The Good, the Real, & the Fake Economy

An exchange with Lawrence Auster about the possibility that the European Monetary Union might dissolve, and with it much of the impetus of the more general socialist project embodied in and effectuated by the EU, got me thinking about what would happen if the European or American government apparatus were simply to disappear. What would happen, in other words, if the whole thing were just to collapse? Sure, there would be a huge dislocation, millions of government workers thrown out of a job, etc. But, would it not also, after a while, usher in an era of much increased prosperity for the affected populations, in rather the same way that the collapse of Soviet style communism worked to the ultimate benefit of the East Germans, Czechs, and Russians?

This led me to some more general considerations.

There are three sectors of any economy: the portion of it that is good, the portion that is real, and the portion that is fake: the good economy, the real economy, and the fake economy, characterized by work and products that are good, real, or fake.

People who work in the good economy produce goods and services that people want and value, and that are truly good for them; goods and services that promote human flourishing, and that, ipso facto, are properly ordered to the Good Himself, as His Nature and Will are expressed everywhere in nature, and in the natural law. Those who produce, e.g., nourishing, delicious comestibles and well-made, beautiful clothing work in the good economy.  If your work product is elegant or handsome, and does no harm to those who use it, you can be pretty sure you are working in the good economy. Such work is captured in the Buddhist notion of right livelihood.

Almost everyone aspires to do good work, and tries to find in their work something that is good, which they may then emphasize.

The real economy includes the good economy. People who work in the real economy produce goods and services that people want and value, but that may or may not be truly good for them. Porn is the best example I can think of. People want it and value it, but it is not truly good for them. Abortion and sex change operations are pretty good examples, too. They are interesting because, as with any other product, they can be either excellent or shoddy. Excellent porn or abortions are in the same relation to the Good as an excellently made road that leads over the edge of a high cliff.

Almost everyone does some work that is real but not good; almost every human engagement, however much real value it provides, is not wholly good.

Then there is the fake economy. People who work in the fake economy produce things – I hesitate to call them “goods and services” – that no one wants. No one would spend his own money on the stuff they produce, if he had a choice. Most such work involves complying or enforcing compliance with legal, regulatory, or bureaucratic policies and procedures, and demonstrating and documenting such compliance, and complying with policies and procedures for documenting compliance, and so forth. Once you get started with this sort of work, there’s no bottom to it. Then there are all the professionals who help with compliance: accountants, consultants, attorneys, compliance software firms, etc. Government regulators and those in the private sector who specialize in dealing with government regulators – including tax agencies – are all part of the fake economy.

Each of us who so much as files documents with government agencies or pays taxes does some irreducible amount of fake work, and almost every job involves some fakery.  

By its very nature, all fake work increases the cost of doing business for everyone, so that the cost of real goods is higher, and fewer really valuable goods or services are either produced or enjoyed.

Because it aims policy at social goals that cannot be achieved in this universe, or that are flatly incoherent or contradictory, liberalism promotes the fake economy. Libertarianism promotes the real economy. Traditionalism is interested to promote, or restore, the good economy.

How does the American economy stack up? Not well. It’s a fair bet that about 40% of the American labor force is producing fakes. Most government employees are doing fake work. In the banking industry, more than 50% of the labor force is devoted to compliance activities, rather than banking operations; in the health care industry, the ratio of time spent on paperwork to time spent on patient care is 50/50.

Think about the scale of that lost opportunity: about 40% of our labor force is working at producing stuff that no one wants. How much wealthier would we all be if that labor, year over year, decade after decade, were devoted instead to the real economy? And if that extra real wealth had been compounding, with some percentage invested, think how much greater our total social capital would be, and thus our labor productivity (i.e., our earnings). The mind reels.

