--------

Subject: Economic Prosperity and Law...

(Tuesday, March 31, 2009)

(approx. 4195 words, 8 pp.)

(or)

(or)

(or)

From Plato’s Republic, to Aristotle’s Politics, to Cicero’s Republic, and Adam Smith’s Wealth of Nations, Western man has asked the question, What is the Just Republic, and how does it relate to the morally virtuous and truly fulfilled life of the individual and to the wealth, health, and overall prosperity of the nation? Following what appears to be, now, an inevitable worldwide economic meltdown in 2008, it is time once again to raise these time-honored questions of mankind on earth. What are the same lessons learned, yet again, in this our day? The seeds were laid for this latest collapse in the 1960s with an overall or general social/ cultural shift to a morally relative humanism, which is a foolish sand upon which no society, individual life or economy can be built. Once again, this is the lesson learned, but the dynamic of setting up "a just republic" or "commonwealth" with liberty and justice for all is a much greater question, yet to be answered in the long story of man on earth...

Where is this going in economic theory?

So, where is this analysis of philosophical humanism going in economic theory? Many questions are going to emerge now, easily: What are true "self-interest" and "gain"? Who was Adam Smith, and how do markets work and create "the wealth of a nation"? These are some of the questions we will try to answer in this Part III...

The hedonist/ humanist contention of not just mere pleasure but also mere self-gain generally or advantage etc. as supposedly "good" goes all the way back to Socrates vs. the Sophists, of course, and then to Aristotle’s saying that true "self-interest" is the moral, and then the same is in Cicero on the moral good as always the best course of action for the individual’s true good or interest, practically/pragmatically speaking, you might say. And this is doing one’s duty, and it is versus the hedonist Epicureans' pleasure/self based theories. In truth, historically, there are just a handful of major arguments in the history of philosophy dealing with the Natural Revelation and Special Revelation, and all are based on reason and truth. And both sides humanist and non-humanist think they are the ones being "reasonable" (and finding "truth," the degree to which it exists)!

I do not want to hit this too hard (actually I do!) but Mill, Dewey and Russell (all 3) not only say there is no real moral good, only social convention, but they are famous for saying it, and of course, this is the central thesis of the hedonist/ Epicurean, a refined hedonism though Epicureanism tends to be. This means modern humanism with its material facts and amoral pleasures and pains and no afterlife, no God and no Judgment is a revival of the Epicureans from Greek and Roman antiquity, and in Paul it is a revival of the philosophy of the fool described in Solomon’s writings, and humanism, for Paul, is a philosophy of the morally depraved, who deny a Creator and a natural conscience. What’s new? And, again, the postmodern humanist is pretty much a revival of the Sophists with their no real meaning or truth as their central thesis. Again, what’s new? There are a handful of major philosophical minds and writers in the history of mankind, and you used to learn this in college, but usually not anymore because the great discussions of mankind were removed from the curriculum in the mid 20th century, consciously so, in order to "fix" education into a humanist mind-set. So, time to play school...

As some famous football coach once said to his struggling team (Vince Lombardi?), "Guys, we are going to start with the basics." He then held up a football and said, "This is a football." If you want to understand economics, there are certain key or basic concepts you have to get down, and those are the building blocks for all economic theory. You will note not even the reality of any concepts are allowed by the humanist, so in truth he is hardly really in the conversation from the get-go, but let’s not digress to the unimaginable genius of the truly crazy Plato, who understood perhaps too much the abstract reality of concepts. The central thesis of the infamous Scottish/ British empiricist (that is, materialist humanist) David Hume is there are no real concepts, only material facts, and pleasures and pains. All words are are meaningless grunts or sounds that we place on similar objects. I did video after video after video on this when I did Plato, but in reality it is not very complicated, but what in the world does this have to do with economics and the 1929 crash and the 2008 economic collapse (of the house of cards)? Everything.

If you only have pleasures and pains and self-advantage as the basis for action and life the only possible motivation for action is pure "self-interest," Hume himself argues. This is the question, of course, of Plato’s Republic: is pure self-interest and advantage (for one’s own self, pleasure, power, fame and fortune) one’s real "good" or is the moral truly "the good" for you and the wisest life? Again, this is the same thing Solomon, Jesus, Aristotle, and Cicero also ask, explicitly, no less. The plot now thickens, big time. The famous Adam Smith (1723-1790) is a friend and contemporary of David Hume (1711-1776), and they carry on a good bit of correspondence over the years, and Adam Smith is, of course, generally considered to be the father of modern capitalism. (Hume also has a complicated philosophical, not personal, relationship to Immanuel Kant, but that is another story for another day.)

