Chapter 11 - Two Opportunity Memes
It is a recognized fact that human beings, from the advent of their capacity for abstract thought, have had a strong inclination to look for the
reason of things. Our impulse to survive would have encouraged the formulation of that type of questions long before our capacity of thought was able to provide satisfactory answers. Therefrom the emergence of a multitude world mythological conceptions which, apart from soothing unconscious worries, had the virtue of, to a certain degree, preparing the path to produce better answers. It was not, however, until the dawn of the Modern Age, with the Renaissance,311 that the emergence of scientific method finally provided a rational and sure means to satisfactorily satiate such thirst for knowledge. A phenomenon of unique and powerful novelty started to happen which would set apart our culture from all previous stages of memetic evolution. True: the classic Greeks anticipated many of the specific ideas that integrate nowadays our scientific systems; for instance, Democritus already outlined, in an embryonic form, the atomic theory. The fact that free philosophical thought could get it right devising a vaguely approximate description of some aspect of reality, is one thing. Another, qualitatively different, that such a description could be asserted with the support of a conscious and definite methodical attitude, within a generic pattern of rational elaboration –and subsequent empirical confirmation– of hypotheses and theories. Such a pattern only came about during the Renaissance, within the double methodological frame of rational theorizing and empirical control characteristic of the modern scientific endeavor. In that glorious period, two complementary currents of thought flourished in Europe: mathematical rationalism (with Galileo, Descartes, and Leibniz) and empiricism (with Bacon, Locke, and Hume). Together they provided solid grounds to the idea of how to maintain notions of reality internally consistent and in agreement with experimental data rigorously collected and corroborated. An odd cultural species, modern science, began to flourish, as a result of a fantastic process of intellectual creation and political and economic development offering it ground and protection. It will soon commence to bear fruit of an amplitude, variety and depth never before known in human history.
The novelty of this development becomes more conspicuous when we compare it with the type of “science” that prevailed before this fortunate period. It came in two flavors: first, the chaotic and often delirious research of alchemists, hardly separable from occultistic ideas and practices related to the ancient tradition of magic; second, at the other end of social recognition, the erudite investigations about past authors, especially Aristotle, conditioned by the desire to irrigate religious mills and erect counterforts to prop up the power of the Church. Under the cry for freedom, the figures of Luther and other religious reformers rose against such dogmatism at the dawn of the Renaissance, claiming for direct and open examination of the sacred scriptures. However, only modern science would drive this idea of free examination to its ultimate consequences. Scientific criticism should be universal; nothing should be protected against it; all stones should be turned over for the purpose of the investigation of nature. In sharp contrast with alchemy, occultism and other esoteric traditions, the new science would demand total publicity (favored by the printing-press invention), based on the principle that every observation or experiment ought to be replicable by anyone capable of performing it with methodological seriousness and rigor. Finally, facing the immoderate dreams and aspirations of human beings, science adopted an intellectual chastity belt, imposing itself the obligation to work under the sign of a set of fundamental precautions: no wishful thinking, no clinging to preconceived ideas, no tribal idols (our natural tendencies), no cave idols (individual private interests), no market idols (unfounded mouth-to-mouth transmitted assertions), no theater idols (prestigious theories of the past) (Bacon, 1854). All those goal of knowledge purity and enlargement were pursued spontaneously, with little conscious deliberation –which had to wait for later centuries–, but with a lucid spontaneous accuracy that would soon be rewarded with an abundant harvest of intellectual and technological achievements.
Francis Bacon (1561-1626), Lord Chancellor of England, lawyer and philosopher, not a scientist himself, was possibly the first person who understood the enormous significance of the knowledge revolution developing throughout Europe. Being submerged in the empiricist tradition of his country, he was not too agreeable with the mathematical approach to the incipient science sustained by Galileo and Descartes. Hence he took over himself the defense of the experimental aspects which he considered ought to be its first and foremost foundation. The danger that Europe would be divided into two manners of practicing science, one rationalist and the other empiricist, as it was already divided in practicing religion (Catholic and Protestant), was conjured by an exceptional genius: Isaac Newton (1642-1727). His monumental work of 1687, Philosophiae Naturalis Principia Mathematica, clearly established mathematics as the way to consolidate the results of empirical research. There was never to be another doubt concerning the tenet that science has two indispensable faces: that of data collected through field or laboratory work, and that of abstract theories in charge of explaining such data, preferably under the form of mathematical models and equations. His work did much more than solving an emergency crisis: he managed to integrate into one single grand synthesis, with his laws of motion and his theory of universal gravitation, Galileo’s terrestrial mechanics and the celestial one produced by Johannes Kepler. This grandiose theoretic-experimental integration became the reigning paradigm of physics for centuries to come, as well as a model worthy of imitation by the articulators of yet-to-be-thought-out scientific disciplines of the immediate and more remote future.
