About the economic decoding of religions: in my coming book “THE ECONOMIC DECODING OF RELIGIOUS DOGMAS: How Great World Religions Rank in Terms of Economic Consistency”

January 30, 2014


4.1 The General Economic Consistency Ranking of the Great Religions

In order to find the level of economic consistency of the great religions I was concerned with in this research, I employed economic consistency criteria. These are nothing more than dogma components to which I attached specific logics for ultimately decoding the preference for the megagood absolute wealth. I employed ten economic consistency criteria (I could have employed more, but there were not enough data).

The overall economic consistency ranking for the great religions and one religious substitute covered by my study, in descending order, is the following: Judaism, Protestantism (Calvinism, Lutheranism), Catholicism, Orthodoxy, Islam, Confucianism, Buddhism. The overall ranking as well as the rankings for each criterion are depicted in Figure 16.

It was not possible to decode and, consequently, rank all religions for each criterion. A comprehensive consistency ranking of religions was made by employing transitivity. Transitivity was possible because within the general power model all religious values and rules are rankings of the megagoods (in terms of preferences or opportunity costs) and each religion is a system and, as such, should have a unique ranking of the megagoods. This logical consequence was proved true by the finding that none of the rankings of various criteria contradicted any of the other rankings.

For two criteria—level of divinity concentration/dissipation and the power of man over woman—the Christian religions are ranked as a group: C(p,c,o). For three of the criteria—type of preference for general wealth, type of asceticism and the level of transcendence—Judaism and Calvinist Protestantism seem to rank equally. However, when the ranking included Lutheran Protestantism, this was ranked after Judaism, which makes it safe to say that, as a whole, Protestantism has a lower economic consistency relative to Judaism.

My analysis confirms Weber’s observations about Protestants and Sombart’s observations about Jews. From the very beginning Judaism has known an economic consistency level which the other religions, except Calvinism, have not known yet. Judaism proves to be  nothing  more than encoding, by employing religious terms,  the social system of liberty or of the institutions  and values which are most consistent with economic performance.



4.2. The Evolution of the Economic Consistency of the Great Religions

The internal evolution of the six great religions depicted graphically in figures 9 to 12 leads to a conclusion which the general power paradigm generates and which I previously revealed in my book The Economic Theory of Cultures and Institutions (2007): All cultures have a unidirectional movement toward an ever greater weight for the megagood absolute wealth. All six of the great religions, except Judaism (which constitutes an exception only regarding schismatic evolution), have recorded schisms following this pattern: New dogmatic components or religions with higher economic consistency separated out from the initial dogmatic component; in the course of time these new components became dominant components. Catholicism and later Protestantism separated out from antique Christianity, which was carried on by Orthodoxy. Mahayana separated out from antique Buddhism, which was carried on by Hinayana. Sunni Islam separated out from the initial Islam, which fundamentally was carried on by Shi’a Islam.


Figure 9. The evolution of the economic consistency of Judaism: From its very beginning Judaism has known a level of economic consistency which the other religions have not known yet. During Biblical times (until the Second Temple, 535 BCE), Judaism was affected by Canaanite influences (meaning it contained idolatry components), which equaled to institutionalization of some relative power supply. Beginning with the period of the Second Temple (after 535 BCE), the economic consistency level was higher due to King Josiah’s reforms which were initiated almost a century earlier, and the emergence of Rabbinic Judaism elements. In the period that followed the last destruction of the Temple (70 CE), the economic consistency level increased again, coming very close to the highest possible level. This was due to due to passing to full Rabbinic Judaism and the disappearance of the sacerdotal function. What kept Judaism from reaching the highest possible consistency level was its adoption of the idea of afterlife.


Figure 10. The evolution of the economic consistency of Christianity: The first significant increase of the economic consistency level of Christianity occurred about one millennium after its birth, and it is singled out by the Great Schism of 1054 when Catholicism separated from antique Christianity. However, the great leap to a very high economic consistency level was recorded half a millennium later by the separation first of Lutheran Protestantism (in 1517 when Luther published his 95 theses) and especially of Calvinist Protestantism (in 1536 when Calvin published his work Institutes of Christian Religion). This last version of Protestantism brings part of Christianity very close to the economic consistency level of Rabbinic Judaism, or close to the maximum possible level.


