Unlike most of our guests in Czech Books, Tomáš Sedláček is an economist, and an influential one at that. He is chief economic strategist for one of the major Czech banks. But that does not mean that we are going to be talking about numbers. Instead we shall discuss his new book, “Ekonomie dobra a zla” (The Economics of Good and Evil), which has attracted a great deal of attention in the Czech Republic and, amazingly for a book about economics, has become an instant best-seller.
I shall start with a quote from the opening chapter that gives an idea of the book’s subject matter:
Initially people explained the world around them through myths and religion; today this role is played by science. It would be foolish to think that economic thinking only began with the scientific age. In order to understand the economic thinking of our distant ancestors, we need to steep ourselves in their myths and philosophy. That is the aim of this book.
To put it simply, we could say that you are trying to take economics “out of the box” and to say that economics is not just about number-crunching, but is connected with many other different aspects of our lives.
“Yes, economics is a beautiful area. It’s mainly to do with the way we humans behave and relate to each other. I have been looking for mirrors, because that is the only way you can really get out of the box. It is, of course, difficult and it can rarely be done without some external aid. I use as an aid the old tales from the Old Testament and from Mesopotamia –these people were dealing with issues very similar to what we’re dealing with today. We mainly use mathematics these days and a scientific, rigorous approach to explain the world around us, and they explained the very same world using stories and fables and very beautiful ways of describing how we relate to each other.
“So I’ve not put a single number in this book. Even the pages are actually numbered backwards. So it starts with minus 368, just to get the point across that numbers are something that is created by our society, a construct, a product that can serve us and should serve us, but sometimes it also binds us, if the only way we can look around is through numbers and through statistics. Sometimes it’s helpful and sometimes it isn’t helpful and it can be misleading.”
As someone who does not really understand economics, I was very much gripped when I started reading the book, and I was fascinated by some of the parallels that you drew. For example, there is one point where – I think slightly with tongue in cheek – you describe Joseph in the Old Testament as the first Keynesian. When the Pharaoh asks Joseph to interpret his dream – it’s the dream about the seven years of plenty and the seven years of famine – Joseph gives him the sound Keynesian advice that during the seven years of plenty he should stock up with grain for the seven years of famine – which he consequently does. Good sound economic advice – and this is from the Old Testament!
“It’s a very interesting story – the first ever recorded business cycle in the history of mankind. The story has a lot to say to us. First of all, we don’t hear why the cycle happened. There is no explanation in the Bible. It just happened. Secondly, the Pharaoh saw the future in dreams. Now this today is expected of economists – to see the future, to say when the crisis will come, when it will be over. Now we don’t have these dreams any more. We don’t look for reality, for the future, in dreams and in visions, as the ancients did. Now we look at statistical models, and we can see that they didn’t help us very much – not in this case.
“And I then fast-forward the story to this age. Our civilization – the Western civilization as we like to refer to ourselves – has also had a very good seven years of plenty, from the year 2001 to the year 2007 or 2008. It’s been a very good seven years and we’ve not stocked up anything. We’ve actually indebted our civilization even further. So, despite the fact that this is a very ancient story, thousands of years old, and we should have actually learned something, we haven’t, and we’ve actually been foolish. We’ve not stocked up any grain. On the contrary, the storehouses are empty after the seven years of plenty that our civilization has had, and not only that, they are full of IOUs lying on the table.
“So I like to take these stories out and say: Listen! This is a story that every child can understand, a story that we tell to our children before they go to sleep. And yet our super-duper economic models have produced a situation in which even a small child could see a much wiser solution than what we’ve actually chosen as a civilization.”
You put it rather nicely in the book. Here is another quote:
If modern economics feels confident to explain the way churches function or to carry out an economic analysis of family relationships (often offering new and interesting insights), why shouldn’t we also look at theoretical economics in the way that we look at a system of religion or private relationships? In other words, why not try looking at economics from an anthropological point of view?
So, you’re turning economics on its head and saying: What can the way we see the world, the way we tell stories, as you put it, tell us about economics? This is something that really has been neglected by economists in recent years, hasn’t it? There has been a tendency more and more to see economics as a science.
