“Economics distorts reality like psychosis”

Economist Tomas Sedlacek on digital communism, fairy tales for adults and the book of Job

Ad Marginem publishing house published a Russian translation of Tomas Sedlacek’s book “The Economics of Good and Evil. Finding the Meaning of Economics from Gilgamesh to Wall Street." Sedlacek is a Czech economist, leading specialist at the Czechoslovak Trade Bank. At the beginning of the 2000s, at the age of only 23, he was appointed economic adviser to President Vaclav Havel. In his book, Sedlacek calls for humanizing modern economics by turning to ethical values. “Gorky” talked with the author about the role of morality in economics, Tarkovsky’s “Stalker”, the Bible and the migration of humanity into digital reality.

Tell us about your career. How did you start working with Vaclav Havel and the Czech government?

It was the last year of his presidency. The dean of the Faculty of Social Sciences at Charles University at that time was a real academic hero - an out-of-the-box economist, a specialist in institutional economics. He was asked to recommend someone to work for the president - he recommended me. I was only 23, teaching institutional economics and business ethics at the university, and later the history of economics. Working with Havel was incredibly interesting! He had no economic education, so I had to talk to him about economics in a way that he could understand without difficulty. I learned to speak the language of philosophy, of art - the language that Havel himself used. It helped me a lot with teaching and how to write about economics.

When I read about Niskanen [William Arthur Niskanen, American economist, one of the architects of Reaganomics - approx. ed.], I was inspired by the fact that he worked in academia, business, and the public sector. This is how he lived his whole life. I also wanted to gain a wide variety of life experiences. After working with Havel, I returned to academic work. We had a project with Georgetown and Harvard Universities on the post-communist transition: we tried to apply theoretical institutional economics to the practice of the 1990s. Then I worked for the Ministry of Finance for two years - I was responsible for fiscal reform, healthcare, pensions, taxes. I participated in several tax reforms, reformed VAT and other taxes. It is a very valuable experience to understand how government and politics work and how little economic reasoning is behind the economic decisions made in the Ministry of Finance. After that I spent a semester at Yale University. Then my wife and I had a child, and I began working for a Czech bank and returned to teaching. In addition, every week I write an editorial column for the Czech equivalent of The Financial Times. That's my whole career.

How did you come up with the idea for a book about the role of morality in economics?

I have always been interested in philosophy and theology. During the day I worked like an ordinary economist: I studied GDP, inflation, price indices, which could fall in one month due to changes in the price of potatoes, and in another could rise due to the price of gasoline. Ordinary, routine work. I liked her, but she wasn't intellectually stimulating. So in the evening I came home, poured a glass of wine and read books on philosophy. Since I'm an economist, I had a lot of ideas about how to look at philosophical texts from a different angle. This overlapped with academic work—my undergraduate degree was on the economic thought of Thomas Aquinas. Every year after defending my thesis, I went both forward and backward in studying the history of philosophy from Aquinas. And somehow it happened naturally that I reached both the ancient Jews and modern economic problems. Now I am collecting notes for my new work on the book of Job - my favorite book of the Bible, a very existential text, it can be called the first critique of ideology.

After some time, I approached my teacher, who taught the history of economic thought, and said that I wanted to write about the economics of the epic of Gilgamesh. Nobody wrote about this before - I checked. I was the first economist to tackle this topic! Almost like being the first man on the moon. I could give free rein to my imagination.

This is how my book came about. I have a habit: if I write books, I write down short comments. The comments were supposed to form the basis of a dissertation, but I never connected my work as an economist with my interest in philosophy. And then the 2008 crisis came, and I met a publisher who wanted to publish my newspaper articles. I didn’t like this idea: it’s wrong to publish what has already been published, the articles are already outdated. Therefore, I proposed to make a collage of my lectures, interviews and parts of the dissertation - so that all together it would be interesting to readers. I sent the publisher a text about Gilgamesh, warning that it was the craziest thing I had ever written. The next day he called back and said that he had changed his mind about publishing the articles and wanted to publish a book. You could say it all happened by accident.

And how was the book received?