Another culminating moment in the consolidation of the scientific revolution was the foundation of the British Royal Society in 1660. Its first members closely followed the guidelines of scientific policy recommended by Bacon, understanding with great vision the importance of science for the development of the individual and the State, expressed by him with his now famous maxim knowledge is power. Bacon's influence is also noticed in the drafting of the Society’s statutes wherein it is commissioned “to complete the knowledge about the matters of nature and to improve all useful arts, ways of manufacturing, mechanical methods, machines and inventions by way of experimenting and not to interfere in theology, metaphysics, moral, politics, grammar, rhetoric or logic.” England’s example was followed by diverse European countries with the establishing of their own scientific societies, the most respected and influential being the Paris Academie des Sciences, founded by the minister Colbert in 1666. The role of these societies was decisive in granting professional sense and social prestige to the scientific activity, reinforcing the sense of identity of its practitioners with respect to the traditional power groups, especially priests and military men. It would be within this matrix of international intellectual community that the scientific method would take definite shape and consolidate itself during the following two centuries.
Of particular importance within the activity of scientific societies was, from early on, the support to the publication and circulation of research results from their members, as well as the promotion of periodic meetings, both by specialties and interdisciplinarily. These reciprocal confrontations would turn out to be essential for the application of a method whose fundamental requirements were the reproducibility of experiments and the critical unhindered analysis of hypotheses and theories. The scientific method had emerged as a passionate desire to directly questioning nature by the exercise of observation and reasoning, without the researchers being subject to any authority or censorship, or being mediated by traditional beliefs and values. These cultural novelties, which may be considered collectively as the new scientific-method meme, required –as all memes– a population of minds wherein to reside and multiply. To maintain and reproduce such population was precisely the role particularly performed by these scientific societies from the beginning, still today fulfilled by them.
Under the perspective offered by the time passed and the multiple and thorough works by philosophers of science of the last hundred and fifty years, let us try to briefly characterize the essential content of the modern-science meme. The scientific method consists of the set of rules tacitly accepted by all practicing scientists for progressively increasing human knowledge and making it ever more accurate. Such rules are a set of conventions, transmitted more through contact with teachers and immersion in study and research environments than by direct formal teaching (Polanyi, 1964). For the sake of clarity, allow me nevertheless to try to specify the most important and general of those implicit rules of scientific practice, following the lead of Karl Popper. This is the fundamental one:
Anyone who decides that the statements of his knowledge do not require any ulterior contrasting and should be considered definitive and unmodifiable, automatically retires himself from the game of science. That central rule is complemented by the following:
A hypothesis which has proven its resiliency in the presence of repeated and forceful attempts to demonstrate that it is false, cannot be eliminated, except in the presence of extremely good reasons.
Good reasons could be, for instance, having found a substitute hypothesis simpler to put to the test and at least equally able to explain the phenomena than the replaced one, or the fact that the hypothesis might have been repeatedly and clearly falsified.312 Finally:
Any other rule followed by practicing scientists in their different fields must be such that it never protects a statement from criticism (Popper, 1962).
A consequence that seems to be deduced from this characterization of the scientific method is that, in fact, science can never offer us genuine knowledge, just reasonable conjectures. This alleged conclusion, however, should be approached with caution. It is stated from a pre-scientific perspective which erroneously assumes that human beings are able to possess infallible or irrefutable truths. Such conception, of course, is grounded on the religious meme, which assumes the existence of “revealed truths” by a “supernatural” being, exceeding the knowledge capacities of human beings. The scientific method is, obviously, an alternative to the religious meme, resulting from the Renaissance humanist revolution. Even if the creators of the science meme did not experience it this way, both memes are not just incompatible but incommensurable with each other, since their supporters speak languages and have world conceptions totally different. Being true in science and being true in religion are completely different things, since words acquire their meaning within the context wherein they are regularly applied. From the scientific point of view, there is no such thing as a truth immune to revision, or with a foundation distinct from its conformity with the up-to-now examined data and its consistency with the systematic network of all that has been reliably established as a representation of nature by means of the scientific method.
