Economics and the Good Life: Keynes and Schumacher
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It is, I think, interesting to compare the views of E. F. Schumacher and J. M. Keynes on the ethical aspects of economics – both the economic systems of which they were a part and economics as a subject. Both agreed that economics (as commonly understood and taught) applied to only a limited sphere of life. They agreed about the role of profits, the market and the love of money. And they both believed that there was much more to life than getting and spending. For Keynes, economic activity was the means to bring society to a position where the good life could be enjoyed. Schumacher was even more ambitious: he thought economic activity should be made part of the good life.
Victoria Chick’s paper makes a comparison between Keynes’s and E.F. Schumacher’s positions on the issue of economics in relation to ethics, more specifically to the project of a good and happy life. In general, I would describe it as a particularly welcomed contribution, for a number of reasons. First, the paper brings to the fore the ethical dimension of economics, at a time when the discipline is suffering from really low legitimacy, due both to the restrictiveness of its own assumptions about the presumed human nature – itself among the reasons why mainstream economics has so clamorously failed to warn against the risks of a global crisis and to cope with its effects – and, as a corollary, the impermeability to inter- and trans-disciplinarity which derives from its “imperialism”. “The insidious quality of the assumptions of economics”, as Chick writes at the very end of the paper, seems truly the crux of the problem. Second, it sheds light on the moral dimension of the economics of the man who has enjoyed a (though ephemeral) rediscovery in the immediate aftermath of the crisis and is currently invoked, not only on the part of non-mainstream economists, as one who has heretofore untested solutions (suffice to think about his global reform plans, which do involve moral considerations as regards creditor/debtor international relationships and the right to policy space) to the problems of today’s global economy. Third, it correctly emphasizes, by means of the abovementioned comparison with Schumacher’s position, the limits of Keynes’s vision about material and moral progress. Scholars who are continuously engaged in the attempt to save Keynes from the oblivion in which mainstream economics let him fall, and to rescue the complexity of the work of a multidimensional economist, might sometimes leave unintentionally behind what many critics regard as the elitist notion of good life adopted by Keynes. In this regard, Schumacher’s sharp critique is an important invitation to reflection.
I turn now to specific comments. When treating “Keynes’s values” in relation to the EPG (which, though published in 1930 after a series of revisions, were first read in May 1928), the author might think it appropriate to insist more on the Aristotelian flavor of Keynes’s ethics, which is responsible for Keynes’s radical distinction between means and ends, between the material preconditions, which political economy is required to supply, for the enjoyment of the good life and good life itself, between the intermediate ends of “practical ethics” (economics, politics, moral rules) and the ultimate ends of “speculative ethics” (love, friendship, knowledge, and so on), as he calls them in “My Early Beliefs”. Criticisms, in the paper, of Pecchi and Piga’s recent volume on “The Economic Possibilities of Our Grandchildren” are fully justified, exactly because contributors to the volume (in truth, contrary to what the author claims, the volume includes at least one complete – and various incomplete – quote, in Frank’s essay, of Keynes’s passage on the two classes of needs) have chosen to concentrate on Keynes’s forecasts and the related neglect of positional goods, and almost completely overlooked the moral dimension of Keynes’s essay. Paradoxically enough, Fitoussi is the only one who has insisted on this, but his intention is to criticize Keynes. “In freeing himself from economic rigor”, he writes, Keynes would be “attempting to unveil his moral philosophy”: “what is deceptive is the naivety with which Keynes deals with human needs and even more deceptive his arrogance and the questionable moral which goes with it”. The author’s paper helps understand both that Pecchi and Piga’s volume is something of a missed opportunity, and that the view – popularized by Skidelsky (“The Economist as Saviour”, 1992), who follows Plumptre (“The Canadian Journal of Economics and Political Science”, 13(3) – according to which the EPG are but a provocative “jeu d’esprit” is probably mistaken.
Keynes’s essay should be taken seriously, as Schumacher did. I don’t know whether there was irony in Keynes’s contradiction about avarice and usury and precaution to be “our gods” until abundance is reached. For sure it is a contradiction, and Keynes seems sometimes to take pleasure in disorienting his readers (think about his positive appreciation of the “long-term classical medicine”, to be supplemented by the short-term solutions to international problems provided by the Bretton Woods agreement, in his last article of 1946 about the balance of payments of the United States). Still, reading the EPG in the more general context of Keynes’s socio-political speculations, as Moggridge (2005, “History of Political Economy”, 37(3) calls them, offers new elements for reflection. As Pecchi and Piga recognize, the EPG is also an essay against pessimism in a historical context of world depression, as the whole collection of “Essays in Persuasion” was (which Keynes himself, in a letter of 1931 to W.S. Woytinsky, admitted to have written “for popular consumption against deflationists in this country” (reported in Ruiz 2009, “Socio-Economic Review”, 7(2)). In other words, a non secondary aim of the dimension of future Keynes adopted in the essay was to change his times. After all, it is Keynes himself who wrote, as early as 1925, in “A Short View of Russia”, that capitalism is tolerable as a means, not as an end, and that – contrary to what the “Protestant” and the “Puritan” respectively believed, “if heaven is not elsewhere and hereafter, it must be here and now or not at all. If there is no moral objective in economic progress, then it follows that we must not sacrifice even for a day, moral to material advantage”. This same position is then restated in “National Self-Sufficiency”, where Keynes maintains that, while enjoying “a higher standard of life than at any previous period”, Britain was nevertheless suffering “disillusion … because other values seem to have been sacrificed and because they seem to have been sacrificed unnecessarily, inasmuch as our economic system is not, in fact, enabling us to exploit to the utmost the possibilities for economic wealth afforded by the progress of our technique, but falls far short of this, leading us to feel that we might as well have used up the margin in more satisfying ways”. In sum, I think there surely was a contradiction, but also that it was exactly the non peremptory character of Keynes’s position to allow it. As Backhouse and Bateman (2009, “History of Political Economy” 41(4)) correctly observe with regard to freedom (and more in general, to the moral progress which favors it), Keynes believed that capitalism was “necessary for freedom, but the activities of a capitalist society were not themselves an essential part of what freedom was about”.
These are simply my thoughts about the issue, but I think the author could elaborate on this point in the paper. Schumacher’s interpretation of the contested final passage of the EPG seems fundamentally unfair, for ethical values are certainly not a “hindrance” for Keynes. If he ended up with exaggerating the contribution the “economically sound” can make “towards the attainment of the ideal” (“Modern Socialism”, 1931), this is perhaps because he wanted to reaffirm the need of a cultural struggle against scarcity, which is a core issue of the EPG. But Schumacher’s position is extremely helpful, especially if read as a critical adjunct, rather than in complete opposition (also because, as the author claims, there are important points of similarity between the two), to Keynes’s stance. And it is evidently a relevant starting point for today’s research. Also in the light of this, I would suggest revising those parts of the paper (the introduction in particular) which still give the impression of having been constructed having a conference presentation in mind.