Figure 11. The evolution of the economic consistency of Islam: Shortly after the exodus to Medina, Muhammad became the political and religious leader of the Islamic world. As the absolute religious leader he was also the only interceder in the relationship with divinity having de facto capacity to form the dogma. This extraordinary power is preserved by Shi’a Islam through the position of Imam which is assisted by an ecclesiastical hierarchy. It could be said that overall, except for a short period between Muhammad’s death (632) and the Great Islamic Schism (661), Shi’a Islam almost preserved the power concentration and, consequently, the consistency level that existed in the course of Muhammad’s life. As such, Sunni Islam moves this religion toward a greater consistency level because it decreased the relative power supply (or increased its opportunity cost) by introducing the position of caliph. The caliph retained Muhammad’s positions as religious and political leader but lacked the position of the unique interceder with the divinity or the capacity to shape the dogma. Besides, the caliph was elected by the community. A shift toward an increase of the economic consistency level, although not great, occurred following the disappearance of the caliphate in 1924.


Figure 12. The evolution of the economic consistency of Buddhism: From its very beginning, Buddhism created an extraordinary supply of relative power and, consequently, achieved the lowest economic consistency level, indeed a level very close to zero. This was done by limiting salvation to a small group of very able monks and conceiving of Nirvana as a state beyond the paradise of gods. The Hinayana component preserved the initial Buddhism. The separation of Mahayana between 150 BCE and 100 CE increased the consistency level of Buddhism: Buddha and the other interceders could help others less able to get salvation. This democratization of salvation decreased the supply of relative power and as such increased its opportunity cost. However, even if only Mahayana is taken into account, Buddhism records a level of economic consistency lower than Judaism, lower than any of the Christian religions and lower than the consistency level of Islam. This is due to its rejection of the idea of divine transcendence.

This unidirectional movement of cultures, which is confirmed by the transformation of religions over the course of time—from cultures centered on the megagood relative power to cultures centered on the megagood absolute wealth, is rejected by many scholars. However, these scholars ground their rejection on a fundamental confusion. In a way similar to Fukuyama’s (who initially defended the unidirectional movement in 1992, but later rejected it in 2004), many tried to check this possible evolution toward the social systems of liberty based only on the presence of the political system of liberal democracy[1].

Such a method of checking up does not confirm the unidirectional movement because many countries of the world are politically organized based on dictatorial and/or authoritarian systems. The fundamental error consists of not taking into account the evolution of the other institutions which signal cultural evolution, especially the institution of free markets. Almost all of the present authoritarian political systems and the greatest dictatorial political system (the Chinese one) employ on a sizable scale the institution of free market which is in fact the institution of liberty in the economic field and which, as such, doubtlessly signals the aforementioned unidirectional cultural movement.

Another great confusion is relative to the time span of evolution and prediction. Cultural values were shaped during millennia and the duration of their transformation should be comparable. Consequently, we should not expect cultures centered on the megagood of absolute wealth to prevail fully in time spans of decades or even centuries. What we should look for is only the direction of evolution. In other words, the unidirectional movement of cultures can only be asymptotical to a time coordinate.

A great part of the world has already evolved toward a culture centered on the megagood of absolute wealth through simultaneously adopting both liberal democratic systems and the institution of free market. Other countries have evolved in the same direction by partially adopting the same values or, more exactly, adopting the institutional setting of free markets. Taking into account that in the long run it is not possible for any society to function by simultaneously employing different systems of values in various sectors, the presence of the institution of free market in the economic sector will trigger an evolution toward the same values in the other sectors. These changes might not be spectacular in the short run, but there is certainty relative to their nature.

In the end, I would like to answer a question which might very likely be posed by many readers: If religions are so important to the economic performance of various countries, why have countries with very different religions performed economically equally? Why, for instance, have Sweden and Japan had comparable economic performances (at least in the course of their modern history), when it is well known that Sweden is a Protestant country while Japan has been dominated by religions having much lower levels of economic consistency (Shinto, Buddhism, Confucianism)? The answer is simple: The economic institutions which account for the good economic performance of the countries having religions with much lower consistency levels than Protestantism—free markets—are not of a similar nature with that of the local religions, but rather are similar with the nature of Protestantism. Those institutions were either freely adopted (as in the case of China) or were imposed by force (as in the case of Japan). The Protestant religion and the institution of free market are simply descriptions in different terminology of the values and institutions inspired by the same Western culture—which has a high or exclusive preference for the megagood absolute wealth.