The revisable character of the truth of science should not be taken as meaning, within the scientific vision of the world, that another type of reliable truth obtained by means different from the application of scientific method might be acceptable or even conceivable. To whom have accepted the scientific world vision, revisable truths (with the tools of controlled observation and logical analysis) are the only truths accessible to us. By definition (implicit in the scientific method) whoever postulates the existence of another way of establishing truths is automatically placing himself outside the realm of science. This is so simply because scientific method is the sole reasonable way to select, among all possible conjectures, those in which we can trust. Why should we trust the statements selected by this method? Because this method is the sole one313 that implies a sustained and open-ended attempt on the part of its practitioners to intensely criticize their own theories –or those of their colleagues–, so that the doctrines finally presented to the general public as true are only those which have stood the systematic effort of organized science to prove that they are false. No other human group consistently uses such strategy; specifically, political parties or religious faiths do not, since they invest their best energies precisely in defending their own ideological positions and/or vested interests. Their method is not criticism but apologetics, an approach to issues for which politicians and religious ministers are systematically trained.
It is useful to trace a parallel here. In accordance with the theory of evolution through natural selection, organisms who survive the struggle for life are the best adapted to their environmental conditions. The environment can be considered as if it is attempting systematically to eliminate the ill-adapted ones. Precisely the same occurs with scientific method, which could also be conceived as if it always were on the hunt for false theories, in order to purge science of them as much as possible. The hypotheses or theories314 that scientists through their selective method are unable to refute, would be the ones that survive “the struggle for life” in science. Scientific method, with its reiterated attempts at refutation, guarantees that the conjectures surviving the sustained attack of research have proven their strength, since they have resisted innumerable experiments and logical criticisms. Science only offers conjectures, right. Not any conjectures, though; only those having taken part in the Olympic Games of Science and decisively won. They are champion conjectures, although only the standing ones. To more, we cannot aspire. If you are looking for something else, try the next church!
Before leaving the topic of scientific rules, we should make clear that, in general, it is just as global and collective activity that science progresses through the elimination of “ill-adapted” theories and hypotheses. That is not always true regarding the activity of a particular scientist. As a specific businessman expects to ensure through his work the greatest profit for his company, and not necessarily the best distribution of social resources, a particular scientist might not act out of sheer desire to know, but mainly to achieve results appreciated by his peers, ensuring promotion, attaining fame, higher salary or employment perks. Furthermore, in normal periods, scientists are more interesting in articulating already-acquired knowledge than in discovering new one, what implies their being more respectful of tradition than attempting science reform or overthrowing its reigning paradigm. There is more: it is well known that scientists, in periods of normality, are prone to overlook novelties encountered by chance which collide with the basic assumptions of their discipline. This does not happen necessarily due to scientists’ dishonesty: most of the time, scientists who encounter novelties blame themselves, out of modesty, for their clumsiness in achieving the results predicted by the textbook-consecrated standing doctrine. This inertia of the scientist’s ordinary work can only be broken by the accumulation of anomalies, when an alarming number of experimental results happen to collide with received wisdom. Only then, the dominant theory having been discredited, are scientists encouraged to be on the look-out for alternatives. It is then that the emergence of revolutionary science becomes possible. Solely during this extraordinary period novelties become appreciated and searched for. Not the novelty of individual results, but that of ways of looking at things which, continuing to explain the facts accounted for by the discredited theory, elegantly take care of fresh anomalies and give heuristic promise of disposing in the future of many more. (Kuhn, 1962).
We, who accept scientific method as the single truth criterion accessible to human knowledge, also do so by defect of alternatives: we have explored other possibilities of obtaining knowledge and have been disappointed. An alert reader could retort:
–What you are saying is that only science passes the test of science; that is a vicious circle.
