Dear readers, TikTok has a great feature that allows you to repost videos from last year “on this day.” I am especially proud of this series from last year so I thought I would share it here as well. I hope you enjoy…
In order to map their new "scientific" theories, economists returned to their catechism. You see, certain essential assumptions about human nature undergird economic theory, especially the Free Market variety. This human nature, it is assumed, is what determines economic actions. The first assumption, as described by economists Richard D. Wolff and Stephen Resnick in their book Economics: Marxian versus Neoclassical, is every human’s inherent ability to prioritize all goods and services consistently. Obviously, haircuts are less important than groceries. Having a roof over your head is a higher priority than an expensive television. We make these choices every day.
Another core understanding is that it’s always better to have more than less of any good or service. It seems so obvious! More money, more shoes, more cars, two scoops of ice cream – more is better. We are built this way to survive.
Finally, rationality is recognized as one of the most basic components of human nature. Like economists, we are all rational individuals who make reasoned choices based on evidence (dramatic pause). Irrationality is not a common trait among human beings (stares into camera). We are all rational actors in a rational world.
It is these unquestionable bedrock understandings about human nature that make it possible to predict the economic choices people will make in society.
If we follow the logic from these core understandings about humanity the rest of Neoclassical theory starts to fall into place. Free Market economists know that it is our innate human nature that determines outcomes. We get back what we put in (also known as the Theory of Distribution). As Wolff notes, economists understand that human beings possess within their natures an inherent rational and productive capability to produce the maximum wealth possible in society. This assumption goes back to Adam Smith and the Invisible Hand of the market. Maximum wealth corresponds with the individual’s maximum freedom to pursue his or her own self-interest. When we have the freedom to act in our own self-interest, we will feel the power of that invisible hand guiding us to produce maximum wealth for society. Maximum wealth equals maximum happiness for everyone. Therefore, Neoclassical economics understands that following one’s own self-interest is what brings maximum happiness to society.
But logic dictates that this can only happen when there are perfect markets and supply and demand are equal. If markets are completely free, the Neoclassical ideal, it’s possible to reach a state of economic nirvana where the producers’ selfish maximization of profits perfectly corresponds with the consumers’ selfish maximization of preferences. The goal is a state of harmony between scarcity and choice. If everyone is pursuing their own self-interest, the central imperative, nature’s economic equilibrium will be restored. At that point, the two tectonic plates of our human nature, our unlimited desire for more and our ability to satisfy those desires will have finally come into balance and hence we will all achieve maximum societal happiness.
American philosopher John Dewey talks about this in his book The Public & its Problems. Economists, using their new empirical analysis were relying heavily on their old philosophical roots. The old metaphysical conceptions about natural law slowly morphed into new economic facts of life. Supply and demand, under this new understanding, were now part of “natural” law. This put them in opposition to artificial, political laws made by people. The exchange of goods and services is guided by human nature which is in turn guided by mother nature, the thinking goes. Therefore, these interactions should be kept free from artificial political meddling or risk blocking maximum social prosperity and progress. The logic of Free Market theory dictates that economic law is natural and political law is unnatural. To tamper with economic nature is to invite disaster, like Dr. Moreau breeding grotesque horse-rhino-human or leopard-man hybrids in H.G. Wells’s classic book. Yuck!
Free Market theory dictates that to achieve economic nirvana the government needs to butt out. “A principal aim,” writes Wolff, of both the classical and neoclassical schools, was to show how “capitalism could reach its potential only if all economic and non-economic barriers to private wealth maximization were removed.” The only answer, Free Market economists tell us, is to let markets correct themselves. Any efforts to reform or modify private property or competitive markets are inherently wrong, describes Wolff, because they create barriers to maximum wealth – and by extension barriers to maximum societal happiness.
When you peel back the onion on the bedrock assumptions of Free Market Capitalism you can begin to see how moral philosophy informs the "science" of economics. Other sciences don't operate from moral presumption. Religions do.
This is part 6 of my series... be sure to check out parts ONE and TWO and THREE and FOUR and FIVE and SIX and subscribe so you can follow along. Please also like, comment, share, and restack to help others find me here on Substack.
Let us make them pay.
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