Let’s do it... Adam Smith and The Wealth of Nations

In essence, what happens in economic theory is Adam Smith attempts to, and I would even say does, create in The Wealth of Nations a theory of capitalism based upon everyone pursuing their own self-interest which results in the society’s greatest prosperity by the Invisible Hand (of God). And in doing this Smith explains not just how wealth is created but how markets work by the Invisible Hand of God and market exchange and each independently pursuing his own ends or well-being creates an over-all wealth of the nation. (This has actually been around in embryonic form since the Middle Ages with the "just price theory" of a willing buyer and a willing seller, best determining the proper value of something.)

In any case, the libertarian (and/or laissez-faire) capitalist is going to take Smith’s notions, indeed economic theories of markets, self-interest, and personal as well as societal wealth and run with it, in an excessive, amoral, and ideological sense, no less. The libertarian (and/or laissez-faire capitalist) is going to argue in order to have personal and societal wealth, you do not need "morality" (beyond physically harming someone or cheating them). This is a very common argument, the most famous exponent in our time was, I think, Milton Freedman (bless his heart), brilliant though he was. Is this amoral libertarian laissez-faire capitalism true? No, in my opinion it is not. Clearly, this is Hume’s view of amoral (indeed anti-moral) self-interest, and clearly this is the Sophist view of amoral (indeed anti-moral) self-interest. In fact, however, the concept of "interest" or "self-interest" that makes the Invisible Hand of God to create personal and social wealth is not "self-interest," as such, or, that is, "pure self-interest" but rather it is, philosophically speaking, "mutual interest" or "mutual self-interest" (of individuals interacting in the body), whether Smith calls it mere "self-interest" or not.

How this is all going to work out in the society and economics is unbelievably fascinating. Of course, Adam Smith can be read as a laissez-faire capitalism, which the amoral libertarian certainly does, but I do not think that is the best way to understand him for a variety of reasons. The first reason is pure amoral self-interest does not work to make an automatic wealth of the nation. We learned this as a practical matter in 1929 as well as 2008 (with un-regulated over-leveraged markets). Further, if one reads Smith as advocating pure self-interest, you tend then to fall into the theoretical communism (no self-interest) vs. capitalism (all self-interest) dichotomy, which is not the best dichotomy to understand economics, but rather historically and philosophically for economics mutual-interest versus mere self-interest is the best way to understand how Smith’s theory can work to create personal and societal wealth. (This was Socrates’ argument for Athens’ prosperity and the individual’s as well. Cicero had similar arguments of course.)

Smith with his Invisible Hand of God can be read either way in reality, in my view, but the theory, in fact, does not work when based on Hume’s and the Sophist’s view of pure amoral self-interest. The right way to think of things is well-regulated markets versus non-regulated markets (with "no markets’ of the utopian liberal and even communist not even on the table). If you read Smith as pure, amoral self-interest produces wealth (for the person and society) with "no regulation," then "no regulation" becomes the goal of government, and virtually any regulation is in theory harmful, no less.

Will the real Adam Smith please stand up...

No-markets communism also did not "work" practically or pragmatically speaking, for the Soviet Union. No one disputes this today, and it was inherently corrupt besides, but un-regulated capitalism completely self-destructed on a worldwide scale twice in 80 years, once in 1929 and again in 2008, when unrestricted markets didn’t "work" practically or pragmatically speaking. Further, in 2008 this was complicated by an especially toxic mix of corrupt, special interest welfare liberalism coupled with libertarian (un-regulated) capitalism that made matters even worse (with an explosion of bogus paper and government mandated loans). And, in fact, neither special interest welfare (virtually utopian) liberalism nor libertarian (un-regulated) capitalism work alone, let alone in unison! But they are an even bigger disaster when coupled together!

However, the welfare/ utopian and usually amoral liberals (known in America as Democrats) push ahead with their liberalism and special interest politics as a supposedly higher vision of life and a vision of an America, supposedly, based on a hope and change of "justice and "compassion." This is just as the religious liberal pushes ahead in the face of all theological reason and historical evidence with his, supposedly, higher vision of religion which has, foundationally, no real moral good, atonement and resurrection, but that is another subject for another day.