Well, it is clear that it is a circle. However, it is a virtuous one, since it is the only one that can achieve universality: all rational beings can live comfortably in the house of science. Only science has been unifying the planet along the last five centuries by means of its good-for-everything offspring: education and economic development. Religions, on the contrary, have kept the world divided and their millions of believers subdued to heinous contradictory commandments. The only alternative to embracing scientific method as criterion of truth is to accept, on-faith, some particular “revelation.” Which one should it be? Why this one and not some other? The seed of universal discord is planted by this perverse criterion. How would you reconcile that seed with humanism, with respect to the dignity of your own self and that of all people, when you are subjecting your own reason to alien authorities? If you can accept this and go soundly to sleep, go ahead: it is your own life, conscience and destiny. Do not pretend, though, to generalize this position as a basis for humanism.
Most of the founders of the scientific method did not perceive these philosophical and practical inconsistencies; they were too busy with the formidable task of creating modern science practically out of nothing. Many continued to be Christian, even devote ones, until their death, as happened with Newton. The cases of Galileo and Descartes are less clear, since it is historically arguable that they preferred to be accommodating facing the ruling powers rather than relinquishing their opportunity to continue forging along their valuable contributions to the future of humankind. It is only with Darwin’s work, in the 19th century, that the incompatibility between scientific and religious visions became clearly apparent. This is one of the reasons why we are celebrating his current ephemerids as actually the anniversary of scientific humanism.
As apposite as it is to view science as the incarnation of reason and the positive search for knowledge, it is more important for its characterization to look at it negatively: what science is not, what it does free us from. We have already advanced that it frees us from futile illusions or wishful thinking. More specifically, it frees us from the errors that the human mind, incarnated in our complex biological being –a sheaf of feelings and passions–, is prone to commit, always prepared to take the desirable for real. The great value of scientific method is that it preserves us from symbolic traps, such as illegitimate generalization –the idea that if something occurs in a number of cases, it will necessarily occur in all of them– or that of false cause –that if an event precedes another, it must be its cause–. Astrology, a system of well-organized beliefs backed up by centuries of multicultural tradition, has an enormous archive of well-documented cases in which, under a fixed constellation of stars, some particular kind of event has occurred. In that sense we could pretend that its teachings are extremely “well confirmed.” What gives us grounds to consider it pseudoscience is not, then, its lack of confirmation. It is not positive empirical confirmation what defines science. What defines it is rather an eminently negative characteristic: that its doctrines have not been refuted by the facts, by empirical observations, in spite of countless, rigorous, and public attempts to demonstrate that they are false (Popper, 1962).
A passage from a beautiful literary piece can finely illustrate the erroneous character of knowledge pretensions that do not ground themselves in this negative strategy of science:
The divine Chrisostomus learned one night, after many prayers, vigils, and coins received, how to answer the greatest wish. The most impossible. That which not even Heaven had answered. The poor people who died every day, the muleteers, begged him: Make the drought stop! And save us, Saint, most holy Chrisostomus! And, lo and behold, he actually did it. Since that very night it poured. And you can already imagine the joy in the world! An absolute miracle! . . . (Jara, 1985)315
How many times that saint or many others, in that drought occasion or in countless others, had not heard the prayer? How many other prayers were never answered?
Every individual necessarily labors to render the annual revenue of the society as great as he can. He generally neither intends to promote the public interest, nor knows how much he is promoting it.... He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for society that it was no part of his intention. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. Adam Smith
The market meme basically consists of a very simple idea, which must have been rather obvious to the
members of our genre since early on, i.e. that the work of the members of a family turns out to be more productive in goods and services if, in some measure, they specialize in a particular one, offering the surplus not directly consumed to other families, in exchange for whatever else is needed. Adam Smith, the founder of economics, believed that this invention might not have been conscious, but rather the result of a spontaneous tendency of the species “to barter some things for others”; furthermore, he thought that such a tendency must have been related, since the beginning, to the possession of reason and speech. This hypothesis seems logical in the light of what we have discussed concerning the original acquisition of language. In any case, the manner in which the economic organization would have developed throughout millennia would have been, of course, very gradual, step by step.
