Traducción y audio: Nicole S. Dobianer
In the great business of life, we’re all economists, politicians, business men and executives. Shackle summaries what we might call his definition of economic science in a simple and illustrative manner: economics is in simplified terms, the ‘science of business’. He explains it by saying: ‘Economics is that which relates to business. This, when broadly interpreted, really covers it all. We need to understand that the expression ‘business’ includes the housewife, who plans her domestic budget, extracting the maximum benefit from any expense; itincludes the man who earns his living by looking for a job where his aptitudes are most valued and therefore best paid; it includes the business man, in his most common form, who tries to invent, discover or produce, the cheapest product satisfying the public rendering him some profit; it even includes the government, which as some unfortunately now believe, has been performing the roles of business and consumer.’
The extract clearly establishes four different levels of economic and business activity: 1) the individual, representing the employee or labourer who tries to extract the maximum profit from his physical and intellectual qualities. 2) the housewife, representing the management function of the domestic economy. 3) the business executive, coordinating and taking responsibility for the running of the business, who incidentally is the one, we will be focusing on in this piece of writing. And finally, 4) the public servant tasked with managing the activities of the whole community. Four levels thus with the following management areas: individuals, family, business and state.
To speak of coordinating, guiding, instructing and managing, in either of these micro- or macrocosms, is to speak of the art of governing and harmonizing the conduct of – free – human beings. To govern human conduct in free individuals in the first instance means to try to achieve the best outcome, which is perhaps the most difficult to achieve. In the second instance, we aim to boost the production capacity of every member of the family unit, and by consequence, the family’s economic and social standing. In the third instance, we incentivise commercial and social value creation, harmonising personal freedom and directing it towards a common objective. In the fourth instance, the task is to coordinate and encourage millions of people making up the ‘city state’, while respecting their personal freedom. In this example, we can also call itbusiness, family or political policy. In the broader sense, the term ‘policy’ does not need to restrict itself to the activity of occupational politicians or executives serving the nation.
Politics can be contemplated as fundamental social activity prone to reconcile the diversity of community interests through the exertion of power. We all play at politics in our personal lives. Man is a political animal.
This is why I see economics as a human or personal art form. In fact, a number of economists over the course of the history of economics, have pondered the absolutely trivial question, whether economics is a science, a technique or an art. Specifically Leon Walras, in his book Elements of Pure Political Economics, wonders whether it can be considered a natural or human phenomenon. The origin of the first can be found in the interplay between the blind and inevitable natural forces. Alongside these universal forces exists a self-aware and independent force: human will. Human beings are normally conscious of their acts and can take action in various ways. ‘The fact that human resolve is subjective and free divides all human beings into two types: people and things. Every being that does not know itself and is not master of itself is considered a ‘thing’. Every being that knows itself and has mastery of itself; is a person.’ Economics and its related activity generally speaking offer up results to service the people. This activity, I believe, is more closely related to art, than to science or skill.
In these past two centuries, economics has patented the god-less belief in the inevitable progressive and working character of human history. Rationalism has allowed European civilizations to contemplate their future with optimism ever since the EnlightmentAge. It is believed that scientific, technological and economic advances will determine the continuous well-being of man.
However, continued and significant economic crises have generated chaotic bewildermentof the artistic method applied in diverse sciences: the absence of convergent philosophic thinking, the growing predominance of particular sciences, fast-paced technological innovations, the political and economic effects of industrial revolution (in many ways lacking cohesion), the expansion of communication channels, and the overcrowding and standardization in the education sector … etc. The artistic taste of expressionism triggers state-of-the-art developments, subverts the relationship between form and content, establishes the dominance of the subconscious, and its tendency for theoretical abstractions … etc. It raises the issue of superiority of dream-like powers over the conscious mind; and theoretical abstraction foregoes the consideration of the external environment to comply exclusively with intuitive suggestions.
Given the many different artistic eras, I suggest weneed a newRenaissance revival, this time in economics. In the face of the centralising and obstructive character of the previous era, I believe that factors are surfacing that impress upon us an open and changing dynamic, fundamentally enriching for all participantsthatshare in the information.
This extraordinary dynamic, which also took place in the Italian Renaissance, requires the generation of multiple new energies and knowledge. After a period of great decadence during the Renaissance a new world order arose that was explored with optimism. A variety of world news, including the economic field, bode a welcome return to man’s humanization, who as he recognised his true personality, came into possession of his creative energy.
