It is hardly an exaggeration to say that, with increasing affluence, economics has moved into the very center of public concern, and economic performance, economic growth, economic expansion, and so forth have become the abiding interest, if not the obsession, of all modern socieites. In the current vocabulary of condemnation there are few words as final and conclusive as the word “uneconomic.” If an activity has been branded as uneconomic, its right to existence is not merely questioned but energetically denied. Anything that is found to be an impediment to economic growth is a shameful thing, and if people cling to it, they are thought of as either saboteurs or fools. Call a thing immoral or ugly, soul-destroying or a degradation of man, a peril to the peace of the world or to the well-being of future generations; as long as you have not shown it to be “uneconomic” you have not really questioned its right to exist, grow, and prosper. — E.F. Schumacher, Small Is Beautiful, pp. 41-42

Schumacher’s work holds up surprisingly well considering that it was published in the early 70s. The issues he identifies are still with us and, if anything, may have intensified in the last 30+ years. The chapter that this quote comes from addresses the fragmentary nature of economics – its inability to deal with subject matter that falls outside its methodology. This is worth recalling in a time where economics has taken on something like an aura of omnicompetence, and the bestseller list is full of books applying the principles of economics to everyday life.

The argument is pretty straightforward: economics, valuable as it is within its own domain, presupposes a host of non-economic facts as given. And its quantitative nature renders it inadequate for dealing with questions of quality (or, we might say, value). Thus we get a model of “the Market” where there is an inexhaustible supply of goods, and everything is, in principle, convertible into everything else (i.e. there are no incommensurable values).

The market therefore represents only the surface of society and its significance relates to the momentary situation as it exists there and then. There is no probing into the depths of things, into the natural or social facts that lie behind them. In a sense, the market is the institutionalisation of individualism and non-responsibility. Neither buyer nor seller is responsible for anything but himself. It would be “uneconomic” for a wealthy seller to reduce his prices to poor customers merely because they are in need, or for a wealthy buyer to pay an extra price merely because the supplier is poor. Equally, it would be “uneconomic” for a buyer to give preference to home-produced goods if imported goods are cheaper. He does not, and is not expected to, accept responsibility for the country’s balance of payments. (p. 44)

What’s in question is not the usefulness of the model, but the consequences of mistaking the model for the reality:

Economics deals with a virtually limitless variety of goods and services, produced and consumed by an equally limitless variety of people. It would obviously be impossible to develop any economic theory at all, unless one were prepared to disregard a vast array of qualitative distinctions. But it should be just as obvious that the total suppression of qualitative distinctions, while it makes theorising easy, at the same time makes it totally sterile. Most of the “conspicuous developments of economics in the last quarter of a century” (referred to by Professor Phelps Brown) are in the direction of quantification, at the expense of the understanding of qualitative differences. Indeed, one might say that economics has become increasingly intolerant of the latter, because they do not fit into its method and makes demands on the practical understanding and the power of insight of economists, which they are unable or unwilling to fulfill. For example, having established by his purely quantitative methods that the Gross National Product of a country has risen by, say, five per cent, the economist-turned-econometrician is unwilling, and generally unable, to face the question of whether this is to be taken as a good thing or a bad thing. He would lose all his certainties if he even entertained such a question: growth of GNP must be a good thing, irrespective of what has grown and who, if anyone, has benefited. The idea that there could be pathological growth, unhealthy growth, disruptive or destructive growth is to him a perverse idea which must not be allowed to surface. A small minority of economists is at present beginning to question how much further “growth” will be possible, since infinite growth in a finite environment is an obvious impossibility; but even they cannot get away from the purely quantitative growth concept. Instead of insisting on the primacy of qualitative distinctions, they simply substitute non-growth for growth, that is to say, one emptiness for another. (pp. 47-48)

One of the most important qualitative distinctions Schumacher has in mind is that between primary and secondary goods. Primary goods are those which human beings don’t produce, i.e. natural resources. Secondary goods are the products and services which we make, but which have their ultimate origin in the natural world. To pretend that all goods are equal in the sense of being convertible in principle and given a monetary value is to fail to recognize the essential incommensurability between these different categories of goods.

Additionally, he refers to meta-economic factors which are presupposed by economics but not adequately dealth with by its concepts. The entire natural environment, especially things not amenable to private appropriation like air, water, and soil, constitutes the framework that any economic activity depends on, but they typically fail to appear in economic calculation and therefore the damage that economic activity may cause them is ignored. This is a bit like sawing off the branch you’re sitting on.

All of these considerations can, perhaps, be summed up under the heading of ends versus means. Economics can tell us what means are most efficient for acheiving given ends, but it can’t tell us what ends are worth pursuing. It may be that it’s not the economists who are at fault here, but the policy makers who are too timid to question the value of things like limitless growth. Debates about things like trade agreements or how best to address climate change are almost inevitably couched in economic terms, with the unspoken assumption being that anything which threatens aggregate economic growth is ipso facto bad and anything which promotes it is good, regardless of their effect on non-economic values.

The trouble about valuing means above ends–which, as confirmed by Keynes, is the attitude of modern economics–is that it destroys man’s freedom and power to choose the ends he really favours; the development of means, as it were, dictates the choice of ends. Obvious examples are the pursuit of supersonic transport speeds and the immense efforts made to land men on the moon. The conception of these aims was not the result of any insight into real human needs and aspirations, which technology is meant to serve, but solely of the fact that the necessary technical means appeared to be available. (p. 51)

It may be that in a diverse and pluralistic society “growing the GDP” provides a convenient lowest-common-denominator goal that (nearly) everyone can agree on. But I think it’s safe to say that in the last 30 years or so since Schumacher wrote this we’ve become more aware of the impact the pursuit of growth at all costs is having not only on the natural world, but on our communities and human happiness. What’s less clear is that we still have a public language for debating whether things are not only “uneconomic” but “immoral or ugly, soul-destroying or a degradation of man, a peril to the peace of the world or to the well-being of future generations.” “Mere” aesthetics, value judgments, philosophy, religion, etc. have been largely relegated, at least among the elite classes, to matters of private judgment or sheer preference, while economics retains its reputation as a hard-headed empirical science. As such, it seems to provide a more “objective” basis for policy-making, despite well-founded critiques like Schumacher’s.