It is reasonable to assume that, at the origins, exchange would have operated as a simple surplus bartering between families, the specialization not having been an explicit decision but a random results induced by the respective larger surpluses of different types of goods at each home, brought about by non coinciding individual skills. A little later, the discovery would have been made –in accordance with the normal process of evolution which adds traits one by one– that families would be better served if they periodically concurred to a particular convenient place to get rid of their surpluses, with the additional incitement of, say, religious ceremonies or seasonal parties. Thus, the institutions of the sporadic or periodic fair and the all-year-round marketplace would have been created; such good tricks would have spread extremely fast in different cultures, quite early in history. Here again, in all likelihood, the exchanges –of goods and services– would have started as direct bartering,316 still without an intervention of money. The meme thus emerged would rapidly spread from community to community, thanks to the obvious increase of comfort and wealth for those who adopted it. Such growth in wealth would have been based on the following three grounds:
Cumulative invention of machines, which would gradually increase the productivity of specialized labor.
Inevitably, the practice would have started of choosing a commonly used good
(with characteristics favorable to the purpose: solid, modular, easy to use, and durable) as a means of exchange. It would have been used at first just to give change when the barter could not go “tit for tat,” only later as genuine currency.
The utility of this invention cannot be exaggerated; it could even have occurred many times over, say in different continents and subcontinents.
It is wonderful to verify here, as in many similar cases, the “inevitability of the obvious”: given certain cultural achievements, their improvement would have been carried out in the most natural way, without the need of a genius to think of it. We find that naturalness in the entire history of economics, where anonymous inventors, perhaps without even realizing it, would have climbed the steps of a most splendid evolutionary stair.
Once the currency intermediation appeared, its refinement enjoyed the same naturalness of the emergence of markets. When mineral exploitation was undertaken, metals became ideal candidates to serve as means of exchange.317 Their divisibility and easy valuation (by their weight) would have represented competitive advantages easily displacing more primitive alternative options. Another favorable characteristic of metals would have become obvious when some prominent person of the community decided to mint them with his personal seal, certifying its weight. Important step, implying already a rudiment of financial intermediation. The honesty of the warranter would have invested the good with the appreciation of all the economic actors, who would demonstrate their preference by carrying out their transactions in that currency. Its value would increase impelled by demand, a little bit over the value of extracting, transporting, and minting the metal in question. It would not increase too much because that would have stimulated other respectable people to concur in the business. Regrettably, this paradisaical stage of the origin of money had to come to an end. A person would rise, not necessarily respectable, with the purpose of claiming the business of currency minting just for himself: the king –or his equivalent in different societies. Political power, in all its rudeness, would have superseded fluid free contracting, to the disgrace of humankind. The maneuver would have been justified with the argument of abuses, real or pretended, taking advantage of the inherent difficulty that the human mind seems to have to this day to comprehend the magical intricacies of economic utility theory (Gutierrez, 1970).
Woe betide Power! Why should minds welcome memes that harm them? Why would command enter the world when contract would have sufficed to grant people all their needs and most of their pleasures? The answer is clear: the correlate of power is fear, and we are all fearful by nature. Power promises people safety, and for the sake of it, humans are prepared to sacrifice everything else. In particular, the freedom and growing prosperity offered by natural selection. At some moment, the commanding lord interloped in the economy and created seignorage, the right to issue currency and charge for it. For centuries, that right will concur with that of others, although the prestige of power would frequently impose itself, as when the Romans' currency advanced at the same pace of the imperial troops. Once modern national States were established, laws would impose norms or restrictions to the issuing of currency, as the gold standard which reigned in most countries –well into the 20th century. It meant that banks issued note bills against the existence in their vaults of ingots of the precious metal, for which those bank notes –at least in theory– could be exchanged at any time. A prudent way to avoid terrible ills which would appear later on, wrapped up in the misleading-sounding technical word “inflation.” While gold dominated world transactions, its relative shortage kept the value of currency stable, ensuring the neutral character of the means of exchange.318 However, when the gold standard was dropped, governments fell into the temptation of issuing bank notes with no backing in goods and services, systematically subjecting their people to the lash of galloping devaluation. At the beginning of the 21st century, governments seem to have learned the lessons of the past and understand that austerity in public expense is a must for social development and famine prevention for their populace.
When speaking of the marketplace as a meme, we are referring to an invention of human culture which spreads amongst populations through imitation, that is, through spontaneous absorption of the respective attitude, practice, idea or constellation of such. The reason for the popularity of a meme is, of course, that it satisfies needs and desires of the participants, in preference to other previous or different social habits or ideas. What is important is that human minds find something useful in it, as a means to an end or as an end in itself that gives them direct pleasure. On the other hand, and depending on its importance on people’s lives, it often is not a simple thing (like the steam machine, which spread throughout Europe as soon as it was invented, or games like football or chess). It often can be much more complicated, containing an essential nucleus and several “adherences” or layers which cover and protect it, or even parasites that thrive on its popularity or enter into some kind of symbiotic relationship with it, as organelles do in cells.319 The market, embodied in currency or money, is of course one of the most important existing memes, mediating as it does all life necessities and activities. It could not avoid developing many such adherences and parasites.