In economics today the non-regulation capitalist libertarian has as much a false ideological commitment as the welfare/ utopian liberal because in the face of all evidence and reason going back years, the libertarian will not give up his ideological commitment to unregulated markets even when they have virtually destroyed a nation and the world and its economy twice in 80 years. Let’s not forget both 1929 and 2008 were preceded by a decade or more of wild even infamous speculating and leveraging in the "free" unregulated markets.

There are reasons the liberal and libertarian each hold out against almost all reason and evidence even when their theories have completely failed. The liberal (and even radical) tends to think, "I have such good intentions, my economic liberalism must be correct and just, and it has just not been rightly done yet." On the other hand, the economic libertarian, falls back on the reality of market forces, most famously developed by Adam Smith, no doubt, but goes into an ultimately irrational over-commitment to market forces without regulation (though market forces basically are true and quite real, which the utopian liberal cannot understand). There is some truth in both positions, of course, but both are inherently extremist and impractical and each alone a bad foundation and certainly incomplete, and in the bigger philosophical picture liberal/ utopian welfare state "capitalism" and non-regulated libertarian capitalism tend to be to two sides to the same humanist coin, which has been the object of attack of Socrates, Aristotle, Cicero, Augustine and so forth for over 2400 years.

The heads and tails of this humanist coin are the liberal/ utopian welfare state on one side and non-regulated libertarian capitalism on the other, but both are generally historically seen to be in opposition to harmonious, mutual-interest of individuals in the body or commonwealth models. Again, most of this is specifically in the great thinkers like Socrates, Aristotle, Cicero, and Augustine as well as in Paul. Indeed, this is the central point of their thinking, namely: starting with the moral life of the individual, treating others as you would have them treat you in our common humanity (with not mere self-advantage as foundational for the individual), and the great thinkers then develop a theory of justice for the state, where it is like a person or human body writ large with a harmonious moral interaction of the parts (different though the parts are in specialization says Plato, Paul, and Smith) for the benefit of all or the wealth, health, and well being of the nation. Each pursues his own interest, not that of the state or group, but as each pursues his own moral ends, or good, it tends to benefit the whole group or economy. (And you probably did not learn this in college I would bet, but I sure as hell did, and you should have, most of it anyway. This is very, very serious stuff.)

Personal righteousness and accountability before God is the issue for the individual, and as people so interact socially in the marketplace, each pursuing his own business and function, by the Invisible Hand of God it produces a wealthy, healthy, and generally stable economy and society. The issue for economic social policy is good regulation or truly desirable regulation, and this requires wisdom and wise leadership and legislation, all of which are woefully lacking in today’s world whether in America or otherwise! Be that as it may, the ultimate end or goal for the state historically is seen to be not simply a harmonious/ moral interaction of the parts but, in fact, "justice," in the same way that "righteousness" is the end or goal of the individual in living the wisest and truly most fulfilling life.

However, if the wise end of the individual is "moral righteousness" or good (and not simply indulging the passions), and the desirable end of the society or state or republic is "justice" with its harmonious moral interaction of the parts, then you open up the ultimate can of philosophical worms here because this is fundamentally the question of the relationship of social and political theory on the one hand, and economic theory and the wealth of nations and individuals, on the other. This is still the basics, but we are starting to move into upper level stuff here: the relationship between personal moral righteousness, justice, economic theory, and political theory. Still, this stuff used to be taught in college in its basics, anyway, and not only was it taught, it was generally front and center, foundational, central, etc.

It is time to look briefly at the unsurpassed and generally unequaled modern thinker John Locke. John Locke was arguably the central philosophical figure for the American founders and the formative thinker for the British Empire until he was displaced by the faulty, humanistic so-called "utilitarianism" of John Stuart Mill and others (even Bertrand Russell concedes this point, but thinks Locke’s demise was for the better, of course). In any case, we are going to have to say quite a bit more on markets and well-regulated markets before this series is over because they are so misunderstood, but we are still trying to establish the basic components of the discussion. ("Men, this is a football.")

Markets, theories of markets and how they work are, of course, central and important to capitalism, but the truly foundational question of capitalism is, well, capital. This is, of course, money (goods, etc.), but in reality the philosophical basis for the concept of capitalism is "property" or private property. One can truly say, "This is my money. This is my stuff. This is my land. This is my house (at least as much as I have paid for!)." You get the idea. The concept of property is, obviously, inherently tied to the concept of justice. (Hello?) If something is "mine" it is inherently unjust (virtually) for any individual or group of individuals or the state to take it away from me without due process of law, and furthermore, if there is a higher moral law or natural law (which there clearly is) taking "my stuff" can even be unjust with due process of law! That is, we can and sometimes do make bad and unjust laws, but that is another subject for another day.

