a common struggle...”

As I have written before, one cannot transcend religion, for religion embodies objective metaphysical truth. Therefore, if one tries to sidestep it, it will simply return in the form of sub-religious magical thinking, such as scientism or socialism. Just as religion is the most fruitful way to “think about ultimate reality,” capitalism is the most fruitful way to think about economics.

But just as the person who rejects revealed religion falls back on “natural religion” (i.e., what can be revealed by the senses and perceptions), the socialist falls back on what might be called “natural economics,” that is, a flawed way of thinking about the creation and distribution of wealth that is more or less hardwired into our genes.

Remember, only a tiny, insignificant fraction of mankind’s evolution has taken place under modern circumstances. Rather, 99% of our human evolution took place in what is called the “archaic environment.” Where you situate the archaic environment is somewhat arbitrary, but let’s just go back to the emergence of archaic homo sapiens, which was half a million years ago. It is presumed by evolutionary psychologists that our human traits emerged and were selected during this period of time. Included among these traits would be our “natural” way of looking at the accumulation and distribution of goods.

So if we delve into the archaic environment, what can we learn about Economic Man? Certainly he wasn’t a capitalist. One of the most fascinating economics books I have ever read is The Mind and the Market, by Jerry Muller. What makes it so fascinating is that the book is not a history of economics per se, but a history of what people have thought about economics, which is mostly flat wrong, if not plain absurd. In this regard, it is similar to a history of medicine that looks at all of the crazy beliefs human beings have had about sickness and health. Until about a hundred years ago, you were lucky if most medical procedures didn’t actually harm you.

It is the same with economics. Until Adam Smith in the late 18th century, there was no understanding at all of how wealth was created. Hard to believe, but we are still fighting the same battle Adam Smith was, in that we cannot overcome something deeply irrational in the heart of man when it comes to thinking about wealth. By actually developing a true economic discipline, separate from all of the magical thinking that had previously pervaded the subject, Smith unwittingly detached the subject from its deeper irrational roots--as if he literally developed a “conscious economics” split off from “unconscious economics.” But this doesn’t mean that “unconscious economics” will disappear. To the contrary--like the Freudian unconscious, it will simply come back with a vengeance.

What I am suggesting is that in order to understand leftist economics, we must go all the way back to cave man economics, because that’s where it starts. And what do cave men believe? The default setting of mankind seems to be that wealth is fixed, so that it is a matter of fighting over one’s share--one persons gain is another person’s loss. People still struggle with the idea that the creation of wealth is unlimited, and that both parties of a transaction may benefit from it (such as in free trade).

In my opinion, the psychological mechanism of envy was evolved in the archaic environment as an expression of primitive economics. Remember, human beings are fundamentally social animals that evolved in small, face to face bands of only 20 or 30 individuals. Evolution actually selected these small human groups more than individual humans. Therefore, anything that facilitated the survival of these small groups was likely to be selected by evolution.

I believe envy was one of these factors, because envy is in fact a primitive form of socialist egalitarianism that helps to promote social solidarity. Remember, social solidarity is the purpose underlying what might be called the “envy theory” of primordial socialist economics, not the production of wealth. Indeed some (that is, I) might go so far as to say that nothing has changed in this regard: that the contemporary left is an expression of our primordial envy, which cannot help noticing that some members of the group possess more than others. Therefore, those with more must be attacked under the guise of equality.

Just as in the case of our primitive furbears, the purpose of the attack is not to create the conditions that advance the material circumstances of everyone, but to undo the psychologically uncomfortable conditions that make one feel envious. As Helmut Schoeck pointed out in his book Envy (listed in sidebar), the economically successful society must function as if the envious individual does not exist. It must learn to recognize him in his many guises, and ignore him.

Of course, we try our best to do that, and the United States has been the most successful country in trying to ignore its envious citizens, which is why the U.S. is such an economic powerhouse. But in America the enviers have formed their own party that revolves around the expression of their primordial envy. And in Europe the enviers have taken over, which is why European governments work so hard to appease primordial envy--and which is why their economic systems become weaker and weaker (which ends up creating even more envy, as in the rioting in France).

It is fascinating to read Muller’s history of beliefs about wealth, because it is as if the left has learned nothing. Prior to Adam Smith, it was firmly believed that only a shared, top-down vision of the public good would hold society together. The idea that a much more robust order could be achieved by each person pursuing his private interests was literally inconceivable.

You may think that we have transcended cave man economics, but just look at the furor over gas prices. The push for a windfall profits tax is the expression of pure irrational envy. Economically, it would be entirely counterproductive and self-defeating. In the long run, it would actually create more envy. But that is beside the point. Leftist ideas are not rooted in external reality but internal reality. What is important is the emotional satisfaction that can be derived from them, not their actual consequences.

You know this is true because gas prices, adjusted for inflation, aren’t even that high--comparable to 1981. Nor are gas company profits out of line with other industries. Nor, needless to say, is there any furor over all of the thousands of commodities commodities and consumer goods that have come down in price--which they inevitably do--because of the incredible efficiency of our capitalist economy.

In other words, envious man only sees that which provokes his primordial envy. The rest of economic reality goes undetected.

Out of time again. To be continued.