It is enough to consider general literature or art in order to find them. There are crimes because of money, marriages of convenience, families ruined by inheritance lawsuits, sermons denying salvation to the wealthy, religious congregations making vows of poverty (the “mendicant orders”, whose members –ironically– subsist on alms, most of them in cash!). Countries are divided in “worlds” according to their wealth level, their envy or arrogance based on riches –or lack of them– determining their reciprocal complexes. The Catholic Church, long before the Renaissance period, prohibited the collection of interest over loans; however, and at the same time, it sold indulgences and built Europe’s largest monuments, on the basis of all the financial resources it could mass by any means. In our own times and countries, politicians win their campaigns by promising money to the poor and, once elected, divide it amongst them in the form of succulent wages, traffic of influences, or direct brazen embezzlements of public funds. These dismal practices are also part of the market meme, since it is enough that they offer advantages to a group, for them to propagate, together with the use of money, indefinitely and by emulation.
Among the more inconvenient adherences possessed by an important meme are the failed attempt to explain the automatic phenomenon which constitutes its core. Regarding the market meme, history is full of this kind of error. The most primitive ones are of a religious nature. Thus, the myth of the Garden of Eden tells how, at the beginning, trees in Paradise produced abundant fruit for Adam and Eve, without requiring toil on their part. The original sin, whatever its nature might have been, has the terrible consequence of deriving into an implacable punishment for the couple and their descendants: scarcity, “in the sweat of thy face shalt thou eat thy bread” being henceforward the cruel fate of the human kind. Many other bad interpretations of the economic phenomenon stem from this tradition, as those preaching that wealth and riches are means used by the Malignant to tempt righteous men or, on the contrary, –as Calvin preached and it is still believed by many Americans– the sign of God’s predestination upon His chosen ones.
An interesting by-product of the idea of work as punishment, which has lost its religious character but not a moralistic one, is the double notion that things are worth the quantity of work put on their production, and that there exists a “fair price” for any good or service. It is probably a derivation from the old Catholic concept, which so much annoyed Martin Luther, of “salvation through good works.” But also a quite spontaneous idea, as proved by the attitude of a close relative of mine, a very intelligent engineer, who put a lot of work on improving his house throughout the years, and now, when he needs to sell it, cannot find the buyer who will pay him the “fair price,” that is, what he originally paid for it plus all the money he invested on it, rightly or wrongly, during the entire time it has been in his possession. To excuse himself, he could have invoked not just the teachings of many theologians, medieval or modern, but also those of the first economists who still asserted the concepts of “natural price” (as opposed to the variations imposed by supply and demand) and that of the “work value” of goods and services (as opposed to their –much more sensible– “exchange value”).
The most surprising is the following. As we have seen, the market meme emerged and spread on the planet in a natural way, being easily welcome and practiced, in all ages and cultures, worldwide. However, when there was an attempt to explain it, to reason over it, transform it in reflection and finally into a science, it turned out to be an enormously difficult undertaking. The market as historical experience is the world’s banalest of things, but the market as theory has been a challenge that has defied the best minds of the globe, undoubtedly because of its characteristically extremely abstract nature. Indeed, economics was engendered laboriously. First, the central idea at the top of this chapter was perceived –the invisible hand concept–, still with mystical connotations. However, the founder himself made a mistake when he drew the first consequences from this basically correct idea. More than one century of reflection was needed to give birth to a theoretical analysis which could appropriately explain this wonderful meme, so easy to exercise in practice. And many more decades were still needed for humankind in general to assimilate the result of this analysis, clearing up mistakes, theoretical and practical, accumulated along the way, some with dreadful consequences to the nations whose rulers used to believe in them.
