Economy was integrated into a system of values

Economy was integrated into a value system

by Günter Faltin (excerpt from " David versus Goliath ")

Let's stay in economic history for a moment. Until modern times, the economy was integrated into a value system. If someone did not stick to it, that was also sanctioned. Anyone who violated the value system had to reckon with severe penalties. In some places, those who tricked or cheated risked having their earlobes slit open. This is how the term “rascals” came about.

Only modern economics gets rid of this value system and relegates it to an area outside the scientific discipline. Makes it up to the individual whether to operate from a value system or not. All he has to do is comply with the law - and often not even that.

What is now called business administration began as private economics, as profit theory. It was only later, also because of the reputation of the subject, that the term business administration, which sounds more neutral and value-free, was used.

But even Eugen Schmalenbach, one of the fathers of German business administration, pointed out that profit maximization based solely on the individual is basically too narrow. It also needs a public service aspect. Above all, Schmalenbach had the so-called external effects in mind - costs that a company burdens the general public. He coined the term »public economic efficiency«. [1]

A monster of a word - perhaps a reason why the idea was not taken up. [2]

Let's try to defend our own discipline. Isn't it permissible for economics to start from the assumption that people aim to maximize their utility? Couldn't one even say that it is absolutely realistic and correct not to start from any idealistic ideas, but from what really determines action - to maximize one's own benefit, one's own profit? Seems very plausible.

Anyone who argues in this way overlooks the fact that an economy that bases its edifice on profit maximization cannot do without a value system.

A quick and easy way to maximize your profits is to snatch an old woman's purse and disappear. An almost risk-free opportunity to enrich yourself. Still, most of us don't. Why not? Because the very thought upsets us, because basic decency forbids us to act in this way. We are therefore far from being noble people, but adopt an attitude that is self-evident and normal.

Values ​​are a form of knowledge. Values ​​are curdled knowledge. knowledge from centuries. Values ​​are much more than just inspiring ideals. They are a powerful determinant of human evolution. They are psychological factors of great practical importance. [3]

Our actions are based on values. If other values ​​come into play, we will also experience different actions.

We don't have to accept the theoretical arguments of great thinkers like v. Trace back Hayek, Keynes or Polanyi to understand that social norms and values ​​feed into the economy, are important to them. In economic history, the exchange of goods has always been embedded in a framework of norms and rules. In most cases, social norms even had priority over economic processes.

In Adam Smith's famous example of the baker, the baker's desire to make a surplus is slowed down - one could also say: balanced - by the value system of his time in which he moves. He only pushes the price range upwards as far as is compatible with the idea of ​​a fair price. He does not pursue maximum gain without regard for those around him.

Things become quite different when we override the value system on which Smithian reasoning is based. The baker will start to cut back on the quality of his products as long as the customers don't notice. Depending on the extent to which he dismantles his old value system, the temptation to take advantage of uninformed customers is more likely. He will try to compensate for the declining product quality with advertising poetry, with which he underscores his product with statements of quality and trust. He will weigh the risks of being caught against the benefits of greater gain. He will weigh the respect and recognition he has received from his social environment in the past against the higher profit margin and economic resources that are available to him. He will buy sympathizers as confidence-building for himself. Perhaps he will even seek to gain a position of power in which quality or trust are no longer important.

Market thrives on social norms, needs rules, otherwise it becomes an event for tricksters and mafiosi.

We can see that when we "deregulate" the market, like the Chicago school, that is, declare it to be a "free play of forces." When "deregulation" is demanded instead of setting rules for the market - as demanded by the representatives of the social market economy - and also enforcing these rules. It is clear that in a free play of forces it is the strength of the forces that counts - that is, the stronger, the more brutal, wins. It goes without saying that a very specific species then feels attracted to this game. And that strength, elbows and the will to assert yourself, coupled with unscrupulousness, count decisively. And everyone else who isn't wired that way, feels repelled by this type of market.

Allow me an analogy. We know that football needs clear rules and a good referee. Even a poor refereeing is enough and the game, despite clear rules, gets out of control. So we need not be surprised that an economy without strong referees and "freed" from its social rules develops its own - bad - variety. And if the outcome of the game falls to the strongest, they will try to use the funds gained to stabilize their power. They will try to prevent changes in the game and will fight against political guidelines beyond the economic playing field. Will mobilize against politicians if they try to enforce guidelines against them.

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[1] 56 Cordes, Walter (ed.): Eugen Schmalenbach. The man - his work - the effect. Stuttgart 1984.

57 Faltin, Günter (ed.): Handbook Entrepreneurship. Springer Gabler 2018

58 BC Weizsäcker, Wijkman, et al., 2017