{"id":1249,"date":"2013-05-26T01:19:53","date_gmt":"2013-05-26T01:19:53","guid":{"rendered":"http:\/\/www.rationalargumentator.com\/index\/?p=1249"},"modified":"2014-02-09T04:33:37","modified_gmt":"2014-02-09T04:33:37","slug":"extraordinary-business-of-life","status":"publish","type":"post","link":"https:\/\/www.rationalargumentator.com\/index\/blog\/2013\/05\/extraordinary-business-of-life\/","title":{"rendered":"The Extraordinary Business of Life – Article by Sanford Ikeda"},"content":{"rendered":"
\n
\"The<\/div>\n<\/div>\n
Sanford Ikeda
\n<\/big><\/big><\/strong><\/span><\/div>\n
May 25, 2013<\/big><\/span><\/div>\n
Recommend this page<\/a>.<\/strong><\/div>\n
******************************<\/div>\n
\n

I heard it again from this year\u2019s commencement speaker: the common mistake of thinking economics is just about business and making money. I know I\u2019m not the only economics teacher who every year has to disabuse his students (and many of his own colleagues from other disciplines) of that same error.<\/p>\n

Economics is not business administration or accounting. Economics is a science that studies how people interact when the means at their disposal are scarce in relation to their ends. That includes business, of course, but a whole lot more as well.<\/p>\n

Where Does That Notion Come From?<\/strong><\/p>\n

Well, for starters, perhaps from one of the greatest economists in history, Alfred Marshall. He opens his highly influential textbook<\/a>, first published in 1890, with this statement:<\/p>\n

“Political Economy or Economics is a study of mankind in the ordinary business of life; it examines that <\/em>part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of wellbeing.” <\/em>(Emphasis added)<\/div>\n
<\/div>\n

This definition more or less prevailed until 1932, when another British economist, Lionel Robbins, defined economic science <\/a>as being concerned with an aspect of all human action insofar as it involves making choices, not with a part of individual action. Economics, in other words, is the science of choice. Its starting point is not the \u201cmaterial requisites of wellbeing\u201d but a person\u2019s subjective valuation of her circumstances. Ludwig von Mises got it, which is why he called his magnum opus, simply, Human Action<\/em><\/a>.<\/p>\n

Similarly, Libertarianism Isn\u2019t Pro-Business<\/strong><\/p>\n

An equally common mistake is to think that supporters of the free market are \u201cpro-business\u201d and favor so-called crony capitalism. But a consistent free-market supporter is neither pro-business nor anti-business, pro-labor nor anti-labor. A free market to us is what happens when you safeguard private property, free association, and consistent governance and then just leave people alone.<\/p>\n

Part of the misunderstanding here might stem from the term \u201cfree market\u201d itself. Since people tend to associate markets with buying and selling, jobs, and making (and losing) money, it\u2019s perhaps understandable that they would think that advocates of the free market must be concerned mainly about business-related stuff: profits and losses, efficiency, and creating and marketing new products.<\/p>\n

Indeed, I\u2019ve met quite a few who claim to favor \u201cfree-market capitalism\u201d merely because they believe in making as much money as possible in their lifetimes. It\u2019s not surprising that many of these folks do tend to be pro-business and supporters of crony capitalism. I want to ask them not to be on my side.<\/p>\n

Connotations aside, the free market encompasses far more than the stuff of business or a money-making scheme. Yes, it does include the essentials of private property, free association, and stable governance. But a dynamic market process that generates widespread material prosperity and promotes the pursuit of happiness would not be possible if it were based solely on the relentless pursuit of one\u2019s narrow self-interest. Markets would not have gotten as far as they have today (with per-capita GDP up more than fiftyfold since 1700<\/a>) if people didn\u2019t also follow norms of honesty and fair play, trust and reciprocity. Such norms are without question partly the result of self-interest; few would trade with us if we weren\u2019t honest and fair. But, as Adam Smith taught us, these norms also arise in large measure from a sense of sympathy<\/a>, of fellow-feeling and fairness, that comes from our ability to see others as we see ourselves, and vice versa. This is why in most contexts I usually prefer the term \u201cfree society\u201d to \u201cfree market.\u201d<\/p>\n

Bourgeois Virtue<\/strong><\/p>\n

But I think one good reason the association between business on the one hand and economics and classical liberalism on the other has been so persistent is that business and the free society arose together. That is, the liberal idea\u2014that certain fundamental individual rights exist prior to and apart from the State\u2014sparked one of the most momentous social changes in history: the commercial revolution and the emergence of the modern urban middle class.\u00a0<\/a><\/p>\n

The triumph of liberty, of personal freedom, unleashed the creative potential of people, who found expression in art, religion, literature, but most of all\u2014or at least most visibly\u2014in the Marshallian \u201cordinary business of life.\u201d The changes that have taken place in the past 500 years\u2014scientific revolutions, religious reformations, political upheavals, artistic rebirths\u2014were driven by the same human propensities as the commercial revolution and fueled by the wealth it produced. Indeed, the social and political changes of the past century\u2014for women, workers, and minorities\u2014would not have been possible without the entrepreneurial pressures of competition and innovation that forced radical changes in conventional thinking and socially conservative attitudes.<\/p>\n

Tradition\u2019s Worst Enemy<\/strong><\/p>\n

In short, business is the most dynamic social institution known to mankind. The critical and competitive attitudes that enable business to flourish erode custom and break old ties even as they foster new ones. The products of business tend to offend people whose sensibilities were refined by generations of tradition. The free market is tradition\u2019s worst enemy.<\/p>\n

Business has become part of the default mode of modern society. We take it for granted. We don\u2019t realize what a radical, subversive force it is, to the point where it sounds strange to say so. But try to imagine a world without businesses and commerce. A world like the Dark Ages of, say ninth century Western Europe: static, grindingly poor, strictly hierarchical, socially intolerant, and, apart from the occasional battle or beheading, boring like you wouldn\u2019t believe.<\/p>\n

So, while it\u2019s still a mistake to think economics and classical liberalism are somehow about studying and promoting business, maybe at a deeper level it\u2019s not such a bad one to make after all. Business is subversive.<\/p>\n<\/div>\n

<\/div>\n
\n
Sanford Ikeda is an associate professor of economics at Purchase College, SUNY, and the author of The Dynamics of the Mixed Economy: Toward a Theory of Interventionism<\/em>.<\/strong><\/div>\n
***<\/span><\/div>\n
This article was originally published by The Foundation for Economic Education<\/a>.<\/strong><\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Sanford Ikeda May 25, 2013 Recommend this page. ****************************** I heard it again from this year\u2019s commencement speaker: the common mistake of thinking economics is just about business and making money. I know I\u2019m not the only economics teacher who every year has to disabuse his students (and many of his own colleagues from other disciplines) of that same error. Economics is not business administration or accounting. Economics is a science that studies how people interact when the means at…<\/p>\n

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