I expected a much more negative reaction, I was afraid that my method itself would be rejected. This way of writing was not very popular - only later did I find out that Slavoj Žižek writes in exactly the same way. But this did not happen. Philosophers have criticized me for misinterpreting Descartes—perhaps rightly so. But overall the reaction was positive, and the book quickly became a bestseller. Later I learned that my publisher was not a publisher at all: he never published the books that were bought, but only published his own poems in an edition of 50 copies. It's very funny: a non-writer meets a non-publisher and together they make a book, the first edition of which sold out in the Czech Republic in a week.

The reaction in the academic community was different: colleagues did not accept the work as a dissertation. This seemed strange to me. Everything I wrote for the department before—about Thomas Aquinas, Gilgamesh—received excellent marks. Over time, the book was accepted, but it was the reaction of my colleagues that forced me to return to it and significantly improve it. After this we proposed the book to Oxford University Press, and it was accepted - this was very pleasant, since continental economists are very rarely translated into English.

The book opened the door for other projects: today I work with theologians, philosophers, psychologists. I am currently writing a book about the psychoanalysis of economics. As a patient, we put the economy on the couch and asked ourselves: what does it want, what is it afraid of, what does it talk about and what is it silent about? And she turned out to be not just depressed, but manic-depressive. Mania is more dangerous than depression. Economics distorts reality in the same way as psychosis, in which people do not see the whole of reality, but only some parts. In economics we see things that can be expressed in numbers. But only a small part of the world can be expressed in numbers.

You defend a pluralistic view of economics, including philosophy, even poetry. How can such a transition happen?

It is important to understand that the economy was modeled after physics - this is no secret. I don't ask questions about models, but take the second derivative and ask what the models are based on. Similar changes were taking place in physics. This is the most serious of sciences, its mathematical approach was very useful. A hundred years ago physics was mechanistic, very dry. Today, after the advent of quantum physics, you can see a Buddhist monk next to a theoretical physicist - and they will talk about the same thing. Electrons and photons in several places at the same time, time that flows backwards... Sometimes a very strict, mathematical, technical theory, taken to its logical conclusion, leads you into the realm of angels, fairy tales and Taoism. This can happen to the economy as well. There will come a time when we will have to invent new mathematics, as was done for quantum physics. The point is not about mathematics per se, but about what kind of mathematics we want.

The second possibility is that we will see that the theory does not work. But we won't see it. What was decided at the level of symbolism must be canceled there, and not in the sphere of experience. A theory will never be refuted by facts. Even if the 2008 crisis showed that the models are incorrect, the models will not be rejected - this requires a new theory. Today we do not want to believe in the dominant neoclassical economic theory, but since there is no new theory, we have nothing else to believe in. This is similar to a situation from cartoons, where a running character does not notice how he has stepped over a cliff, and continues to run through the air, and when he looks down, he falls. Maybe this happened in “Well, wait a minute!” with a wolf?

What do you think about behavioral economics? Do you see it as a step forward because it incorporates moral considerations into economics, or as a step back from a more humanistic approach to economics?

I like behavioral economics, I think this is a step forward. She tries to understand people, not just describe them. Our goal is precisely to understand. It always takes a mathematical theory to convince the mainstream. Keynes needed it, although Keynes himself was skeptical about the use of mathematics in economics; there are very few equations in Keynes's General Theory. For Keynes to be accepted, he had to be translated into mathematical models - stupid ones, in my opinion.

My son, when he was younger, was talking to his friends one day, and I accidentally overheard. They discussed what their parents do. One said: “My father is a garbage man, he makes sure the city is clean.” Second: “My father is a doctor, he treats people.” And my son said: “My father tells stories for adults.” I think this is the perfect definition. Some adults like to listen to fairy tales with mathematics, so fairy tales need to be translated into this language. Unfortunately, translation difficulties arise. Physicists hope that they will find something through translation - and this is normal for physics. But you can also lose a lot, because in the world of mathematics they only talk about measurable things.

Theology or philosophy is also based on logical, rigorous analysis - but theology and philosophy are designed for ordinary people; at an advanced level they are only a little more complex. Something similar is needed for economics: politicians will need to implement economic policies that are based not on mathematical, but on linguistic models. “John Loves Jane” is also a model. But teaching within the economic mainstream has still not changed.