What is worse, much fake work is expended in pursuit of social objectives that cannot be achieved, such as equality. Not only is the work fake, not only does it represent opportunity lost and resources squandered, but it perverts and deforms society by forcing it to adapt toward unreality. It is probably fair to say that most fake work is aimed at improving social performance in pursuit of real and attainable goals, increasing the cost of the really valuable activities we would undertake even in its absence, so that we are doing real work less efficiently. But peculiarly liberal or leftist sorts of fake work force us to waste social resources in pursuit of unattainable goals, that we would never otherwise seek. They force us to degrade our social performance for no really operative reason: that is, they force us to do fake work less efficiently.

But note that even if there were no fake economy, so that the whole economy were real, as the libertarian urges, then while it would certainly be far more prosperous than it is today, it would not thereby be rendered good. One can’t measure goodness simply in terms of what people want; after all, some people want to kill themselves. Utilitarianism is fine as a guide to life and to policy, provided that most people’s utility functions are not too perverted by sin and error. Unfortunately, this means that utilitarianism is no good as a guide to life or policy: our utility functions, as individuals and as a society, are deeply whacked. Freudians would say that people are more or less deranged or neurotic; Christians, that they are more or less depraved. Same thing, effectually.

The libertarian argues, correctly, that the pervasive operation of natural law in and among a population of free agents will result eventually in the discovery and uncoerced, bottom-up adoption of forms of social order that promote the true good, the true welfare and flourishing of the people, and in a preponderant, unforced conformity thereto. Sin being more or less lethal, it is self-limiting. Libertarianism allows death to do the works of justice that humans have traditionally delegated to governments. And there is no question that the libertarian strategy would work: in the long run, we are all dead, as Lord Keynes and Ecclesiastes both remind us.   

Well and good; but it will take a long time for that fruit to ripen – the harvest will be ready at about the same time as the eschaton is completed – and in the meantime there will be much suffering (when we are unguided by prior reasoning, suffering is how we learn how we ought to behave). Until its citizens learn virtue, society will be weakened by vice, so that it will be easy prey. It’s a price we needn’t pay, because humanity has already paid it: we already know how to organize a society – how to legislate morality – in such a way as to promote human flourishing. Traditional morality gives us all the main points of the necessary policy.

Where there is in respect to the finer points of policy any doubt remaining, a simple thought experiment can quickly tell us whether a given option ought to be ruled out. All we need to do is ask ourselves, as between two otherwise completely similar societies, and holding all other things equal, if one of them allows the behavior in question while the other does not, which of them will prevail. Such questions generally answer themselves.

Notice that the question is not, what policy would be nicer or more fair, but what policy would be prudent – would, i.e., lead to the prosperity and prevalent success of society against its competitors, and vis-à-vis the challenges posed by the natural environment. Such questions of policy confront any form of government. The issue, then, is not whether legislative authority ought to be, or is optimally, vested in a monarch, an oligarchy, or a Parliament, or whatever; for any such authority would have to make the same decisions about policy. When we ask what form government should take, we should understand ourselves as asking which form of government would be most likely to make prudent policy – i.e., policy that leads us, individually and corporately, toward the Good.

The first such question, in the order of logic, is whether a society ought to have a government at all. As between two otherwise identical societies, which will prevail: the one that is governed, or the one that is not, at all? Like I said, the question answers itself, no? Even a poorly governed society can conquer territory occupied by far more prosperous and happy, but uncoordinated freeholders, who can in the nature of things have no foreign policy or war-making power.

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16 thoughts on “The Good, the Real, & the Fake Economy

  1. Your policy test is so obvious and self evident. Why is it never taken? Indeed, why is it so fastidiously ignored?

    Has the success of the West made its people so stupid about reality? Just as trust fund babies need not develop virtue because their inherited money shields them from the consequences of their poor choices, our society’s wealth, bequeathed to us by our ancestors, has blinded us to necessity.

    • “Stupidity” is not the problem. It is the poisonous ideology of liberalism that generates and expands vast amounts of fake work. The smartest people in the West are mostly liberals, and they sincerely believe that the government creates real, important jobs, not fake make-work.

  2. The libertarian claims are certainly not proven and almost certainly false, based as they are on false anthropology and hence a false story of Government.