[1] Fukuyama (1992) rightly identified the unidirectional movement of cultures, but his argument and mainly his way of checking up were wrong (Fudulu, 2007). Testing the hypothesis based only on the presence of institutions of liberal democracy and ignoring the institutional setting of free markets (which equally signal the evolution toward liberty, even if they are employed by authoritarian political regimes), forced him to later retract (Fukuyama, 2004) and accept its falseness.

Idei sociale profund eronate – fundamente ale “profesionalismului” politicienilor români

January 30, 2014

Nu sunt, din principiu, un spectator constant al programelor televiziunilor române.  Ba chiar socotesc că implicarea considerabilă directă (ca participant ȋn calitate de invitat) sau indirectă (ȋn calitate de spectator) la programele televizate este nocivă pentru oamenii de știinţă. Dar chiar și urmărirea sporadică a dezbaterilor pe teme politice sau economice transmise de televiziunile române mi-a prilejuit constatarea unor grave erori, din perspectiva unor cunoștinte solide de știinţă socială. Voi semnala ȋn ce urmează unele dintre aceste erori, care sunt prezentate de importanṭi oameni politici – miniștri, prim-miniștri sau parlamentari – ȋn calitate de cunoștinte infailibile ale știinţelor sociale, și, foarte succint, raṭiunile pentru care ele sunt doar erori.


Separaṭia puterilor în stat este un principiu sacru care trebuie implementat și evaluat ca principiu ȋn sine. 


Principiul separaṭiei puterilor ȋn stat, după politicienii români, justifică orice, inclusiv iresponsabilitatea și eșecul ȋndeplinirii misiunii instituţiilor statale separate. În faţa abuzurilor scandaloase și a eșecurilor lamentabile ale acestora, politicianul român ridică din umeri resemnat: “Ce putem face dacă separaṭia puterilor nu ne lasă sa acṭionăm?”. Într-adevăr, separaţia puterilor este un principiu ce nu poate fi ȋnṭeles ȋn profunzimea sa de oricine, deoarece ȋnţelegerea lui este condiţionată de ȋnţelegerea unor stări și cauzalităţi sociale fundamentale care, paradoxal, sunt ȋnṭelese doar de puţini specialiști ȋn știinţe sociale.  Raritatea acestor experţi profunzi, ȋn general, nu implică ȋnsă inexistenţa lor ȋn România. În mod foarte probabil, acei puţini experţi profunzi existenţi ȋn România nu se găsesc ȋn proximitatea liderilor politici români.


Separaţia puterilor ȋși justifică existenţa doar atât timp cât ea se dovedește potentă ȋn impunerea egalităţii de putere ȋn cadrul structurii instituţionale, dar, simultan, și ȋn interacţiunea dintre membrii individuali ai societăţii.  Egalitatea de putere este condiţia esenţială a stării de libertate umană și chiar și a performanţei economice excelente.  În consecinţă, doar separarea strictă a zonelor de acţiune ale diferitelor instituţii statale nu este suficientă. Separarea este doar o veriga a unui lanţ cauzal și ea trebuie, în mod necesar, completată cu supravegherea mutuală și continuă a instituţiilor separate. Principiul separaţiei eșuează atunci cand prin separare s-au constituit doar zone ȋn care instituţiile separate se angajează ȋn abuzuri ȋn relaţia cu cetăţenii. Ideea curentă că instituţia “justiţiei” trebuie lăsată să acţioneze nesupravegheată, necontrolată și necorijată, independent de performanţa ei, este o gravă eroare. 


Principiul separaţiei puterilor nu exclude controlul, supravegherea sau interferenţa, ci impune control, supraveghere și interferenţă mutuale și egale ale instituţiilor separate prin reguli și reglementări bine conturate.  În caz de eșec al principiului separaţiei ȋn termeni de asigurare a condiţiilor de egalitate de putere și libertate, acesta poate fi diminuat ȋn importanţă și rol, ceea ce se și ȋntâmplă ȋn multe ţări cu tradiţie ȋn instituţii liberale. Principiul separaṭiei puterilor este un mijloc, doar un mijloc și are ȋnlocuitori. Un bun exemplu al practicii separaţiei sau inseparaţiei instituţionale ȋl constituie istoria relaţiilor dintre băncile centrale ale diferitelor ţări ale lumii și guvernele corespunzătoare.  Atât separarea cât și subordonarea băncilor centrale a funcţionat și funcţionează cu performanţe comparabile.




