Monday, July 25, 2011

Thoughts on "Small is Beautiful"

Many years ago (a lot of years ago), I had a picture book titled, How Big is Big? The point of the book was to show how "bigness" and "smallness" were all relative to the observer. A dog appears big to a flea, but small to an elephant or whale. The Empire State Building is huge compared to an elephant, but is tiny compared with the size of the earth. The earth itself appears gargantuan to us, but is virtually nothing compared with the galaxy — as is the galaxy compared with the size of the universe.

Get the picture?

All of that was pretty profound for a kid's book. Frankly, it's also pretty profound for an adult's book — such as E. F. Schumacher's Small is Beautiful, a virtual "bible" for "New Age economics," as it was originally touted. The difference is that the kid's book made it clear that a standard such as "big" or "small" is purely relative. Schumacher's book failed in that respect. By discarding or redefining fundamental natural rights such as liberty and property and advocating a "human standard," Small is Beautiful inadvertently slips into pure moral relativism.

This is where it gets deep, so don your hip waders.

In economics as in everything else, there is no such thing as objective bigness or smallness. It is all relative. Using bigness or smallness as a standard changes what it means for something to be a standard. A standard is supposed to be an objective absolute against which you measure something. Especially in economics, the size of something is whatever is most appropriate to its function. A standard that is relative to the observer or one doing the measuring is no standard at all.

As a case in point, I once saw a "gag gift" in the form of a "kit" for golfers. One of the items included in the kit was a tape measure to aid in replacing a ball after putting. One side had "inches" that were about a quarter inch long, while the other side had "inches" that were about three inches long. Obviously, if you were measuring how far your ball was from the cup, you used the "long inches," and replaced it using the "short inches." You did exactly the opposite for your opponent.

This wasn't as bad as Big Jule's "lucky dice" (with the pips removed) in Guys and Dolls and which thus came up whatever the person with the gun said they were, but it was close. In this way it becomes possible to enforce any "standard" simply by having sufficient coercive power. Absolutes cease to have any meaning at all. Paradoxically, by trying to base things on a human standard, we end up removing humanity from the equation.

How's that?

Those absolutes with which Schumacher played fast and loose, i.e., liberty and property, are discerned by reason and represent a consensus of the whole human race as to "right" and "wrong," "good" and "bad." We cannot simply insist on the opinion of ourselves or our small group without taking into account the rest of humanity. Nor can we simply project our opinion — our private human standard — on to everyone else and try to force others to go along with it. That's what Napoleon, Stalin and Hitler did. It's not a Good Thing.

Instead, what we do as reasoning creatures is attempt to discern those absolutes that characterize the absolute source of all creation, as inductive reasoning tells us must exist. From there we reason out the general consensus of all mankind as to what is right and wrong. For example, the universal prohibition against theft tells us that private property is part of human nature, that is, a natural law.

Does that, however, tell us how to exercise our property, or what we can or cannot own in certain circumstances? Of course not. That is left up to the wants and needs of specific individuals, cultures and circumstances — but the "absoluteness" of private property remains. As Pope Leo XIII reminded us, we must assume "as a principle that private ownership must be held sacred and inviolable." (Rerum Novarum, § 46.)

Can we be wrong about the conclusions we reach through the use of reason? Of course — but that does not invalidate the absolutes. That simply says we probably made an error in reasoning. As Pope Pius XII pointed out in the second paragraph of Humani Generis, "absolutely speaking, human reason by its own natural force and light can arrive at a true and certain knowledge of . . . the natural law."

This is similar to the functioning of the free market in which consensus about just prices, just profits and just wages reached by aggregating many individual opinions tends to approach the objective free market price, profit or wage. Do we know that for certain? Of course not — but the opinions of many in consensus have a greater chance of approaching justice than the opinion of a small group or single individual bent on controlling the market to achieve political or religious ends rather than economic.

How is using reason to decide what is right and wrong any different from just using our own opinion? That's simple . . . if not easy. Our own opinion, unsupported by argument or evidence, has a much higher chance of being wrong than anything discerned by the use of reason and obeying the rules of logic, primarily the "law of contradiction," that a thing cannot be both true and false at the same time.

Using reason is hard to do, because we naturally tend to believe something is true because we believe it, not because we can prove it. That inserts faith into things, and faith applies to things that are not "manifestly true," that is, that cannot be proved by the use of reason. As G. K. Chesterton quoted Aquinas in his short biography of "the Angelic Doctor,"

"Behold our refutation of the error. It is not based on documents of faith, but on the reasons and statements of the philosophers themselves. If then anyone there be who, boastfully taking pride in his supposed wisdom, wishes to challenge what we have written, let him not do it in some corner nor before children who are powerless to decide on such difficult matters. Let him reply openly if he dare. He shall find me there confronting him, and not only my negligible self, but many another whose study is truth. We shall do battle with his errors or bring a cure to his ignorance."

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