Dealing with Debt: A Review of ‘Economics of Good and Evil’ by Tomáš Sedláček

On Wednesday, June 13, U.S. News and World Report and other media outlets reported that Medicare and Social Security are hurdling towards insolvency — in large part to a ballooning national debt. While Americans will attempt to find creative solutions, time will tell if such solutions are too little, too late.

With our country’s national and personal debt steadily increasing, Tomáš Sedláček’s seminal work, The Economics of Good and Evil: The Quest for Meaning from Gilgamesh to Wall Street (Oxford University Press, 2011), continues to offer insight into this quagmire from an economic, philosophical and psychological perspective. This review will summarize Sedláček’s work and suggest ways for us to avoid this modern day addiction to debt.

Consumption has become a worse addiction than opioids.

A Summary of Economics of Good and Evil

Econometrics, statistics and mathematical modeling likely come to mind when you think about the modern day discipline of economics. In The Economics of Good and Evil, Tomáš Sedláček exposes the reader to an alternative — a journey through myth, history, legend and film — as he argues for a human-focused approach to how economic value is calculated. Sedláček is a Czech economist and a former member of the National Economic Council of the Czech Republic. He is a university lecturer, and The Economics of Good and Evil was a Czech best seller.

In it, Sedláček urges us to do away with homo economicus — the purely rational being. He simply does not exist. Humans make value judgments and persuade not through purely rational thinking, but through story, narrative and prose. If you’re acquainted with economic terminology, think normative economics (“why we should”) as opposed to the cold calculus of positive economics. Sedláček reaches back historically and systematically traces the footprints of economic thought from a moral philosophical perspective. In doing so, he attempts to answer the following:

Is there an economics of good and evil? Does it pay to be good? Is selfishness innate to mankind? Can it be justified if it results in the common good?

Sedláček answers these age-old questions while also providing commentaries and directives on current economic trends.

In the first half the book, he lays the historical foundation and flirts with his thesis:

There is a much broader and more fascinating story of economics than what mathematical models can ever hope to attain.

He shows how humankind has developed increasingly sophisticated means to tell the same story that men have been telling through myths and legends since Gilgamesh.

Sedláček begins by unpacking a series of ancient myths and legends. He dissects the Epic of Gilgamesh through the lens of an economist. Certain archetypes in this epic, mankind’s first known written work, which can be traced through time. The epic hints at these by the means of stories and myths. These stories, Sedláček explains, differ only slightly from mathematical or scientific stories of today. In fact, Sedláček maintains, math and science were created to simply tell a story. Sedláček describes that tension between that which is efficient (math and science) and that which is human (love, friendship, adventure). Gilgamesh, in his quest to build a wall around his city to protect it from the untamed, turns his people into automatons. Enkidu, Gilgamesh’s initial antagonist, is wild and uncivilized — in other words, he is human. Throughout the story, an unlikely friendship forms between Gilgamesh and Enkidu. True, non-mechanical humanity is discovered, and the rewards are not economically quantifiable. Love, friendship and adventure are enjoyed through this unlikely partnership. Gilgamesh is no longer just another brick in his wall of civilization.

Next, Sedláček turns to early Jews’ contributions. Jews in the Old Testament placed great responsibility on property management. They gave us moderns our concept of a linear timeframe and presented the first recorded instance of a business cycle through the narrative of Pharaoh’s dream. This dream prophesied seven years of plenty followed by seven years of famine. The solution to Pharaoh’s dream was found in surplus supply, which ultimately led to the prophecy becoming incorrect, since the years of famine never actually occurred. The prophesied years of excess demand were mitigated by discipline and forethought.

Sedláček next asks whether the happy life lies in the maximization of utility. Early Greeks attempted to answer this question. With the Greeks, Sedláček makes the case that one can see both ends of the spectrum — Hedonists on one end and Stoics on the other, with hedonism ultimately winning. Hedonism has a philosophy of maximization of supply, a philosophy that the modern Western world has been hyper-productively living by throughout its history. In Christian thought, Sedláček posits that the ultimate incentive for humans is not maximum utility in this life, but in the next life. When one’s incentives are otherworldly, Christians are empowered to take actions in this life that appear selfless.

Sedláček transitions from ancient times to the genesis of modern economic theory. The moderns include Descartes, Mandeville and Adam Smith, the “Father” of modern economics. Descartes attempted to unify mankind beyond all doubt by objective science. Mandeville focused his studies and thought on vice and how it drives the markets. And Adam Smith introduced the concept of the invisible hand of the market, even though he only mentions the topic on three occasions. It is this free individual egoism that has provided direction for society, but human behavior can’t be explained by a single egotistical principle. This exhibits itself in the tension between both of Smith’s major works—The Wealth of Nations and A Theory of Moral Sentiments.

The book transitions from historical analysis to “blasphemous thoughts,” in which Sedláček comments on critical concepts in modern day economics. One of the blasphemous thoughts Sedláček addresses is debt. According to Aristotle, excessiveness is one of humankind’s greatest weaknesses. This constant “need” (or greed) has snowballed into what Sedláček calls a “Debt Age,” and consumption has become a worse addiction than opioids.

Today, we applaud progress for progress’s sake. This elevation of progress encourages us to view economists like modern day secular priests, leading their flock to the promised land of higher GDP, which, in turn, leads to higher consumption. Sedláček suggests that nations should correct their economic goals from maximizing GDP to minimizing debt—aiming to address the social and earthly burnout that can result from over-consumption.

Sedláček’s postmodern critique of the current state of the field of economics successfully argues that there must be a return to an economics of good and evil. Positive and normative economics cannot and should not be divorced. According to Sedláček, a chessboard has 64 squares, but the 65th square is the most important. The 65th square is the table where the humans sit, rest their drinks, have discussions and share the stories and myths that point us towards truth.

Dealing with Debt

Published in 2011, the Economics of Good and Evil focused on being a counterbalance to value-free positivistic economics. Sedláček also delivers a clear message about minimizing debt. As a new husband, I would be fool to lead my family in accumulating wanton debt without the ability to repay it. How then is such debt acceptable with the American government or any other?

In conclusion, Sedláček, like Joseph responding to Pharaoh, indicates that we must address our ballooning national debts, and he offers solutions to do so. Left unaddressed, the economic recession of 2007-2009 will be trivial compared with what is to come. In an immature, irresponsible manner, we are punting the consequences of our excessive lifestyles and entitlement mentality to our children. Change, potentially austerity, is needed to resolve this debt. As families, we try to manage our finances and spending responsibly; it is time we expect the same of our government leaders and with discipline and fortitude tighten our belts and get our nation’s financial life in order.