Noi nu intervenim pe pieţe! Eficienţa pieţelor și libertatea de acţiune a agenţilor economici sunt incompatibile cu intervenţia de orice natură pe pieţe.


 Adevărul este că pieţele libere sau eficiente nu apar spontan, ȋn special ȋn situaţia economiilor moderne, decât ca excepţie! Cele mai eficiente economii ale lumii sunt acelea cu cele mai sofisticate, energice și profesioniste intervenţii statale, ȋn sensul impunerii deliberate sau intenţionate a condiţiilor care caracterizează pieţele libere și monitorizării permanente a acestora.  Într-un cadru mai general, non-intervenţia nu generează libertate, așa cum intervenţia sau interferenţa nu este prin natura sa coercitivă.  Ca exemplu, vezi economia SUA, care a iniţiat, la finele secolului XIX, primele legi de intervenţie pentru distrugerea concentrărilor monopoliste și care are și ȋn prezent cea mai sofisticată și puternică reglementare a condiţiilor concurenţiale. De fapt, diferenţele dintre ţări ȋn ce privește nivelul și calitatea reglementării pieţelor sunt similare cu diferenţele ȋn performanţa economică.  În timp ce ȋn SUA reglementarea pieţelor este impresionantă prin vigoare, promptitudine și profesionalism, ȋn România instituţii precum Consiliul concurenţei au mai mult un rol decorativ, cu intervenţii sporadice și timide și nu sunt sprijinite de un corp adecvat de experţi economiști și juriști. 



Creșterea economică a României depinde esenţialmente de investiţii externe, iar lipsa lor epuizează cauzele stagnării economice.


Ideea că procesul de creștere economică depinde de un plus de resurse, care trebuie să fie exterioare agenţilor a căror performanţă economică urmează a fi sporită, este fundamental eronată și ea domină ȋncă o mare parte a economiștilor.  In România, economiștii care ajung să fie obsesiv mediatizaţi sau angajaţi pentru consiliere par a fi numai din tabăra celor care nu ȋnţeleg ȋn profunzime cauzalitatea performanţei economice. În mod primar și fundamental, creșterea economică depinde de voinţa agenţilor economici de a folosi o parte optimă din resursele de care ei dispun, oricare ar fi acelea, pentru ȋmbunătăţirea performanţei economice deoarece resursele pot fi și sunt ȋn mod real angajate și ȋn alte scopuri decât cel economic. În consecinţă, resursele economice nu constituie o problemă a creșterii economice, indiferent de nivelul lor iniţial. Problema este cantonată ȋn perimetrul comportamentului agenţilor economici și prima condiţie a unui comportament cu o direcţionare benefică din punct de vedere economic este existenţa unui set de valori și instituţii corespunzătoare, care favorizează obiectivul performanţei economice.  Aceasta este explicaţia pentru care variaṭia ȋn performanţele economice ale ṭărilor lumii nu se aliniaza dotărilor cu resurse, ci tipurilor de instituţii sau, mai profund, tipurilor de culturi, iar atunci când o ţară ce are o cultură incompatibilă cu o buna performanţă economică obţine, totuși, o bună performanţă economică, aceasta se bazează tocmai pe adoptarea instituţiilor care ȋși au originea într-o cultură cu mare compatibilitate economică.


Scurtând relatarea, determinanţii unei creșteri economice ȋnalte și durabile a economiei României sunt localizaţi, ȋn mod potenţial, ȋn Romania sau sunt la ȋndemâna agenţilor economici români, iar câţiva dintre aceștia sunt: stoparea prădarii bugetelor de stat care devorează resursele pentru infrastructură, sistem medical și sistem de ȋnvăţământ pro-creștere economică; distrugerea concentrărilor de putere de pe pieţe care fac posibile practici de șantaj și repartizări ale veniturilor pe factori de producţie care nu urmează logica economică (prea mari pentru unii agenţi economici neimportanţi și, ȋn mod inevitabil, prea mici pentru alţii foarte importanţi); introducerea impozitării progresive pentru a crea un mecanism automat de corijare a repartizării aleatoare și frauduloase a veniturilor; corelarea strictă și unitară (cu instrumente discrete și indirecte) a tuturor veniturilor indivizilor (inclusiv a celor din sectorul privat) pe baza unor criterii unitare, pentru a dirija coerent talentele și competenţele umane pe sectoare de activitate; măsuri dure de eliminare a haosului din legislaţie și justiţie, precum și distrugerea șantajului notarial care ridică enorm costurile de tranzacţie. 