Civilization presents itself as an intellectual and cohesive movement just like the Renaissance, which revolves around Petrarca’s motto: man as the measure of all things. In the face of sterile abstractions, the index and acronyms that proliferate, the already obsolete collectives and the apparently protective states, the objective of human thought is to reabsorb philosophical, moral, artistic and scientific content and find in it, its very own aspirations. Freedom, free will and human dignity become the most thought about topics and therefore, more determining still. If economics and modern entrepreneurial science do not move closer to this paradigm, then I believe they will fail. Maeztu in The Crisis of Humanity said: “Every true thought, like every geographic discovery, adds to the good, the same way as a good deed. Given that the Renaissance was this great period for art, intellect and economic activity, it remains that it was also an era that considerably enhanced the amount of good in the world”.
In the field of philosophy, humanities, also had to confront earlier conceptions, and today continues to battle the collective framework which lingers in our daily attitudes. Anthropocentrism, on the other hand, converts man in the undisputed protagonist of economic art: the economic artist creates added value for man. We must start, once and for all, to substitute the apparently neutral ‘Homo Oeconomicus’ for ‘Human Economics’. The artistic Renaissance distanced itself from Middle Age abstractionism to emphasize its entirely anatomical representation. We cannot remain in an ‘automatic’ economy, which resolves those human problems with technological indifference that we believe already resolved by incomprehensible laws that exceed our intellect. The realist and Renaissance representation of the natural forms are accompanied by the search for an emotional expression that clashes directly with the econometric trigonometry. It is about discovering the human element as fundamental to every economic task and trying to marry the external natural states provided with willpower. In the face of antiquated industrialism and radical and ideological environmentalism we need to make man see inspiration in economics’ work of art.
In this task to humanise economics, we, professors, have a particular responsibility. The renewed momentum that comes from youthful learning taking place in the many lecture theatres of universities and numerous business schools, is a development that in the western world is apparently well-trodden and mundane. However, it has a significance for the future that is difficult to put into words. Therefore, I wouldn’t want to lose the opportunity in this introduction to dedicate a thought to the two-sided task of a professor, which consists in learning as well as teaching. These two aspects are so interrelated that they have to be united in one person. As a professor, you learn much from teaching and teach a lot about learning. How many times have I already learnt something while I was teaching! How many times have I thought I was teaching while I was also learning!
The term ‘teaching’ originates from the Latin word ‘insignare’, which actually means to signal or point out, and which is often used to name a structured system that provides instruction in a particular subject with the efforts of professors and pupils.Teaching requires the complete subjectivationof what is taught by the pupil. In order to achieve this, you cannot reduce the act of learning to an activity restricted to lecture theatres, because this is where you transmit a set of facts and doctrines. This subjectivation process is especially important because of its practical and every-day components when it comes to economics. You can teach something without necessarily causing a change in the individual’s conduct, however, the best instruction occurs when what is learnt is also put into practice. The end result that is targeted by all science is ‘knowledge’ or ‘wisdom’ within its particular field. The aforementioned knowledge grows in quality the more it matches the human spirit; and becomes truly human.
Broadly speaking we can say that education happens where something valuable is transmitted, which is then effectively put into practice by the instructed individual. Good education, on the other hand, demands that the process isn’t simply a mere transfer of information, but that the fundamental conceptual foundations on which the information is based are revealed. To this effect, instruction is often understood as a dialogical activity between the individual teaching and he/she receiving education. In either case, recognising the most efficient instruction methods remains a difficult issue to resolve. Numerous centuries spent educating individuals have yet toprovide the desired answers. Furthermore, until only recently, our culture was so elitist and the knowledge available so smallcompared to today, that the need to find answers had simply not arisen yet.
Another characteristic of today’s quality teaching comes from our culture’s inherent ability to change and adapt.As a result, content is not something that can be determined at one time and for ever more, nor, much less, can we irresponsibly force teachers, to continue to teach the same things without taking account of changing times. It is the mission of the teacher to determine the subjects that constitute, according to Ortega, the nucleus of present day ideas. The evolution of and adaptation to actual reality cannot be deterministic; but must be creative and in harmony with progress. It must be the progress per se that admits variation and free generation.
Education can have the consequence that the pupil feels sheltered by the rules that have been presented to him, without being able to explain them or having truly understood their meaning. This, evidently, is contrary to what is inherently human. The individual shows no self-reflection, butmere repetitive conformism, which impedes any development of one’s own personality. Genuine instruction transcends this initial stage to demonstrate the principles on which the information rests. In this way, the pupil is not sheltered by rules but will be capable of calling upon them and explain them. The latter, makes it potentially self-critical and as a consequence, eliminates conformism and the indiscriminate application of rules. In this way, progress and personal development is facilitated, providing opportune answers.
