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On "Iron Laws" of Economics

ABSTRACT: 1. A strong interest shown by modern society to the sphere of


economic attitudes, and connected to it the growing authority of the
economists. - 2. Perception about the "iron" laws of economics as highest
criteria of economic activity and life in general (economic fatalism). - 3. An
exploration of the most widespread motives of housekeeping: struggle for a
survival, earning one's "life", earning on "the black day". - 4. Logical
"circumvention" of all these motives confirmed by the daily facts. - 5.
Managing for the sake of managing - professions for amateurs. - 6. Narrowing
the sphere of action of the economic "laws" from "all" to "wishing". - 7.
Optionality of the "iron laws" of economy, even for those wishing to be
engaged in it. (with examples). Dependence of economy on ethics and
psychology. - 8. The essence of the moderate fatalism, its incompleteness
and discrepancy. - 9. Economics as a game, initiated and regulated by the
government. Decreasing of the status of economic game with the eldering of
the population. - 10. Inevitability of occurrence of "shadow" sector in
economy, which considers as its basic purpose the obtaining of the profit. 11.
A dilemma rising before any man without preconception: to admit economy
to be a "dirty business", fun for the adults, or to search for the "third" way,
which... 12. ...on my sight, consists of returning to the initial sense of the
word: economics-a reasonable running of an economy, or keeping house
keeping) - 13. The elementary analysis of this definition. - 14. The task of
philosophy of economics in the given context. - 15. Concept of "organic
economics" demanded by real life, instead of the obsolete, and diminishing
influence of the exclusively mechanical approach. Universal character of this
concept.

"Economics is a special world, with it's own laws and problems, dramas and
contradictions" The textbook "Modern Economics"

Respectable colleagues!

It's unlikely, that I need to explain to any of you, what place in our life the
phenomena of economic order has achieved. The well-known "market
attitudes" have penetrated into practically every, sphere of our life, even
most intimate. The leading economists, beginning from Marx and ending with
the present "liberals", habitually incur the role of critics and prophets,

predicting the possible and even the certain future. In their own declarations,
they have the right to do it, because of a vast knowledge of the nature of
economics.

"Economics has it's own special, immutable, iron laws, which no one can
violate with impunity. Our task is - to study it carefully (through an economic
science) and try to follow it all the time". These calls, metamorphosing
sometimes into exorcism, are often forced upon us. Some even compare
economic laws on power to the natural laws- such, say, as the law of world
gravitation (which all are obliged to follow); and on clarity to the table of
multiplication.

All of it, together with the aggravated economic concern, has resulted in an
occurrence of the original worldview - economic fatalism, which by it's
popularity can be compared only with the astrological fatalism.

I believe, that economic fatalism (as any fatalism) does not, by any means,
promote normal development of the economic sphere, and consequently, I
consider it my obligation to convert it into a subject of critical research.

It is doubtless, that within the basis of all economic life lays the simple, and
apparently, really "iron" principle: the economy (housekeeping) is necessary
for survival. But even here there is something to muse upon. It is no secret
that the instinct for survival (under any conditions) is, by no means,
characteristic to all. There were, and are, people who prefer a proud death to
a base vegetative existance by any means. It would be too hasty to announce
them from the doorstep as abnormal and sick. For this it is necessary, at least
at first, to comprehend in a general way the blind instinct of survival (why
survive?), to make from this instinct a rational principle, which is not too easy.
Moreover, the word "survival" itself can be understood differently: some have
only in view not dying from cold and hunger, others - to preserve the status
quo, that is, to not lose the obtained positions, which sometimes can be
rather high.

Concerning "cold and hunger", it is necessary to note, that in many advanced


countries there is a special sort of citizens, which haven't any economy at all
(in the habitual sense), going about from one flophouse to another, from one

soup line to another, and selecting clothing for themselves in a rubbish heap.
This fact (sad in itself) testifies, however, that with the existence of a well
developed charitable system, housekeeping for the physical survival of the
individuals is absolutely not necessary. The people voluntarily engaged in an
economy, are quite able to very poorly dress and feed their less lucky cocitizens. Generally speaking, the "economical" resources of the human
organism are really inexhaustible. A precious example: Indian yogis, a certain
sort of leaders in asceticism - some of them suceed in feeding not by the
famous bread and water, but by, strange to tell... air! Certainly, on all
similar "miracles" there leave years of wearisome trainings, but, you see, the
search for appropriate work, (for any fan of tasty eating), can also require
considerable efforts.

Another widespread motive, exposed by the supporters of compulsory


housekeeping, is earning one's life. Really, the aspiration to life is inherent,
apparently, to each of us, but, you see, the life in this case should not be
understood literally. It's clear to everyone, how much you will work you will
not work for life, the richest and most influential magnate dies and decays in
just the same way as the poorest beggar.

Under the "life" it's usually understood not the life itself, but a certain
sensation of life, as opposed to mere existence. And what's more, the subject,
which evokes this sensation differs not only in every separate man (someone
needs for "life" a bottle of vodka; another - a villa on the Canary Islands; a
third - a new wife; a fourth lives only when he is playing "with a big stake"),
but also within the same person in the course of time.