Locke was a social and political philosopher among other things, and he had numerous important and famous things to say about democracy, the rule of law, education, consent of the governed, the supposed divine right of kings, and so forth, but he also had important notions of economics and property (with some complications) and about the presumed natural state of man. To keep this simple, his argument goes like this: If I go out and fish in a pond, and catch 10 fish, for Locke, in theory, they are mine and my property, justly speaking, because I did the work. This is apart from the complication of who owns the pond, of course, but Locke says, in effect, (in a different example, I do not recall) "forget who owns the pond. We will call it a primitive state of man, and nobody owns the pond so there are no overriding conditions." What Locke is trying to do is establish a notion of real property, real ownership (metaphysically speaking), and what is "just." (And this is where the infamous Karl Marx is going to aim all his guns!)

Further, as many people have pointed out, this metaphysical reality of property and justice (in the nature of things) is reflected in the 10 Commandments of God, no less. Why is there a prohibition against stealing by God? Because somebody is taking something that is really not theirs! Right? Not complicated, indeed obvious, indeed so obvious it is "self-evident" Jefferson would say, and he did so say, specifically, as I recall! You could actually pretty much argue that property is not only a metaphysical reality but a human right! I think without question not only Locke and Jefferson but virtually all of the American founders, as well as God, would agree!

The plot thickens a bit here because the idea of property is an abstract concept, as justice is, but they are real concepts and realities, though they are abstract realities (a la Plato, right?). But the fact is "property," "justice," "moral good," and in fact any and all abstract reality (metaphysically and ontologically speaking) is off the table for the humanist. Indeed, that is the very point of his humanism! There is no realm of abstract truth; words are ultimately just meaningless labels and sounds, say the Sophists (as central to their position), says David Hume (as central to his position) and as say our good ole "friends" Marx and Engels, as central to their position. (Dialectical materialism, it is called. Could I make this stuff up? And, of course, abstract truth is supposedly irrelevant "superstructure" to cover class interests, etc.)

Okay, now what? I have 10 fish, I have caught them, and they are mine. Very simple, very straightforward, not complicated. But what will Marx and Engels say, as empirical-facts-only materialist humanists? Marx and Engels will confront me (with their theory and revolution) and say to me, "We see the fish, and we watched you catch them, yes, we did, but we cannot (physically) see your ‘mine,’ sorry. It ('mine') is not an observable material fact."

‘Mine’ for them is just one abstract concept among countless thousands of them, and it is no more real than any other abstract concept. Bottom-line? "Give us the fish, or we will kill you." And I protest, of course, "This is not just!" And they say, "There is no ‘justice’ upon which to act or not to act. ‘Justice’ does not exist, only power and inevitable forces of dialectical materialism and of class or self interest, and we want your fish, and we have a gun (power/ might of the state, etc.), and you don’t, so give them to us or you die." It is really a very simple argument when you think about it?

If you really want to know how crazy this gets, a famous communism slogan for years was, "Property is theft." Meaning "the property of the capitalist" is "theft" which he has stolen from the surplus labor value of the worker, etc. (This amounts to, "We can see you holding that stock certificate of ownership, but we will take it, or shoot you.") Engels goes so far as to say the American founders just thought they were trying to establish Justice with their revolution and Declaration of Independence. Those were actually just meaningless words, he holds. Class self-interest is one’s only basis for action whether one is conscious of it, or not! The great irony is, of course, that dialectical materialism was itself not only an abstract theory of supposed truth but a faulty if not empty superstructure or metaphysical castle in the air used simply or primarily to justify their revolution! And, hence, it was full of self contradictions, that totally destroy the theory as having any real intellectual validity. (Countless people have pointed this out over the years.)

In any case, if you say, "Property is theft," or "Our workers’ revolution is just," you are (according to dialectical materialism) making virtually meaningless statements about your own theory and revolution in order to justify yourself! You are, yourself, appealing to concepts of theft and justice, which you have posited as meaningless in the first place! So, we can say without any question there is a real (metaphysical) concept of "property," and there is a real (metaphysical, even ontological) concept of "justice," and neither are specifically material facts as such of course, but so what, neither are value facts. There are real values, and there is a real thing justice. (All philosophy is a footnote, or series of footnotes, etc. to Plato!)

We are getting closer to being able to do substantial, true economic theory and to see how this is going to play out not just theoretically or philosophically but in history, so join us next time... in the spring of 2010.