Small Is Beautiful: A Study of Economics as if People Mattered by E F Schumacher Read Free Book Online Page A
Authors: E F Schumacher
calculate. Quantitative differences can be more easily grasped and certainly more essay defined than qualitative differences: their concreteness is beguiling and gives them the appearance of scientific precision, even when this precision has been purchased by the suppression of Vital differences of quality. The great majority of economists are still pursuing the absurd ideal of making their 'science' as scientific and precise as physics. as if there were no qualitative difference between mindless atoms and men made in the image of God.
The main subject matter of economics is 'goods'. Economists make some rudimentary distinctions between categories of goods from the point of view of the purchaser, such as the distinction between consumers' goods and producers' goods; but there is virtually no attempt to take cognisance of what such goods actually are; for instance, whether they are man-made or God-given, whether they are freely reproducible or not. Once any goods, whatever their meta-economic character, have appeared on the market, they are treated the same, as objects for sale, and economics is primarily concerned with theorising on the bargain hunting activities of the purchaser.
It is a fact, however, that there are fundamental and vital differences between various categories of 'goods' which cannot be disregarded without losing touch with reality.
There could hardly be a more important distinction, to start with. than that between primary and secondary goods, because the latter presuppose the availability of the former. An expansion of man's ability to bring forth secondary products is useless unless preceded by an expansion of his ability to win primary products from the earth. for man is not a producer but only a converter, and for every job of conversion he needs primary products. In particular, his power to convert depends on primary energy, which immediately points to the need for a vital distinction within the field of primary goods, that between non-renewable and renewable. As far as secondary goods are concerned, there is an obvious and basic distinction between manufactures and services. We thus arrive at a minimum of four categories, each of which is essentially different from each of the three others.
The market knows nothing of these distinctions. It provides a price tag for all goods and thereby enables us to pretend that they are all of equal significance. Five pounds' worth of oil (category 1) equals five pounds'
worth of wheat (category 2), which equals five pounds' worth of shoes (category 3) or Eve pounds' worth of hotel accommodation (category 4). The sole criterion to determine the relative importance of these different goods is the rate of profit that can be obtained by providing them. If categories 3 and 4 yield higher profits than categories 1 and 2, this is taken as a 'signal' that it is 'rational' to put additional resources into the former and withdraw resources from the latter.
I am not here concerned with discussing the reliability or rationality of the market mechanism, of what economists call the 'invisible hand'. This has endlessly been discussed, but invariably without attention to the baric incommensurability of the four categories detailed above. It has remained unnoticed, for instance - or if not unnoticed, it has never been taken seriously in the formulation of economic theory - that the concept of 'cost' is essentially different as between renewable and non-renewable goods, as also between manufactures and services. In fact, without going into any further details, it can be said that economics, as currently constituted, fully applies only to manufactures (category 3), but it is being applied without discrimination to all goods and services, because an appreciation of the essential, qualitative differences between the four categories is entirely lacking.
These differences may be called meta-economic, inasmuch as they have to be recognised before economic analysis begins. Even
The main subject matter of economics is 'goods'. Economists make some rudimentary distinctions between categories of goods from the point of view of the purchaser, such as the distinction between consumers' goods and producers' goods; but there is virtually no attempt to take cognisance of what such goods actually are; for instance, whether they are man-made or God-given, whether they are freely reproducible or not. Once any goods, whatever their meta-economic character, have appeared on the market, they are treated the same, as objects for sale, and economics is primarily concerned with theorising on the bargain hunting activities of the purchaser.
It is a fact, however, that there are fundamental and vital differences between various categories of 'goods' which cannot be disregarded without losing touch with reality.
There could hardly be a more important distinction, to start with. than that between primary and secondary goods, because the latter presuppose the availability of the former. An expansion of man's ability to bring forth secondary products is useless unless preceded by an expansion of his ability to win primary products from the earth. for man is not a producer but only a converter, and for every job of conversion he needs primary products. In particular, his power to convert depends on primary energy, which immediately points to the need for a vital distinction within the field of primary goods, that between non-renewable and renewable. As far as secondary goods are concerned, there is an obvious and basic distinction between manufactures and services. We thus arrive at a minimum of four categories, each of which is essentially different from each of the three others.
The market knows nothing of these distinctions. It provides a price tag for all goods and thereby enables us to pretend that they are all of equal significance. Five pounds' worth of oil (category 1) equals five pounds'
worth of wheat (category 2), which equals five pounds' worth of shoes (category 3) or Eve pounds' worth of hotel accommodation (category 4). The sole criterion to determine the relative importance of these different goods is the rate of profit that can be obtained by providing them. If categories 3 and 4 yield higher profits than categories 1 and 2, this is taken as a 'signal' that it is 'rational' to put additional resources into the former and withdraw resources from the latter.
I am not here concerned with discussing the reliability or rationality of the market mechanism, of what economists call the 'invisible hand'. This has endlessly been discussed, but invariably without attention to the baric incommensurability of the four categories detailed above. It has remained unnoticed, for instance - or if not unnoticed, it has never been taken seriously in the formulation of economic theory - that the concept of 'cost' is essentially different as between renewable and non-renewable goods, as also between manufactures and services. In fact, without going into any further details, it can be said that economics, as currently constituted, fully applies only to manufactures (category 3), but it is being applied without discrimination to all goods and services, because an appreciation of the essential, qualitative differences between the four categories is entirely lacking.
These differences may be called meta-economic, inasmuch as they have to be recognised before economic analysis begins. Even
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