In order to leave a shaky area of psyhological sensations and moods, some


experts offer to understand "life", as offered by the statistical science: an
average standard of living, expressed in a certain quantity of things and
money, for the sole of the population. If I have these things - I live, if not - I
exist.

Even without any exploration of the question of trustworthiness of any kind of


statistical calculations, it can be said with assurance, that in this case,
aspiration to life, which is really inherent to everyone, is substituted by the
conditional and occasional fact of possession of a certain amount of property.
Such substitution causes indignation of many intelligent people, who regard it

as childishness and narrow-mindedness. The aspiration to averageness, to


"being not worse than others", by analogy with the animal's flock instinct, for
a long time was contrasted with the aspiration to originality and
independence, among other aspects in an attitude towards property. From
this comes children, who squander their parent's fortune or go looking for
themselves far outside of the material sphere ("Artamonov's Business " by
Maxim Gorky , "Buddenbrokes" by Thomas Mann and so on).

Really, to consider someone's life in possession of a certain statisticallycalculated things, is obvious, though a very ancient illusion. That fact, that
millions are working zealously for the benefit of this illusion, speaks only
about the power of habit and about the low level of education in the given
area. It's clear, that in the course of time, and with the development of
critical thinking, less and less people will be fascinated by this illusion, until it
lastly it will be converted into some museum artifact.

After all said above, it becomes clear that the economic activity, as such, isn't
something compulsory, hanging, so to say, as a Damoclov's sword (an evil
fate) upon each of us, but it is a subject of choice, a desire, or, if you like...a
calling. With such an approach the "social base" of notorious economic laws is
rather essentially reduced - namely, from "everyone" to "anyone who
wishes". But even within these, much more narrow limits, the effectiveness of
the above mentioned laws doesn't look completely obvious.

Let's take, say, the most simple and less controversial of these laws, namely:
the price of goods or services determined by the correlation between supply
and demand. That is, the greater a requirement of a product the greater its
cost, and vice versa. Imagine an elderly woman, rather well-to-do, who rents
a room to the young graduate student working upon his dissertation. By
some situational reasons, the demand for the rented dwelling place
increases, and the hostess of the apartment would, by idea, desire to
increase the rental payment. But here, she, from compassion for the awkward
material condition of her lodger, prefers not to increase the price for the flat
to the "balanced" level, and leaves it, lets suppose, at the former level. From
the point of view of economic fatalism, by this action, she commits a crime.

But somebody would disagree with me, and say: though the crimes of the
given economic law are possible, it does not pass unpunished. Let's look,

however, further this post-graduate student, after becoming a doctor and


receiving popularity and glory in the scientific world, visits his former hostess,
and in a sign of gratitude, makes her a present, which far exceeds her
"losses" during their joint residing. Instead of a punishment, it appears to be
a reward!

I, however, do not assert, that now, all relations between lodgers and
landlords are based on the "humanitarian" principles of compassion and
mutual aid. But this, in general, regrettable fact testifies not to the power of
the economic laws, but more about the lack of humanity of the average
person. Well, even the most ardent supporter of following the "laws", would
hardly say, that our "aged landlord" behaved in a bad way, by leaving the
price at the previous level; or that the poor graduate student, (and nowadays,
rich doctor), behaved badly by thanking her properly.

"The case with the hostess and her lodger is their own matter, which they can
decide by their own discretion, and at their own risk. The other matter macroeconomics, is an entirely different sphere. Here the law of supply and
demand works at full force." Is this right?

It is known, that in most countries there is an establishment of minimal


wages, in which the level is defined by the appropriate political law. Very few
people suspect, however, that this law is, apparently, standing in explicit
contradiction with the "absolute" economic law being explored, according to
which the price of the goods (in this case of labour) is entirely determined by
the demand. With the large supply of working hands, the size of a monthly
salary, under this law, can decrease to an amount, close to 0 - but it does not
occur, because the employers (for the majority) are afraid of the
consequences of breaking the law of minimum wages. They choose from two
laws, the political one. Why is this happening?

The government, proceeding from consideration of the humanistic order,


maintains a level of the minimal incomes, entering, thus, in counter-action
with market demand. Besides, the almighty demand should stand by itself.
But we see, that even in the most economically "free" countries, the institute
of MW safely exists and it's common result, is not the crash of the
government, interfering in the "business of economy", but the political
stability and tranquillity in society - a necessary condition, by the way, for

further economic development.

One more vivid example of an economic "crime" is charity. Certainly, a large


part of charity, at present, pursues advertising purposes. But if to speak
about the smaller, "creating the boon", charitable part; who can explain, from
the pure economic point of view, all this free-of-charge distribution of money
and goods with universal deficiency on them? How can it be, that whimsical
philanthropy upsets the iron machine of supply and demand?

It is rather easy to notice, that all of the motives, by which the economic
"laws" were broken in these examples, are motives of the moral or
psyhological order - compassion, gratitude, fear, philanthropy (human
kindness). Thus, we find, an essential part of economics depends on ethics
and psychology.