Many hoped that this would change after the 2008 crisis. Why didn't this happen?

There is no new unified theory yet, because none of the critics of the old theory believes in unified theories in principle. But, in my opinion, the economy is becoming less autistic. We used to constantly talk about business, data, ego. Today even the indicators themselves are changing! Ecology a couple of decades ago was nonsense, entertainment for a few crazy radicals. Today she is a serious force behind which are political, business and personal interests. We saw something we didn't see 20 years ago: that there is nature all around us. Our eyes opened slightly. In addition, books about inequality appeared. But I expected it to happen faster. We are still relying on the same models that failed us in 2008. Imagine that a mechanic did a bad job on your car, it broke down, and you give it to the same mechanic because there are no others in town.

Tell us about your zero growth idea. Why is growth so important to us, should it be important at all?

This manic part of economics is a good example where mythology enters into technical science. My colleagues liked to say: “Tomas, you are a naive, romantic person, you don’t understand how the world works.” At first I agreed: yes, I am romantic, naive, I want to remain that way. But one day he looked at his friends and said: “Wait, who’s naive and romantic here? You believe that you can describe people with formulas! It’s romantic in a way and very naive.”

Who ever said that the economy should grow? Where does this come from? It's written in the Bible, did you have a prophetic dream? Does history testify to this? Models? The economy may stand still. A social system based on economics cannot stand still. For example, a pension system based on the assumption that the economy grows every year is pure mythology. Imagine that you are building a ship, assuming that the weather will be good every day. Such a ship will sink - it must withstand any weather. I don't mind growth, just like I don't mind good weather. But if you believe that there will be good weather every day, you will be disappointed.

Let's not rely blindly on economic growth. After all, much of the growth is artificial, created through debt. It's time to rename national income into national debt (original play on words: gross domestic product / gross debt product - editor's note). We see this in Japan, in the USA, in Western Europe. If you have economic growth of 2% and a deficit of 7%, what's the point? Buying 2% growth for a 7% deficit, in my opinion, is not a very profitable deal. There was no growth, it was artificial. So we have to measure it, but subtract out fiscal and monetary stimulus.

The economy is manic-depressive and collapses during periods of mania. Let's remember the summer of 2007. The data for the US looked excellent: high economic growth for many years, Alan Greenspan [Chairman of the Board of Governors of the US Federal Reserve System from 1987 to 2006 - approx. ed.] subjugated the economic cycle, high competitiveness, Steve Jobs is still alive, many new ideas were born in Silicon Valley. And it was at this point that the backbone of the American economy—the financial sector—collapsed. I call it mania-induced collapse: full speed ahead to bankruptcy! It's like accelerating to hit a wall. And businessmen tell me: we want this mania again, we want to return to the same dangerous situation, if only the numbers look good. It doesn’t matter that there is a wall in front - in the numbers the wall is not visible, which means it does not exist.

We should stop predicting. In conditions of fundamental uncertainty, as Keynes wrote about, assessing probabilities is extremely dangerous. Imagine that now the lights in this room went out, the walls shook, everyone was in panic. I get up from my chair and say: “Calm down, I know what to do, I built this building. Follow me here." And everyone jumps from the third floor after me, because I was pretending, imitating knowledge in conditions of uncertainty. Without me, people on their knees, crawling, would have found a way out. If you tell people “next year we will grow by 4.2%,” everyone's thinking turns off. Without such forecasts, companies would be much more cautious: maybe it will be 3%, maybe 0%, maybe 6%. They would consider different scenarios. But after the forecasts, the scenarios are no longer considered. This is an imitation of knowledge.

If we stop being obsessed with the idea of ​​growth, what will we end up with?