University education must present these essential multi-secular characteristics, which include the universal concern for wisdom, freedom in one’s research, spontaneity in the relationship between master and disciple or independence from political power. Universities have created a way of life inseparable from worldly western understanding. In my opinion, humanities cannot be disconnected from professions related to economic management, without leaving them reduced to exceedingly technical actions. I do not believe that it enhancesunderstanding when it is so radically separated from the scientific and technical culture of the humanities. We would need to restore what it means to ‘be an academic’, which implies a global way of life and working and a vision of the world as stable but dynamic and open. If one of the substantial assumptions about our society is that we will be moving more and more towards a society of knowledge, then the centres of higher education need to consider themselves as lighthouses of vital cultural attraction. Knowledge is of rising social value because it is also considered a vehicle of culture and an instrument to progress socially and economically. In this new knowledge society, we can no longer maintain the schizophrenia of ‘two cultures’ in which humanities and technology polarize and antagonize each other. The very word ‘university’ means openness to the universe, unity of that which is diverse, the combination of a multitude of efforts.
Focusing in more detail on the individual, it so happens that when the economic, entrepreneurial, financial, ethical thought process create guiding research models, they’re following, more or less closely, the tracks of classical Platonism. The model of the ideal, utopian city, which the researcher or decision-maker carries within himself and which is the ultimate root of the value principles that guide his actions. This imaginary city needs to be transformed through reflective thought, experience and scientific contemplation in order to adapt it to a city that’s natural and objective.
Ethics, as well as economics,is a science that is exceedingly practical in nature, as are its objectives. The objectives in question are achievable by man. It is not about conjecture. For example, the goal is not to surmise about the good, but to effectively act ethically in your day-to-day. For this reason, applying the myth about the cave to relate to the subjective and objective in ethics and economics suits it so well. It is also worth complementing it with the Aristotelian explanation that relates the object should beware to not fall into the extreme duality between the world of ideas and reality. Aristoteles’ realist perspective could not accept that the world we experienced was not actually real and that reality was really part of a world of ideas, separate from the world we lived in. Being real was in the now, our experience wasn’t about the shadows of reality. It is rather often our eyes that perceive things in a distorted fashion and create a kind of misty reality from it. The purpose of research is to eliminate this very mist and help the individual tune in to the rich variety of the objective. Its purpose lies not in creating it, but helping to discover it. We need to apply the rules of thebehaviour of knowledge to reality, and not the rules that come from invented principles or external proposals which try to force and distort what isfrom what we believe it should be.
This article can be summarized by saying that not everything is coincidence, mess or chaos. There is a universal elf which plans every left and right turn; the economic models and theories; the scientific and political ideologies; specific ethical ideologies; gender, race, age and origin; attracting towards its magic principles all that which can be discerned in solitary intimacy, as well as the rules and decisions which are adopted in the economic realm. I would therefore like to contribute to the discovery and explanation of this universal elf, which attracts the truth of developments of the different human sciencestowards itself and declare me part of one of these small, infrequent and sensible crazies that swarm around this world filled with continuous direct and subliminal compulsion. Peace-loving and optimistic audacity is never bad in the long run when it comes to the defence of true freedom.
The thoughts that are elaborated upon in the following pages were developed a few months before the beginning of the pacifist revolutionary restructuring of some Eastern European countries. They have therefore not been spurred by unforeseen events but rather by a serene analysis,resulting from various readings, that have conditioned economic growth and the opening of sufficiently broad channels through which the economic power of freedom could flow. I understand it as the capacity for human determination to progress towards what the intellect sees as good and desirable. It triggers a natural process that drives property, exchange, specialisation, service offering and entrepreneurial mentality in economic agents. This process, essential part of the nature of things, ends up improving the condition of citizens’ and societies’ material lives, instilling and generating grander expectations for future assets.
In Fundamentals of Economic Value, I stated that economics is the science that studies the economic value of material realities and explained that its objective is to create growth of said value. This book is written as its sequel. In my earlier book, I explained that value stands in real relation withthe ultimate, complementary, concrete and future convenience of the valued objects for human purposes. Value, as I describe it, is relative. On one hand, are the methods that we use, on the other, the needs, goals, desires and immediate human purposes. In economics, one extreme (the methods) is studied in relation to the other (the purpose). The value is not in the extremes, but in the relationship between them, in how they’re sequenced or the projection of these purposes on the methods used. Value does not have another purpose but to direct itself towards its subjective end. It is the mere orientation towards man, it’s a ‘towards the purpose of man’, a tension. The objective of every economic activity presents itself therefore as the continuous attempt to improve the degree of human conditions and material life.