Numai reducerea ratelor de impozitare este favorizantă pentru creșterea economică.


Este o idee simplistă, chiar stupidă, care este repetată obsesiv, probabil, la ȋndemnul  oamenilor de afaceri români miopi și de către persoane fără competenţă ȋn domeniu. Percepţia mea este că mijloacele de informare și partidele politice din România ȋncurajează, ȋn mod paradoxal, prezentarea opiniilor ȋn privinţa regimurilor fiscale, mai degrabă de către neiniţiaţi precum juriști, actori sau poeţi decât de către economiști specialiști veritabili. În primul rând, ratele de taxare  ȋn continuă scădere nu sunt sustenabile.  Un minim de aparat statal trebuie să existe și chiar este ȋn interesul direct al celor care solicită, direct sau indirect, diminuarea continuă a rolului lui.  În al doilea rând și ȋn sens mai larg, veniturile statale susţin infrastructura fizică și instituţională, care este precondiţie a creșterii economice. Altfel spus, creșterea economică și creșterea veniturilor statului (care nu poate fi asigurată prin reducerea continuă  a ratelor de impozitare) merg mână’n mână.  Invers, creșterea inadecvata a veniturilor statului și cu atât mai mult scăderea lor se pot dovedi extrem de contraproductive sau chiar periculoase. Chiar și o succintă survolare a economiilor ţărilor lumii ne arată existenţa unei corelaţii mai degrabă directe decât inverse ȋntre nivelul de impozitatre și performanţa economică: economiile cu niveluri reduse de impozitare ȋnregistrează performanţe economice bune doar prin excepţie și ȋn mod rarisim pe termen lung.  România, care excelează prin performanţă economică precară, pare a fi și ţara europeană care a excelat ȋn ce privește durata și anvergura practicării unei singure rate de impozitare a veniturilor.

Rata plată sau unică de impozitare este ȋntr-un mai mare grad compatibilă cu valorile liberale și cu performanţa economică.


Adevărul este că ideea se dovedește ȋn ambele ei componente eronată.  Rata unică de impozitare este incompatibilă cu libertatea umană, deoarece ea nu permite corijarea inegalităţilor de putere antrenate de variaţiile mari ale veniturilor individuale ca urmare a variaţiilor condiţiilor conjucturale pe pieţe și a activităţilor criminale. Trebuie să reamintesc ȋncă o dată că libertatea umană este o consecinţă a egalităţii de putere sau de abilităţi ale indivizilor. Deoarece ţările cu cele mai mari probleme ȋn respectarea libertăţii umane sunt ţările cu cele mai mari inegalităţi de putere efectivă (ȋn primul rând ȋn termeni de venit și avuţie), prezenţa ratei unice de impozitare agravează problemele ţărilor respective. Rata unică de impozitare accentuează inegalităţile și toate consecinṭele grave antrenate de ele. Mecanismul care poate să combată cu succes inegalităţile și consecinṭele lor nocive este sistemul fiscal cu impozitare progresivă.  Nu ar trebui, atunci, să surprindă că cele mai mari rate de impozitare ale veniturilor mari (adică cea mai mare progresivitate) sunt practicate de ţările cu cele mai bune performanţe ȋn termeni de instituţii democratice și liberale (precum Anglia și Suedia). Îndârjirea cu care o mare parte a clasei politice din România apără rata unică de impozitare trădează fie o profundă ignoranţă, fie o mare manipulare.


Incompatibilitatea cu performanţa economică a ratei unice de impozitare rezultă din efectul destimulator al câștigurilor mari obṭinute cu mare ușurinţă sau care nu ȋși au originea ȋn efortul economic de succes, ci mai degrabă ȋn șantajul practicat prin concentrări excesive de putere sau ȋn jocuri ale șanselor.  Un sistem sănătos de impozitare trebuie să vizeze sporirea și menţinerea la cote ȋnalte a efortului economic al indivizilor și nu recompensa exagerată sau nemeritată care, de regulă, este urmată de relaxare sau trândăvie risipitoare.  Nu ar trebui, din nou, să surprindă că ţările care taxează cel mai mult venitul rezultat din șansă sunt ţările cu excelentă performanţă economică pe termen lung (vezi Anglia, de exemplu, ȋn ce privește nivelul aproape confiscator al taxei pe moșteniri).


