THE PURPOSE OF ECONOMICSNine tenths of mankind

Source Material

• Grand Pursuit: The Story of Economic Genius

• By Sylvia Nasar• Author of A Beautiful

Mind

Economics

• Importance• Relevance• Purpose• Impact • Basic First Principals

Nine Parts of Mankind

• In a Misery of this Sort, admitting some few Lenities, and those too but a few, nine Parts in ten of the whole Race of Mankind drudge through Life.

Edmund Burke, A Vindication of Natural Society, 1756

Poverty and Suffering

• The experience of nations with well-being is exceedingly brief. Nearly all, throughout history, have been very poor.

John Kenneth Galbraith, The Affluent Society, 1958

A world of Oppulence

• Georgian England’s wealth “excited the wonder, the astonishment and perhaps the envy of the world.

European Enlightenment

• Triumph over:– Superstition– Ignorance– Tyranny

“Vulgar Economy”

• Prevent:• Discomfort • Wretchedness• And ruin

Jane’s family was privileged

• Owned property• Had leisure• Chose their professions• Went to school• Had:– Books– Writing paper– Newspapers

• Neither Jane nor her sister Cassandra were forced to hire themselves out as governesses- the dreaded fate in Emma.

• Or marry who they did not love.

The Gulf

• Between the Austens and the so-called lower orders was, in the words of a biographer, “ absolute and unquestioned”

Plight of the Miners

• Scarce ever see the Light of the Sun; they are bureid in the Bowels of the Earth; there they work at a severe and dismal Task, without the least Prospect of being delivered from it’ they suvsist upon the coarsest and worst sort of Fare; they have their Health miserable impaired, and their Lives cut short”

unhappy wretches

And Yet…

• In terms of their standard of living, even these “unhappy wretches” were among the relatively fortunate.

Typical Englishmen

• Farm laborer• Material standard of

living not much better than that of an average Roman slave.

• Cottage consisted of a single dark room shared night and day with wife, children, and livestock.

Life

• Owned a single set of clothing

• Traveled only as far as feet could carry

• No medical attention• Illiterate• Childeren sent into

“service”

Food

• In good times, only the coarsest food – wheat and barley in the form of bread or mush.

• Even potatoes were a luxury beyond his reach

• 1500 calories a day

Suffering

• Chronic Hunger• Extreme fluctuations in

bread prices put them at risk of outright starvation.

• Eighteenth-century death rate were extraordinarily sensitive to bad harvests and wartime inflations.

Yet…

• The typical Englishman was better off than his French or German counterpart.

• Burke: “slavery with all its baseness and horrors that we have at home is nothing compared to what the rest of the world affords of the same Nature”.

Resignation Ruled

• Trade and the Industrial Revolution had swelled Britain’s wealth.

• Still, even the most enlightened observers accepted that these could not trump God’s condemnation of the mass of humanity to poverty and “painful toil…all the days of your life”.

Stations in life

• Ordained by the Deity or Nature.

• Even education• The children of the poor

“should not be educated in a manner to elevate their minds above the rank they are destined to fill in society” lest “ those destined for laborious occupations and an inferior situation in life” become discontented.

In Jane Austen’s World

• Everybody knew his or her place, and no one questioned it.

Fifty years later…

• Jane Austin died July 18, 1817

• by 1870• That world altered

beyond recognition• “extraordinary advance

in wealth, luxury, and refinement of taste.”

• Unprecedented improvement in the circumstances of those whose condition was assumed to be irremediable.

Robert Giffen

• Reminded that in Austen’s day wages had been only half as high and “periodic starvatin was, in fact, the condition of the masses of working men throughout the kingdom fifty years ago…”

The Sense that

• What had been fixed and frozen through the ages was becoming fluid.

• The question was no longer if conditions could change but how much, how fast, and at what cost.

The Sense that

• Changes were not accidental, or a matter of luck, or divine provenance, but the result of human intention, will, and knowledge!

• http://www.npr.org/2012/03/08/148235387/da-vincis-ghost-manifest-in-the-vitruvian-man

1870

• The notion that man was a creature of his circumstance, and that those circumstances were not predetermined, immutable, or utterly impervious to human intervention is one of the most radical discoveries of all time.

1870

• It called into question the existential truth that humanity was subject to the dictates of God and nature. It implied that, given new tools, humanity was ready to take charge of its own destiny.

• It called for cheer and activity rather than pessimism and resignation.

• Before 1870 economics was mostly about what you couldn’t do.

• After 1870, it was mostly about what you could do.

Alfred Marshall

• The father of modern economics:

• “The desire to put mankind in to the saddle is the mainspring of most economic study.”

Victorian Popular Imagination

• Captured by Economic Possibilities.

• Instead of;– Political– Spiritual– Military

• Intellectuals were obsessed with economics and aspired to produce a great work in the field.

Inspired

• By progress and advances in the natural sciences

• Began to fashion tools for investigating and controlling the “social mechanism”

• Creating a wealth of new opportunities.

Ultimately• The new economics

have transformed the lives of everyone on the planet!

• The notion that the nine parts of mankind could free itself from its age-old fate took hold in the Victorian era in London

• It is still spreading.