The mechanisms implied in market operation would only begin to be analyzed in the 18th century, with the work of the English philosopher Adam Smith (1723-1790). In fact, his transcendental book An Inquiry into the Nature and Causes of the Wealth of Nations is considered as the first book of the science of economics sufficiently detached from related fields such as politics, ethics, or jurisprudence. It constituted a meticulous examination on the manner in which wealth was produced and how it was distributed among the different factors contributing to its production, namely: work, land, and business profits (including profits ascribable to capital, that is, the machinery and other implements used in production). Its main thesis was that, given the nature of the price system appearing by itself in a free market, any interloping in its delicate mechanism could only result in a smaller production of goods and services. Free trade, with the least intervention from governments, spontaneously gave rise to the best possible distribution of the receivables among the production factors and, consequently, the greatest possible creation of wealth, within a country’s borders as well as in the community of all participant nations.
In order to explain this situation, he presented his famous metaphor of an “invisible hand” which supposedly created the agreement between the social supply and demand of goods and services (Smith, 1904). Although the author, moved by his strong religious faith, alluded with it to the discreet intervention of a provident God, we prefer to explain it nowadays on the basis of well-known laws of cybernetics, information technology, and evolution, as a parallel computing algorithm which automatically informs all buyers and sellers of each other’s intentions through price codes –regularly brought up to date by the actors themselves–, upon which they all base their decisions to buy or not to buy, to sell or not to sell. For its efficiency, proportional to the degree in which market conditions correspond to perfect competition,320 this mechanism merits being considered one of the most splendid creations of the human culture. No known computer system has been able to be its equal, as proved by the crass failure of the centralized distribution systems of goods and services that have attempted to replace it. The clearest case is that of the extinct Soviet Union and the communist countries of Eastern Europe, whose final crash in the early nineties of last century was mostly due to the total bankrupt of their centralized systems of economic planning.
In spite of its shortcomings, Smith’s notion is basically correct and represents the first adequate analysis of the central nucleus of the market meme. It consists of the idea that, when goods are exchanged in a market where producers and consumers freely concur, all participants profit thanks to an automatic assignation of prices for each one of the production factors that maximize the total possible collective gain in the corresponding circumstances. Up to here, well and good; however, complete understanding of the market meme (the development of the science of economics) was too big an endeavor for a single mind, as we will immediately see. Smith’s discovery of the automatic action of price formation by the market is a genial intuition for its simplicity and capacity to explain with uniformity a large number of phenomena. However, since the training of this thinker was in “soft disciplines” such as history, moral, and general philosophy (in which he widely stood out), the analytical tools of modern economists were not at his disposal. His work is of great interest, for instance, as a rich compilation of anthropological details concerning the different phases of production and exchange at the beginning of the Industrial Revolution, with an abundance of precisions regarding the different means by which humans forge civilizations. Besides, mathematical analyses are lacking, which at that epoch were still the exclusive wherewithal of physicists. Remember that the 18th century represents the apex of the mechanistic world conception edified by Copernicus, Galileo, and Newton.
On the other hand, European culture was then in its apogee, to the point that we still refer to that era as the Age of Enlightenment. The West was proud of its Renaissance achievements and the tempo of changes was slow, notwithstanding the Industrial, American, and French Revolutions. All this is reflected in the theory of economic value with which Smith intends to clarify the action of the “invisible hand.” We have already mentioned that he was a fervent Christian. The double inheritance of the theological conceptions of work and money were still affecting him. Hence, his posing of two types of economic value: the real one, constituted by the work needed to produce the good, and the exchange one, constituted by the price fixations at the marketplace. However, he also retained the idea of a natural price –obvious inheritance from the “fair price” of medieval theologians– around which, according to him, prices induced by supply and demand variations would – moderately– oscillate. Finally, Smith connected these two ideas, real value and natural price, explicitly asserting that the natural price strictly corresponded to the quantity of work required to produce the good in question.
What Smith seems unable to have perceived was that time constantly changes all economic variables, something not easily noticeable against the background of the slow tempo of his era. However, one ought definitely to take time into consideration in good economic theory, to the extent we consider seriously the idea of substitutability of all goods and services against one another. The concept of natural price in terms of the required work, on the other hand, has no definite meaning, as the work needed to produce a good can be quite different from the work needed to replace it, within a dynamic economy. I think about the hours of work involved in the production of the computer I am using now, purchased just two years ago, and what would cost me to replace it today (approximately half that price) and I cannot but crack a smile. Clearly, there are no natural prices, as they vary all the time due to technological progress and changes in work productivity (among other things). It is pointless to favor work in relation to other goods or factors of production as the canon to assess the value of any of them.321
The truth not seen by the distinguished philosopher and historian, and which today many of us find obvious, is that the value of any good is the quantity of any combination of units of other goods which we could replace by them in a competitive market (not even necessarily perfect). What Smith was unable to see was the most prolific implication of his powerful idea: the fact that the value of any economic good is the real and current possibility of exchanging it for other goods in a market. In other words, that economic value is essentially relative, never absolute, for its being based on the concept of substitution (Gutierrez, 1970).