Reducerea impozitării antrenează reducerea evaziunii fiscale.


Este o idee adevărată doar ȋn situaţii speciale. Enunţarea ei ca o corelaţie generală este o eroare certă derivată dintr-o simplificare nejustificată a realităţii. Evaziunea fiscală este practicată atunci când venitul pierdut prin penalizarea efectivă sau reală antrenată de evaziune este mai mică decât impozitele plătite prin respectarea legislaţiei fiscale. În consecinţă, scăderea ratelor de impozitare sau a impozitelor reduce evaziunea numai dacă impozitele plătite legal devin (prin operaţiunea de reducere) mai mici decât penalizarea efectivă pentru evaziune.  Dacă, ȋnsă, penalizarea efectivă este la un nivel foarte scăzut (prin lege sau prin corupţia personalului care identifică și sancţionează evaziunea), reducerea impozitelor, chiar și când este aplicată succesiv de mai multe ori sau când este de amploare, poate să nu aibă niciun efect asupra evaziunii.  Ceea ce ȋn mod sigur antrenează reducerea evaziunii – și această idee este ȋn mod suspect diminuată ca importanţă ȋn dezbaterile din România privind reducerea evaziunii – este măsura creșterii nivelului penalizărilor efective ȋn caz de evaziune și, ȋn special, creșterea probabilităţii de identificare a cazurilor de evaziune prin diminuarea corupţiei personalului din aparatul fiscal și dimensionarea lui adecvată.

About the Failure to Frame an Economic Definition of Culture: In my coming book “Five Reasons for Discarding Western Economics: Solutions to Unsolvable Orthodox Problems”

January 30, 2014

Chapter V.4. The Cause of Confusion in Understanding Culture: Fundamental Failures of Orthodox Economic Theory


The inability of the orthodox economic approach to capture and model most of the fundamental features of the phenomenon of culture has deeply rooted causes which stem from an inability to grasp and model fundamental economic phenomena and processes. The reality is that Western economics cannot model cultural diversity and its accompanying features because it is fundamentally based on the implicit assumption of a universal cultural uniformity, which is based on one culture out of very many. And this implicitly assumed cultural uniformity of humanity precludes not only understanding culture but even understanding basic economic phenomena without which understanding culture is and will remain impossible.

First, a proper economic understanding of culture is precluded by the inexistence of a proper definition of ends, a proper taxonomy of ends, and a sound theory of ends formation. Second, because culture is about emerged values and rules, it is impossible to frame a theory of culture formation and evolution without correct theories of values or preferences and rules formation. Third, because cultures are simultaneously described by values and rules, it is impossible to comprehensively describe and compare real cultures without a theory that grounds the conversion of rules into values and vice versa.

The need for a sound and adequate definition and taxonomy of ends is vital to an economic understanding of culture for two reasons. First, values and rules are ultimately about ranking human ends. Second, since economic science focuses especially on choices and their optimizing bundles, the ends to choose among must not only be assumed generally but also specifically. Unfortunately, in terms of human ends economic science has remained at a very primitive stage. von Mises (1949:92-93) and Robbins (1932:12) could not produce more than tautological definitions of ends that led nowhere, and Knight sealed the impossibility of solving the problem in stating that ends are “the most obstinate unknown of all unknowns” (2009:12).

In terms of values or preferences the state of economic theory is not any better positioned because the nature and formation of values are intimately connected to the formation of human ends. In fact, both are conditioned on a correct identification of the causal principle of the objective phenomenon of life, which to economists at least has retained an implicit mystical nature. For example, in his book Culture and Economics (2009), de Jong gives values nothing more than a definition framed by anthropologist Kluckhohn, which besides its tautological character cannot be used in any economic research.[1] It was within this perspective that incorrect conclusions were drawn: Knight opposed reason to feelings and North went even further and stated that cultural heritage consisting of “myths, taboos, religions, and dogmas” defies scientific explanation and, consequently, hinders economic growth. Becker’s effort to circumvent the general problem of preferences formation by assuming stable and invariable fundamental preferences postponed a sound and lasting solution even longer, after Knight’s groundless idea that formation of values is not economists’ problem had discouraged any renewed effort.