It is important to notice, that the last time the absolute fatalism in the
economic area is replaced by a liberal one. "Ironness" of the economic laws is
accepted here, but, most probably, not as inexorabliness, but as
heartlessness, hardness, and cruelty. "The laws of the market are cruel, but
the society, by means of the state, can interfere with its actions, in order to
bridle the passions and mitigate the consequences of the spontaneous
market". Thus, in the given case, though the objective force of the economic
laws is admitted, at the same time, it shows their moral defectiveness, which
makes them rather alien and hostile for the majority of the people. Here, the
government is offered a little comic role, as a "lubricator" of the iron laws (to
keep them from clanking) without, indeed, any hope for improvement. The
supporters of the "regulated market ", if I am to understand, are trying to
remain seated on two chairs at once, and, as a rule, are falling from both.

The unsteadiness and ambiguity of the moderate fatalism induces the most
active minds to pass to the following step - to reject completely the abstract
economic laws and to declare government as a sovereign ruler and legislator
of the economic life. Namely, the government, here creates and legally fixes
"uniform rules of the economic game", which all of it's participants, managing
in the given territory, are obliged to observe strictly. Thus, the once almighty
economic laws receive the modest role of national customs or peculiarities,
which should be taken into account while drawing up of rules of game. But
who, tell me, presently may vouch for viability of any cabinet? As a result, the

instability of a situation, connected with the changing of political tendencies


and tastes of the government on the one hand, and the absence of the firm
and objective goals in economic activity on the other, stimulates the most
hazardous and vigorous players in "economics", either to bypass, or directly
deny the governmental decrees. From here originates, and by it is fed, the
powerful and well-organized sector of the "shadow" economy: not paying (in
opposition to the "light" one) taxes, or even establishing it's own "rates", with
which the state conducts eternal, ruthless, and, in the final account, a
fruitless war for incomes.

Thus, we notice in the present economics two sorts of actors: on the one
hand - unfortunates, "eaten" by the everyday life and humbly toiling on
housekeeping troubles; on the other - players, making their economic career
at the expense of others. All this can cause, for every balanced and nonsuperstitious man, an impression, that the economy (just like politics) is a
business, if not dirty, then at least not serious. But before coming to such a
conclusion, we need to see whether there is any other way, or any other
stimulus for economic activity?

Eventually, why should we trust in all this, invented by the authoritative


fatalists, the horrible world of self-propelled economic processes,
automatically changing one economic formation for another; mechanically
alternating decreasing and increasing cycles and fluctuations, self-existing
economic laws, and so on, and so on... - the world of casual whims of
economic fortune, and of the chaos of individual decisions? Wouldn't it be
easier to remember the old and overlooked concept of economics, following
from the very sense of the word, due to which it is not more and not less, a
reasonable running of the house. Or, more exactly - a reasonable running of
our house.

If from the point of view of economic fatalism, both absolute and moderate,
economy is a certain kind of black hole, inevitably entangling each of us for
the supposed needs in economic activity; an endless detective, fraught with
external conflicts and internal compromises. Then, with a more balanced
approach, we, like a personage of one well known tale, who has said:
"Shadow, know your place!"; we speak: "Economy, know your place!"

But it is one thing to proclaim, and another - to fulfill. How do we become the

hosts in our own economy? Some hints can be found in the very definition:
rational housekeeping. In order to be the hosts in our own house, it is
necessary to keep it. In essence, namely this question is, on my sight, the
basic question of the philosophy of economics, which, in the given case, can
be treated in two ways: either as a philosophical department of economics
(not very numerous nowadays, it is necessary to admit), or as an economic
department of philosophy. The second question: how is it best to "keep the
house" (in the "capitalistic", "socialistic", or "statistic" way), contains, in it's
turn, the main task of the applied economic sciences and depends on specific
times and places, traditions and historical peculiarities. If the philosophy of
economics is occupied by definition with the best goal of the whole economic
development; then "economics" itself is working out the methods, and ways
for most quickly achieving this goal. Thus, they supplement and support each
other: because the best philosophy is fruitless, if it can not be applied
anywhere, and the most developed and refined "rules of the game" cannot
make it attractive for the seeking the higher sense.

And the last. In the mass consciousness, it has already strongly taken root,
the representation of the so-called economic mechanism. I would appreciate
this as one of the numerous consequences of the well-known in the
philosophical environment doctrine: Decart's of a matter and spirit. This
dualism, on my look, can be surpassed only by the introduction in use, the
notion of the economic organism and accordingly, organic economy. Such
approach, such point of view, undoubtedly will meet the considerable
counteraction on the part of admirers of economic mathematics and
geometry, but it is doubtless also, that it corresponds better to the deep
expectations of the modern life, and, that's why, for it, the future. Besides, for
me personally, it is obvious, that the coming organic economy (with it's
correct understanding) hardly will come to reject all accumulated experience
(in that number by the supporters of the mechanical approach), but will try
to, so to say, assimilate, that is to take on the arms of all the most valuable
and useful experiences. Only in this case can it execute the main task - the
maximum - to ensure a worthy life to mankind and to the world organism as a
whole!

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