    If one reads old writers, such as Dante or the ancient Greeks, one realizes that they consider Government to be the finest earthly work of Man. That we do not live in libertarian societies is not the matter of prudence merely.

    The point is the libertarians lack the concept “Common Good”. They dispute that “Man is a Political Animal”. They lack concept “Sacred”.

    As Chesterton said in Orthodoxy, there is no record of men having said to each other “I will not hit you if you do not hit me” but there are record of men having said “We must not hit each other in the holy place”.

  3. Libertarians are only the classical liberals taken to logical conclusions. The nuclear of the problem and the great inversion from the classical thought is visible in Adam Smith. viz his famous example of baker that produces bread not for feeding the city but to futher his self-interest.

    To ancients and medievals, the baker would have been a bad citizen.
    As Edward Skidelsky writes The Emancipation of Avarice (First Things, May 2011):

    “the ancient vision of the polity as a teleologically ordered whole, in which the public good is not just the product but the ultimate end of private actions, the towards-which they are directed. A bridle-maker, to use Aristotle?s example, aims at ease and agility in the cavalryman, the cavalryman at victory in war,
    and victory in war at the freedom and glory of the polis. Each small
    action is connected through a long chain of final causality to the greater good.

  4. @Kristor – As well as Fake workers, another major part of the economy are dependants – most of those below 25, above 60, the people who cannot work, the people who will not work, the people for whom it is both easier and more lucrative not to work…

    Then there are those who do not do enough work to cover their own expenditure, then those who do not do enough work to cover the expenditure of their families…

    Nowadays, mixed in are very large numbers of persons imported in order specifically to become dependents and clients of the Left…

    By the time this analysis reaches its conclusions it is clear that modern society is – in economic terms – like an upturned cone of Fake work and dependency resting on an only-slightly-flattened point of the Real economy.

    Naturally, living in such a world, people assume that dependency and fake work are real, that there is no distinction between building a defensive moat, and digging holes and re-filling them; that resources just happen.

    And the concept of Good work (e.g. as propounded in Distributist-influenced writings, or by Frtiz Schumacher) has become contaminated almost completely by Leftism – which conflates Good work with ‘good’ intentions.

    What a mess! Impossible to imagine it being unravelled, a strand at a time.

    Presumably it will continue until it cannot continue any longer – then the whole system will stop, fall to pieces and get taken over by… something else.

  5. We will revert back to some extent to a “self-sufficient” economy as the “advanced economy” necessarily degrades. This is necessary as it is the aim of the “advanced economy” to stomp out all self-sufficient economies. This reversal of fortune obviously gives those that transact in the “good economy” an added boost for it is the “advanced economy” that is most hostile to “good economy,” explicitly, and by way of being a facilitator of the “bad economy.”

    One thing that is becoming increasingly clear is that there is money to be made in selling anti-liberalism. And thus, one can detach from the “advanced economy” while strengthening the “good economy.”

  6. Conservatism in the U.S. has historically been divided into two camps: libertarians and traditionalists. Neither of them have a solution to the problem of unemployment that the public will accept.

    The basic problem is that in today’s world all the goods and services that people require and that are good and needed can be produced by about 10% of the workers. What are the rest supposed to do? How are the 90% supposed to earn a claim to the goods and services they need?

    Western civilization has answered this question with a combination of excessive consumption, government expansion, money printing and debt creation. It’s not a good answer.

    Libertarians say, “Confine government to its proper role and all will be well.” But they have no proof that the market will absorb the 90% of superfluous workers. Indeed the market cannot absorb them without even more excessive consumption.

    Traditionalists say, “Return to the ways of our forebears.” But the forebears lived in an age prior to the mechanization of agriculture. Before the mechanization of agriculture, unemployment was unknown.

    This is the economic problem of the age, and it appears to me that people are too stupid, as a species, to figure out the answer to it.

    • Truly sustainable agricultural practice (instead of monoculture and its fellow host of ills) would require the family farm, and it would be culturally and politically beneficial if a large segment of the population returned to such a life.