The orthodox perspective on rules further explains economists’ flawed perspective on culture. Economists’ wishful thinking about a kind of culture that is humanly designed, debatable, and modifiable at will, or a culture that is wholly shaped consistently with the objective of economic growth, is mostly derived from a conception of rules (implicitly, institutions) that can only be humanly designed and enforced by a third party. There is no place and no logic within this orthodox perspective for emerged rules, and this situation precludes any possibility to correctly understand culture. But the orthodox perspective on rules not only erases the reality of the most fundamental type of rules and institutions. If thoroughly followed to its ultimate conclusion, it would imply erasing the notions of rules and institutions altogether. For if rules and institutions are ultimately about ranking alternative ends, a theory of rules and institutions that ultimately assumes only one external-component human megaobjective or megaend like “wealth”[2] makes no sense, and is even logically impossible. As a consequence, the orthodox tautological definition of rules and institutions is the only kind of definition possible although it is essentially not a definition at all. And if there is no proper reason for rules and institutions, there must be no proper reason for culture. The phenomenon of culture seems to be meddling in the economic world and prevailing economic theory.

[1] de Jong takes over Kluckhohn’s definition as cited by Hofstede (2001:5): “A value is a ‘broad tendency to prefer certain states of affairs over others.’”

[2] Definitions of institutions by North: “Institutions are a set of rules, compliance procedures, and moral and ethical behavioral norms designed to constrain the behavior of individuals in the interest of maximizing wealth or utility of principals” (1981:201) and “The behavioral postulate of wealth is the cornerstone of economic theory. It is also the cornerstone of this theory of institutions” (North, 1984:32).

About Human Ends Formation: In my coming book “Five Reasons for Discarding Western Economics: Solutions to Unsolvable Orthodox Problems”

January 30, 2014

Chapter I.4. A Paradoxical Unfolding of Ideas about Choosing and Ranking Ends


To outline the prevailing orthodox view on forming and ranking ends I turn again to Knight’s and Mises’ ideas.  Knight’s would-be critique of Stigler and Becker as imagined relatively lately by Emmett (2006) is a good support for such a decision. Although emphasizing different aspects and using different terms, Knight’s and Mises’ ideas come to quite similar conclusions.  With Mises “the valuation and the choosing of ends are beyond the scope of any science” (1949: 10) because “ultimate ends…are purely subjective” (1949:95).  As long as there is no absolute standard in regard to ultimate ends, man can choose anything or, even worse, one can hardly talk about the choice of ends.  For what choice is that which has no solid criterion, and as such selecting among alternatives is well nigh impossible.

With Knight, learning something about how individuals choose ends is difficult if not wholly impossible on two grounds.  First, human rationality seems to be in an unsatisfactory state.  For him, some reasonable level of rationality is somehow relatively recent in human history and covers only market conduct, while rational thinking about ends is contained only to “the narrowest philosophical circles” (1982: 408).  Second, the “more remote and general interests,” which “are the province of esthetics and morals,” rest on grounds of such an irrationality that “it is an absurd and romantic idea that their treatment should or could be made scientific” (1982: 409). 

I will skip the issue of the state of human rationality, although even here I am in an appreciable disagreement with Knight, and instead I shall take up the following two issues.  First, Knight’s observation about the irrationality of transmitting religious and, generally, cultural values, which are depositary or closely associated with the more remote and general interests, does not prove either the irrationality of those values themselves or the groundlessness of their adoption.  On the contrary, various sets of cultural values were adaptively formed by a slow process involving billions of individual experiences, and once completed their change was slow or barely seen in the course of a single individual life.  The forming of moral or more general values guiding the real human communities was not and should not be the result of a once-and-for-all conscientious debate. 

As sociologists and anthropologists agree, cultural values are, at least primarily, closely determined by geographical or climate conditions and as such their change cannot be affected by more or less conscious debate and adoption.  We irrationally adopt moral or cultural values because this is the most efficient conduct in this regard.  A set of cultural values are a solution to attain the objective end of life in some specific and long-lasting natural and social conditions, and as such this set is a long-viable solution which is valid for all past, present, and future members of the given community.  Eventual rational individual adoptions, if feasible in early childhood, would be a waste of resources as once and again the same cultural solution necessarily emerged.  And if the more general values, moral or cultural, are determined by objective conditions, their scientific treatment is feasible provided a solid general perspective is employed in the research.