Within this construct, human freedom and its capacity to objectify the realities of his surroundings play a crucial role. The classic production factors: land, work and capital, fulfil every single important and complementary function. However, we also have to refer to the subjective and objective purposes of human nature to increase the degree of humanisation. The market institutions that we analyse in the following chapters are the ones that exercise the role of complementing the primary factors, horizontally, between them; and also, those allowing these primary factors to complement themselves vertically with the final subjective and objective causes of human nature. These principal economic institutions realisethe functions of joining together and enriching harmony, by way of their own nature since the beginning of humanity. All the productive forces of economic value, have to, in effect, complement themselves among each other. They cannot act alone. There exists an intimate relationship between them. These reductionisms about the value theory, which have been made throughout history, cannot be justified. Every force is connected with others, fulfilling a specific function to achieve a final effect. The objective end influences the subjective; and both final forces exercise their influence ‘by way of attraction’ on all productive processes. They, therefore, attract the efficient force of human work towards the attainment of objectives.
This, with the help of the instrumental force, exercises creative action on the material force, extracting the passively locked in human ‘vocation’. Material force is not enough, it needs to be worked on. The instrumental force is not enough, it needs to be used. It’s not enough to just work, one must work well,towardsthe required aim,which is structured and oriented towards the appropriate ends. In respectto the latter point, it’s not enough to achieve subjective ends, one must find the objective ones in one’s work. However, it’s also not sufficient to just have objectives, one has the obligation to work towards them and carry them into practice and make them materialise.
The importance that we’re giving to the complementary forces originates from theirinnate capacity to combine the final and primal forces. The economic ‘institutions’ that we’re considering in this section, allow us to unify the diverse forces, giving each the possibility to fulfil its specific function within the whole. The study of property, the voluntary exchange of goods, specialisation, freedom, competence, service, availability, entrepreneurial mentality, the subsidised function of the state, and ethics, help us discover and understand more about the diversified and, at the same time,unified harmony of interrelated, complementary connections of the forces of economic value. Economic value, which is founded upon the existence of things, unfolds all its enriching diversity without losing its unityat any time. The productive forces that we treat here derive their suitable capacity from complementing primal and final forces.
Freedom, seen as active and flexible uncertainty, directing itself towards the realisation of future projects, can be found at the core of the first chapter. The Hayekianan idea of freedom as a source of information and knowledge is also used to demonstratethe efficiency of wealth generation. Personal freedom, as an essential characteristic of the free individual, makes property possible. Property as part of a variety of assets, upon which one exercises free and exclusive rights, signifies the foundation of unity of physical and human estate, preferred by the vertical and horizontal combination of the different assets and the complementarity of land, work and capital towards human ends. The existence of private property makes the free exchange between assets possible. It also constitutes the decisive mechanism of value increase that all economic agents use in their transactions. The treatment of surplus and the consequences of distinguishing between the value of use and the value of change, are at the core of chapter three. On the other hand, the existence of exchanges makes division of labour and specialisation possible. This specialisation facilitates technological and economic innovations, contributing, in its own way, to improving human capital, provided that this division of labour is counterbalanced by understanding of the matter.
Chapter five analyses the ‘invisible hand’ of the market including an, in my opinion, important touch: the priority of service capacity in relation to someone else’s assets, particularly when we aimto increase the economic value of our own assets. The interconnectedness between freedom and service capacity, in relation to the institutions analysed earlier, are important characteristics to improve commercial relations. In chapter six, we’ll deal with the study of the entrepreneurial function as an example of economic wealth responsible for harmonising productivityfactors principally with respect to the subjective and objective ends of potential clients. Following, in Schumpeterian style, we’ll analyse said entrepreneurial function and extend this entrepreneurial mentality to every property owner with some material or human wealth. The obligation to search for a maximum benefit in terms of humanisation presents the only and universal criterion for every economic agent.
In chapters seven and eight, we’ll explain more about general economic politics and the role of the State as the overall coordinator that establishes an adequate framework where we can develop the economic forces that we’ve analysed earlier. We’ll talk about the convenience offollowing any given path with a long-termobjective in mind to achieve decisive and permanent influence. In the ninth chapter we’ll elaborate on the inexcusable relationship between economics and ethics and the consequences that results the moment that we decide to embark on a study of economics as a science of humanities. Finally, in the tenth chapter, we talk about the very important demographic question in relation to economics and the vital ecological interdependencies.
The larger part of these thoughts included in these pages have been partially published in earlier publications. I’ve wanted to personally structure and complement them in this edition to provide some logical sequence that will make understanding them easier and will aid reading.