I give my students the following assignment: “The Lord appeared to you in a dream, like to Joseph, and said that there will be no economic growth for the next 20 years. Develop a model." Most students say, “I’ll try to make this or that grow.” I answer: “You don’t understand. There will be no growth. 20 years." It's difficult for us to think this way. Do you know Scrooge McDuck? He has a safe with gold in which he swims, but outside of this safe he is very stingy, saving on everything. Our society behaves like Scrooge McDuck in reverse - as if we are rich. But we are not even poor. A poor person is someone who has no money. Japan needs 200% of GDP just to become poor. We don't have words for this. Anti-rich? The country is not poor, it is in debt, it needs a lot of money just to become poor.

I try to think differently, to move away from modernity: for example, consider the story of Joseph. Back then, Egypt dealt with a much more serious crisis (seven years of famine) without going into debt. The pharaoh did not have to borrow a single coin from the market. Everyone has a Bible at home, but we don't take its stories seriously. We take our Excel models seriously. Why? Pharaoh created a surplus: not a budget surplus, but a negative sovereign debt - we have no words for this. Imagine that instead of a 30% debt-to-GDP ratio, a country would have a -30% debt-to-GDP ratio. We can describe such a situation, but we have no words, because this does not happen, it is beyond our imagination. I'd like to stretch the boundaries of the imagination - I'm not saying the answer is out there somewhere, but let's just acknowledge how limited our reading of economics is. Another example is a period of zero inflation. The theoretical possibility of this is allowed, but in practice?

What are your political beliefs? What do you think about positions at the ends of the political spectrum?

I don't like extreme positions. I support the European Union, in this sense I am in the mainstream. But I am critical of fiscal policy; this is where the most mistakes have been made, which we are trying to correct with the help of monetary policy. This is not very correct - as if we were trying to fix errors in software by replacing components in the computer.

Capitalism has changed a lot. Look at the 1990s! I think the situation in the Czech Republic and Russia was similar. Today capitalism is more civilized, more open, we try to think more about people. But we need a global economy. The Internet is global, people live globally, and politics remains local. We need a policy not based on national states. Models in textbooks suggest that there is a system of countries. For a person born in the era of the Internet, this does not make sense.

Another challenge is to think about a fiscal policy that is determined within the framework of industries, and not countries. Banks, for example, should have their own fiscal policy - not in a separate country, but globally. The image of the economy within the framework of state borders is based on textbooks of the last century, the role of the state falls.

Despite the fundamental uncertainty, people seek to find out the future, to understand important trends. What do you see in the future, what do you think about robotization?

I just published a book about this! It seems to me that such issues are legitimate. It is unlawful to say that you know the future for sure. In the classical economy, the question always sounds like this: how will society look in a stationary state? Classical economists were not interested in growth, they were interested in whether society would be fair or not. Today, the opposite is true: we know exactly how we will grow the next couple of years, and disputes about long -term trends are almost not underway.

It is useful to use the demand and demand model. The proposal will be replaced by robots and artificial intelligence - many books have been written about this. Lawyers, bureaucrats, taxi drivers will lose jobs. But robotization will replace not only the proposal, but also demand. Here is my contribution to the discussion of this problem: computers will tell your desires, wish for you, because they know your desires better than you. I use Tarkovsky’s wonderful film “Stalker” to analyze demand and desire. The hero, whose brother is sick, goes to the zone - a magical place that fulfills desires. He passes through many dangers, makes a desire, and when he returns, he finds out that his brother died that day, but he himself won the lottery. What happened, the zone deceived him? No - a man deceived himself. The zone gave him not what he wanted to want. She gave what he really wanted. The zone cannot be deceived by the filtration of the desires that we all do.

Imagine that we have such a zone. Will you go there? She will give everything - but not what you want to want, but your dark desires. If an honest, fair person goes there, he wishes the end of all wars and suffering. But will we find such a person? We do not know our desires. Tarkovsky’s film and the book “Picnic on the sidelines” are important because they describe a machine that knows our desires better than us. But when true desires are fulfilled, this is a disaster. Once we thought that God knows the desires of man better than man himself-today we think so about computers.

Another important remark about the future: the black mirror of the phone erases reality. Once the alarm clock was a physical object, it was ticking, rang. Today the alarm clock is dead, but its spirit is alive on the phone. The phone killed the body of the alarm clock, and his soul went to heaven, and it works better, plays more melodies, monitors your sleep. The same thing happened with books, films, friends, diaries, calendars - almost everything is erased and falls into a digital void.