Adam Smith is a son of his time. At the end of the 18th century the patriarch of scientists is still Isaac Newton, the founder of modern physics, who postulated space as an absolute reality. We were bound to learn later, from Einstein, that every space is relative, and Smith’s successors322 would show us that economic value is relative too. They would teach us that markets not only operate as platforms for lukewarm negotiations to discover –through haggling on the part of suppliers and buyers– the “natural prices” concealed in the vicissitudes of the moment, but rather as true determining agencies of the sole valid prices, namely the equalizers at any given time of supply and demand, maximizers of total satisfaction for all the actors concerned. In other words, what determines in a market that all goods expected to be sold are effectively sold, and that all goods expected to be bought are effectively bought, is simply that, for each participant, the marginal utility of the good acquired (price or article) corresponds to the utility of the last unit of the good which that person relinquishes in order to obtain the other. No other economic value does exist.
Note 311: See Chapter 9, THE EUROPEAN RENAISSANCE.
Note 312: By being falsified it is meant the demonstrable existence of at least one clear counterexample to the hypothesis.
Note 313: I ought to qualify. Commonsense deserve to be considered –to a degree– as implicit science, primitive science if you will; it is obvious that for uncountable generations people has used careful observation and spontaneous logical thinking to solve everyday and professional problems. From this perspective, science can be viewed as systematized and standardized commonsense.
Note 314: Theories are hypotheses of a higher level, not confirmed directly by empirical phenomena but by well-confirmed hypotheses.
Note 315: My translation from vernacular Spanish. Incidentally, the Chrisostomus of this story was the donkey of the narrator, died in “fragrance of sanctity” and venerated by the illiterate peasants of a remote Peru district.
Note 316: That services were also exchanged at the marketplace is confirmed by abundant historical evidence. One of the most interesting is the practice generalized in Europe of theatrical representations or juggler performances, concomitant with these fair concentrations. This gives us an inkling of the cultural role of those periodical agglomerations, which would be favorable to the diffusion of the work of such literature geniuses as Shakespeare or Molière, and probably even Homer, at their particular times.
Note 317: Different metals were used by different nations. Iron was common among ancient Spartans, copper among Romans, and silver among rich Middle-Ages merchants.
Note 318: One outstanding exception was the discovery of America, since the pillage by the Spanish government of the indigenous gold and the concomitant exploitation of its mines, caused considerable inflation in Europe.
Note 319: See Appendix L: MITOCHONDRIA.
Note 320: Conditions of perfect competition are fulfilled in a market wherein there are enough sellers and buyers for each product, so that none of them can, by their own acts, impose a price. Usually this occurs in every relatively large market where the State does not intervene by setting prices, rationing products, or decreeing monopolies on its favor or that of specific producers. Although in times past the existence of “natural monopolies” was recognized, as for instance railroads or telephones, which would be incompatible with competition conditions, the progress of technology has made that exception obsolete. Indeed, a railroad can find competitors in naval transportation, roads and airplane companies, or lately e-commerce; phone companies, Internet, radio, air couriers, beeper services, among other diverse resources. As to the case of collusion of several producers (or consumers) associated for the purpose of unduly influence prices, this is –very appropriately– considered a crime in probably all democratic legal systems.
Note 321: As long as it was not for mystical reasons, associated for instance with the “the smell of humanity” –as one of my granddaughters is fond to say– produced by most manual labors. It makes no sense to attribute “humanism” preferentially here, since knowledge or wit, and the perseverance-plus-parsimony producing capital or developing land are at least equally human as the sweat associated with physical exercise.
Note 322: Stanley Jevons, English; Carl Menger, Austrian; Leon Walras, French; however, not David Ricardo or Karl Marx who –due to their fixation on the worse of Smith’s work, its theory of value– got lost on the way.