      In cities, the upper middle class and the wealthy could employ many folks as servants. If it were not for the welfare state, even middle middle class folks could afford domestic help. Wasn’t this the case before the cultural revolution? Honest work even for the dull witted and uneducated — that’s a requirement for a decent society.

      Without women’s largescale participation in the non-domestic workforce, we’d get much closer to full “real” employment. Communities (not to mention families) have greatly suffered from the lack of feminine involvement.

      Stronger extended familial ties would provide a support network for the less able, less intelligent folks who do not manage their lives well on their own.

      Lastly, vocations to the religious life could absorb many folks. We always need more people to pray, teach, and do the Lord’s work constantly for free.

  7. Reverting to labor-intensive agriculture runs counter to the profit motive, so I can’t see it happening.

    People do not need servants today because of labor-saving devices in the home. Nannies and other child care should not be counted as servants because their effect is to allow mothers to enter the workforce to compete for scarce jobs.

    If some women would voluntarily leave the job market, that would help solve the unemployment problem, but I see no sign that women want to make the financial sacrifice.

    Strengthening extended families would be a great thing if anyone knew how to do it.

    Religious vocations for Catholics have been declining for years. Among Protestants, there is a surplus of clergy and not enough paying jobs.

    Working for free continues to present problems for many people.

    I continue to believe that people are too stupid to come up with a workable proposal for solving today’s problem of systemic unemployment. A workable plan would be one that would not require selfish people to do things contrary to their own self-interest.

  8. Jeff W., my bet is that if Federal intervention in the economy were to cease, many sectors of the economy would naturally settle into a much different configuration than we see now. There would be fewer big firms or farms, many more small ones, to take just one example. This would result in a lot of new jobs.

    At the same time, the end of the practice of paying people to move dirt from one hole to another and back again – which is what about half our people are now doing, in effect – and the end of oppressive labor regulations would mean that it would be much cheaper for those smaller firms to hire the marginal employee. Those workers now employed in digging and re-filling holes would instead begin to be employed at creating goods and services of real value. They would be increasing the social supply of value, rather than wasting it. Society would get wealthier as a result, and people would use their greater wealth to buy more goods and services, or invest in capital goods that increased labor productivity – which is to say, wages, and household disposable income. This would make it easier for families to afford to keep the wife off the employment market.

    All these factors would tend to increase the demand for labor, so as to soak up the available supply of underemployed.

    Let’s say that your off the cuff numbers are right, and 10% of the labor force can produce everything that we need to keep everyone alive and healthy. You ask what the other 90% are supposed to do in order to earn a claim to a share of the goods, and I say: Let them bake cake! Seriously, let them become, or work on, artisanal farms or dairys, or in shops that make beautiful furniture by hand. There is already a huge market for luxury goods – for beautiful things, from Haydn to Harleys. What is the problem with letting that market be much, much larger?

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  10. Kristor,

    Handmade artisanal furniture is valuable because its too expensive for most people to have. Mass produced furniture can be good if you use the right materials and the right machines. It doesn’t have to be ikea. Objective value isn’t what makes it valuable.

    It’s about status, not function. Nearly all purchases in the modern economy are about status. And status is a zero sum game.

    You want to know why people aren’t servants. Because it doesn’t have any status. In a world where earnings from being a servant aren’t enough to change your lifestyle and where all basic needs are provided for there is just no reason to be a servant.

    At best if you eliminate the “fake” economy your likely to get a lot more activity in the “real” (status) economy rather then the “good” economy. In fact the “fake” economies purpose, at least as stated (albeit often failing in practice), is often to try and rein in the “real” economy and make it “good”. I think people get that the “real” economy isn’t good, but all attempts to make it “good” or to corral it from interfering with the “good” have been a failure.

    • I am perhaps being too harsh in saying “all” attempts have been a failure. Certainly some have worked well. I guess its just my feeling that in the current economy a majority of the attempts have failed.

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