“If we want to interpret the world, we ask the economists: What’s happening? What is to come? We ask the physicists, we ask the scientists. Now, science also believes in something. We have our Ten Commandments, we have our belief system. We economists must believe in rationality, we must believe in egoism. Once you question that, a ‘fatwah’ is almost placed on your head! You no longer are an appropriate economist! So we have these sets of beliefs, but nobody really understands. If you look in theoretical physics, we believe something that we don’t understand. It’s an interesting thing. If you speak to theoretical physicists and ask them: How much of the reality around us can you actually explain, they will say: Well, around 5-7%. The rest of that is still embedded in mystery. But we kind of believe that we understand what’s happening around us. And we don’t. The only things that we can predict are the things that are predictable, which are exactly the things that we don’t care about. We want to know the unpredictable things. And this crisis is a good example of how we can only predict things that follow the same pattern that they’ve followed in the past. This is something that I’ve tried to point out – that we shouldn’t think that we’re wiser or in any way more educated than the ones that were here before us.”
I was fascinated when I read the concluding few pages of your book, that you really put quite a passionate case for bringing ethics back into economics. Could you expand a little on what you’re trying to say - as the message of the book?
“Well, you know, economists are believed to be the ones who have no values – they are ‘value-free’, so to speak, and then we are expected to give absolutely value-free advice. Now this is very rarely the case. All economists are believers in something. They might be believers in the free market, they may be believers in regulated markets – that is the concern of each individual. My point is that if you don’t admit this, you’re not really going to get very far, because you have a choice of a school, a choice of a model, and you choose that model according to the results that you really want to see. So if you believe in globalization and the free market, you choose the models that are appropriate, and then – ‘Abracadabra!’ – you arrive at the very same conclusion that you started with.
“So, if we pretend that we are value-free science but we’re not really, then that can lead to a great mish-mash. And secondly, economists are confronted with the question: What are we to do? And that is an ethical question. This is something that we economists have avoided in the past hundred years. I mean the word ‘ethics’ has become a bad word, a rude word. And yet, economics started as an ethical discourse. Adam Smith was a moral philosopher, David Hume, Thomas Malthus and others were chiefly moral philosophers. And this is where economics was born. Today we try to get away from this cradle, from this origin of the discourse, and it can lead to very dangerous situations.”
One concept that you criticize repeatedly in the book is the idea of the so-called “invisible hand of the market”. This is an expression that – in the Czech Republic – is associated again and again with the President Václav Klaus, who is himself an economist. He loves to come back to the idea that the economy is what drives pretty much everything in society. This is something that is highly controversial and you do polemicize with it, but I’ve noticed that you never mention Mr Klaus’s name. Is he a kind of hidden adversary in your book?
“He is a political representative of a very popular reading of economy as a solution to everything. I mean – all problems and all riddles of the world will be solved if we apply our method. In this, economists have become the priests of a new era, the priests of abundance, the priests of efficiency, the priests of a golden age that is to come, if you’ll all follow our advice. I don’t directly polemicize with anybody in the book. I polemicize with the idea that economy is something that is the modus vivendi of our age.”
Your name has been brought up as a possible future finance minister in the Czech Republic. Do you have any political ambitions?
“Well, I turned it down after two days of thinking. In my life I’ve always worked very closely to politics, but I’ve never been a member of any political party. I value more influence than power, and if I can influence a good decision in a politician, then that makes my day. I don’t necessarily need to be the one who puts the stamp – or takes the cream out of the pot! So if any politician is interested, I’d be very happy to offer advice, but I don’t want to become one myself – not yet. I think I’m also too young for that…”
You’re still only 32, so you’ve got a long career ahead of you, which brings me to my final question. This book has caused quite a stir; it’s been talked about a lot. What’s your next book going to be about?
“I don’t know. This one came out just three months ago. It’s being translated into English, German, Italian, Polish. There are many translations on the way – none of them yet finalized because this is still a new book. But when I’m falling asleep I’m thinking maybe two or three years down the line of writing a selection of essays reflecting, for example, the topic of adventure, which is something which our society lacks. That’s why we buy it in the movies, in cinemas, we buy a kind of artificial danger, because we lack the real danger. And I have already 12 topics selected like that – on friendship, on utility, on growth and – the newest one I was thinking about – on artificial wealth. How much of our wealth is actually artificial today? How much of it is debt-driven from future generations? How much of our wealth is driving on recourses that we’re stealing from the future, that we really have no right to use? I haven’t done the calculations so far, but I guess the percentage will be quite high.”