My recent economic comparative analysis of the great religious dogmas shows an astonishing result which can be replicated by any economist employing my general power approach.  All components of the dogmas—I used ten components—show the same ranking for each religion in terms of their consistency with economic performance.  This impressive internal logical consistency of each dogma proves that dogmas are perfect constructs which seem to perfectly fit the cultural values (as described by Hofstede, 2001) prevailing in the countries where they were born.  As a consequence, a free conscientious debate would not make German Lutherans adopt Russian Orthodoxy, nor would it make Indian Buddhists adopt Swiss Protestantism.

The second issue I am taking up here regards Knight’s suggestion that the more remote and general interests are the province of esthetics and morals.  If I could agree with Knight that scholarly descriptions of, for instance, moral and cultural values as they have existed and evolved in various communities should be made by noneconomic disciplines, like ethics and anthropology, I would thoroughly disagree when it came to the mechanisms of their formation.

The mechanisms of human action are intimately associated with humanity’s maximizing nature—maximizing anti-entropic absorption—and there is no other social scholar better fit than the economist to solve the problem of the formation of values or ends, which, in fact, are signposts for action. I recall Hofstede’s presentation (2001) of what would be the tentative sociological explanation of how the preferences for equality/inequality were formed. While he excelled in his famous Culture’s Consequences in identifying and describing very meaningful cultural values, in the aforementioned there is a tentative explanation of at least one flawed component that no economist could have conceived.  Consequently, I wholly disagree with Kirzner’s idea that economists’ avoidance of the problem of ends formation is due to “a judicious and fruitful division of labor” (1976: 133).  The selection and ordering of ends proves to be the most fundamental economic problem, and its abandonment by orthodox economics and the consequent failure to solve it as such were due to an incorrect general perspective imposed by Western culture-blinded economists. The consequences were far reaching and very serious.

An astonishing fact in the history of philosophical ideas supports my account of this unfortunate direction taken by economic theory.  The closest perspective, if not identical to my own, is that of the philosophers Zeno and Plato.  Adam Smith appreciatively took over their ideas in his Theory of Moral Sentiments.  With Plato, reason is the governing principle of the whole soul, which includes among other components the “just and clear discernment, founded upon general and scientific ideas, of the ends which were proper to be pursued, and of the means which were proper for attaining them” (Smith, 1984: 268).  And reason covers not only the selection of ends, but also the faculty “by which we judge of the propriety or impropriety of desires and affections” (Smith, 1984: 268).  If the proper meaning of the terms is used, this is nothing more than the ordering of ends.  To dissipate any doubt regarding the nonsubjective nature of the human ends as they are described by passions, Plato asserted that they are “necessary parts of human nature” and, I would add, they should be as objective as the phenomenon of life because they “defend us against injuries,” “assert our rank and dignity,” and “provide for the support and necessities of the body” (Smith, 1984: 268).

With Zeno, the founder of the Stoical doctrine, both what I called life-performing ends and external-component ends are selected through choosing whatever tends to support and rejecting whatever tends to destroy the requirement of the principle of self-love—a stunning antic literal description of the relatively recently revealed anti-entropic nature of living beings.  And the same principle is used for ranking “the two opposite classes of objects” because there are “some which appeared to be more the objects either of choice or rejection, than others in the same class” (Smith, 1984: 272).  In a similar way, with Plato, in order to dissipate any trace of subjectivism in this process, “every animal was by nature endowed with the principle of self-love” (Smith, 1984: 272), the principle that also holds the role of the criterion for both selecting and ordering ends.

Consequently, what paradox seems to be greater than the following one?  As far back as more than two millennia, two of the most important world philosophers, Plato and Zeno, found that ends are reason-based, chosen and ranked, and everything was founded, especially in the case of Zeno, on a deterministic perspective on life.  No difficulty in researching and learning the truth about ends was envisioned.  And this perspective seems to not have been rejected by the most important founder of economic science.  Shockingly, nowadays we are at the opposite end of the spectrum: The formation of ends, covering both selecting and ordering, is subjective and irrational, or not a fact proper for scientific analysis. 

And this wholly agnostic stance came at about the time when biology asserted the adaptive characteristic of mental forms, implicitly of preferences and passions; anthropology proved the deterministic nature of cultural values; and physics proved the objective anti-entropic nature of life.  To reveal the causes of this seeming paradox is not among the purposes of this study.  However, two of the causes have been thinly suggested: culture blindness, to which economists are relatively more prone, and the gradual fading out of the universal approach in science.  The awareness of such problems must be the first step in transforming current orthodox economics from a kind of sophisticated economic religion or economic ideology into a true economic science.