Before the Victorians Economists, Economy was called Political Economy. So the Political part means it was related to people at least. Probably related with how people organized themselves to fulfill certain objectives. But Political Economy changed to become Economics, in order to get along with exact sciences. In these exact sciences the concept of equilibrium was key. How could we understand forces and movement without the concept of equilibrium? How could we understand economy if we don’t have the equilibrium of supply and demand?
But, and here is the main concern, could we describe societies as a system in equilibrium? Aren’t societies in a dynamic struggle of economic or political forces? wasn’t there people talking about a war between social classes?
In Heilbroner words, «suddenly capitalism was no longer seen as an historic social vehicle under constant tension but as a static, rather history-less, mode of organization».
Maybe this is the part when economics started to get way from morals. Do we question should we trade?}, should we consume this? should we buy this from them and sell it to those others?. It seems that we just do it. Now, with all the mathematics and technology we had developed we have very good tools to trade, just because. This is a reason why an underworld of economists always existed. They never quit wondering these questions.
Underworld economists didn’t got wide eyed opened with all the beautiful mathematics; they preferred to kept wondering about the driving causes of society; society’s goals. It isn’t popular to think like this in the academic world. There are not many tools to be used in this area to build a good paper. Underground economists did just not fit.
Some of them shone for a while as an eccentricity, others are still waiting to be respected. Malthus started from the underworld with his crazy idea of overpopulation and shortage of resources (and talking about an issue that still goes on), just to become the first profesional economist. Of course all the utopians could all be labeled here too and probably they will be for a long time, by definition.
Some others, not well known economists could labeled as part of the underworld of economics. Some of them are:
- Bernard Mandeville (1670-1733) He could be called polemic at least. He described a noisy community of bees that suddenly become honest and virtuous. Without their desire for personal gain the bees just decided to live simple lives in a hollow tree. So the busy-working-community of bees became a chilling-out-community of bees. Of course, no more honey were produced. Could we say this change of lifestyle is an improvement?
Mandeville probably meant that without private vices there is no public benefit. Without that noisy group of individuals outside struggling to make a living, no matter what they do, they should keep doing it because that’s how societies works. Probably this was the idea behind the Famous Adam Smith’s quote ”It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest”.
So every time you go party hard, surely you expend a lot of money. It happens that because all of that money, business exists (night clubs, drugs, and all the good things), and those business feed families. So there you go spoiled children, every time yo bro goin’ party hard, you’re keeping society to work (you are very welcome).
- Frederic Bastiat (1801-1850) Have you ever heard the concept of opportunity cost? Well, this guy coined this idea. But the best of this guy was his humor sense: sarcasm at its best. A troll if you prefer.
Some of his points were:
«It goes to enormous efforts to tunnel underneath a mountain in order to connect two countries. An then, what does it do? Having labored mightily to facilitate the interchange of goods, it sets up customs guards on both sides of the mountain and makes it as difficult as possible for merchandise to ravel through the tunnel.»
Or when en 1840 the Chamber of Deputies were discussing about establish higher taxes to foreign goods in order benefit French Industry, Bastiat, in the same line proposed to cover the sun to improve the sales of candle makers. That artificial increase of demand would certainly improve the local economy. Genius.
But the most important present that Bastiat gave us was wondering: does the world makes sense? could politics get along with economics? are these currents going to the same way? Good questions that are still looking for an answer.
- Henry George (1839-1897) This was the guy who noticed (Ricardo noticed first) the nonsense of great incomes:
«Sometimes fabulous incomes derive not from the services they rendered to the community, but merely from the fact that they have had the good fortune to hold advantageously situated soil. So, you can get rich if you have been lucky to buy a piece of good land.»
This is greatly summarized by Piketty as the rate of return from capital is greater than the rate of economic growth, or just .
The problem that Henry George found was even more deep than Ricardo. He argued that this injustice was the cause that got society to his knees from time to time. He was convinced that rent led to high levels of speculation that would lead to a collapse (2008 crisis anyone?).
So, having identified the problem, the solution: a massive tax on land. This remedy would
«raise wages, increase the earnings of capital, extirpate pauperism, abolish poverty, give remunerative employment to whoever wishes it, afford free scope to human powers, purify government, and carry civilization to yet nobler heights».
Beautiful. But depressions also happened where land values were not that inflated.
But the most important thing is that George was talking nothing else than morals. why people should get so highly incomes? are they that productive? is this what economy needs? is this how a society should work?.
- John Hobson (1858-1940) Given the imperialism movement of nations, this man was the first to notice the dangerous tendency of imperialism that tended to war. This the biggest moral issue against economy ever said.
Influenced from Ruskin (and maybe the Austrian school of economics) Hobson saw economics as a humanist than an exact science, so he did not developed a model neither got embraced by the beauty of mathematics.
As a good utopian economist he believed in cooperation rather than competition as a way to improve society.
Taking Mummery idea, Hobson argued that the cause of cyclical economic downturns where excessive savings. Accumulation showed the inability of society to distribute enough purchasing power to buy products back. This is an argument against extreme wealth accumulation of rich people, not regular family savings. Hobson shows how accumulation led to inefficiency in society, and idea that Joseph Stiglitz will show hundred years more.
Notice that this is completely the opposite of the idea that accumulation increases capital which was used then to pay more people to work.
Marx claimed that capitalism would destroy itself; Hobson suggested that capitalism might destroy the world. This was based in an unnoticed aspect of capitalism: unequal distribution of wealth. Massive unequal distribution of wealth has been always a moral concern, but Hobson saw it in economical terms. From Heilbroner:
«The inequality of incomes led to the strangest of dilemmas, a paradoxical situation in which neither rich nor poor could consume enough goods. The poor could not consume enough because their incomes were too small, and the rich could not consume enough because their incomes were too big!. In other words, said Hobson, in order to clear its own market, and economy must consume everything that it makes: each good must have a buyer. Now, if the poor cannot afford to take more than the bare essentials, who is there to take the rest?. Obviously, the rich. But while the rich have the money, they lack the physical capacity for that much consumption…so.. the rich were forced to save».
Not a problem yet; the savings could be put in building new machinery to produce more, but here is the problem, who is going to buy it? the poor people (most part of society) were always struggling just to survive. They just lack of purchasing power.
So what to do with the money? It could be invested overseas Hobson replied. This is imperialism: the hobby of the wealthiest when they find out that local market is not enough and they need more (will it ever be enough?). But considering all of the wealthiest people from all of the world countries are doing exactly the same, what are they going to do when they find out that the earth is finite? Conflict arises; here comes the war; capital driven war.
What if Hobson was not completely nonsense? Lets assume that is right, that accumulation of capital leads to war. Now consider Piketty’s . So, just because of Hobson and Piketty’s model, we could put a blind bet that greatest capitalist country with enough wealth accumulated would be in war right now. Doesn’t seem to be a bad model after all, does it?.
Here laid some of the underworld economist that widen our vision of economics mixing with morals. They did not produce beautiful mathematical models but they did produce beautiful ideas to discuss and that’s what matter to me.