I think that soon the same thing will happen to people. Our soul will live in digital space. Why do we believe that the biological form of existence is the highest? Once our bodies were star dust, and after a couple of hundred years the computer will become our mother. We have already come up with the words: “motherboard”, about the data we say “on the cloud”. The computer program is the most advanced form of mythology that does not exist, it is not recorded in books. When you speak on the phone, you are not talking to a person, but with a piece of metal, understand this. If we see what paradise in Christianity looks like, it turns out that it is very similar to life in a computer - there is no death, no dangers, no sex. There are no rare benefits - and this is interesting to the economists - since the space is endless. Want to live in a virtual castle? Please. Want a thousand rooms - add a couple of zeros. We enter the world where the basic premise of economic science - rarity - is no longer fulfilled. How to trade in an intangible world? We become witnesses to the great relocation of peoples, but not from one place to another, but from one place to nowhere. We are the first generation that sucks into this black hole.

The last example: what will work look like? Let's see how it looked 100 years ago - development in this area exponentially. Compared to the beginning of the last century, we do not work at all. For those who lived a hundred years ago, most people in the economy do not work today, but tells each other fairy tales - this is the essence of management. Anyone who tells the best fairy tale becomes a director or president. Adam Smith in the “Theory of Moral feelings” wrote that the main engine of a person is not selfishness, but a desire to believe in his history. After 20 years, it will be impossible to see the difference between leisure and work in the majority of the population. It looks like Keynes’s dream from the article “Economic Opportunities for our grandchildren”, but on digital steroids.

How will society be arranged in such conditions after the disappearance of rarity? Will we come to digital communism?

There is no other way - in the virtual world you will receive everything you want. How does the Internet work? There is no government, there are no taxes, there is little regulation that can be easily circumvented - and it works. Is this capitalism or communism? These labels no longer make sense, they are created for national borders. Already today we can imagine life on the Internet. If you are imprisoned, but they will leave the phone, your friends will not even notice your disappearance for two or three weeks, the work will be carried out remotely. The virtual world is becoming more and more important, it scares me a little, but I do not see any other way.

We must ask ourselves: who should own artificial intelligence? If a private company is owned by them, a huge threat of monopolization arises. If Google creates cars without a driver, who compensates for the losses of all taxi drivers without work? Should this be, as always, a government? Perhaps the owner of artificial intelligence must be fiscal responsibility. Humanity has been working on the creation of artificial intelligence for millennia, from the moment mathematics was created in Greece. Why should we give everything to the one who took the last step? We did not give the moon to the property of Nile Armstrong. We must think more about capital taxation. Perhaps the share in artificial intelligence should belong to everyone, forming the basis for unconditional main income.

But is this possible politically? Movements against 1% like OCCUPY managed to achieve a little.

We think about democracy within national borders, and it's time to think about global democracy, a global referendum. The theories of the conspiracy about the global government have spread, but that is why the transparent global government is necessary. We need an organization that will accept the multipolar nature of the world. Then a lot will become politically possible. Another proposal is to pick up a fiscal policy from politicians. The tax policy should be completely in the hands of politicians, but a fiscal one, determining the size of the debt and deficit, can be given to technocrats, as the monetary policy was given.

From a global referendum, you have moved to the fact that a fiscal policy should be given to technocrats ...

I meant the following: it also seems politically impossible. But it once seemed impossible that all political parties would gather and give a monetary policy to technocrats. All countries should gather and in a global referendum to agree on what principles they will adhere to. So democracy was introduced! The elites were afraid of communism, but still introduced democracy. It is necessary to take another step from thinking within the national boundaries to global thinking about the economy - so that we tell the economy what to do, and not it dictated our conditions for us.

What are your research plans?

I work on theological work, the economic reading of the book of Job. It seems to me that the economy is based on this book. When the Lord told Satan that Job is immaculate, fair and God -fearing, Satan replied that Job was just a good economist who sees that God -fearing brings return. He donates one bull, and you give him ten. From my point of view, this is economic discourse.