Economics Rules | Dani Rodrik

Summary of: Economics Rules: Why Economics Works, When It Fails, and How To Tell The Difference
By: Dani Rodrik

Introduction

Dive into ‘Economics Rules: Why Economics Works, When It Fails, and How To Tell The Difference’ for an insightful examination of the foundations and evolution of the economics discipline. The book takes you on a journey from ancient economic thought, to philosophical roots, and the influence of religion and ethics. It showcases how contemporary economics has moved towards mathematical approaches and simplified models, but argues that a return to its qualitative philosophical roots is necessary. The summary highlights the impact of moral choices on economic assumptions and the importance of understanding the balance between good and evil in economic decision-making.

The Dehumanization of Economics

The use of mathematics to simplify economics is a limiting and subjective practice that leaves out the ethical content of the field. Economists’ inability to predict and explain events is due in part to their disconnection from reality caused by the reliance on simplified models. The mathematical emphasis of economics is a recent development, which alienates it from its historical roots as a qualitative discipline. The field has replaced philosophy, poetry, and other more subjective contributors to economic thought with mathematical models that hide the impact of selfless behavior and other ethical considerations. To reconcile with reality, economics needs to reduce its mathematical emphasis and return to its philosophical roots.

The Epic of Gilgamesh: Humanity and Efficiency

The Epic of Gilgamesh, the oldest known literary work, tells the story of Gilgamesh, a part-human, part-god ruler, and his attempt to build a wall around Uruk. The story highlights the contrast between nature and urban society, where goodness resides in the latter. Gilgamesh’s friendship with Enkidu, a part-human, part-animal figure who opposes his ruthless actions, brings out their more humane side. However, Enkidu’s death sends Gilgamesh back to his obsession with immortality, ultimately showing that humanity comes at the cost of efficiency or that it is simply a drag on work.

The Role of Ethics in Progress

The history of our understanding of natural phenomena has been shaped by myths and religious beliefs. However, the advancement of science and technology has led to better standards of living and social progress. The link between morality and material reward continues to influence our economic behavior. The recent global financial crisis has highlighted the need for ethical rules and enforcement. The Hebrew tradition, as outlined in the Torah, illustrates the importance of debt forgiveness and the observance of non-material pursuits. The Hebrew concept of linear time also helped shape practical progress by refusing to deify rulers or nature. The modern workweek and weekend also stem from this tradition. In summary, economic progress is intertwined with ethical considerations, and can benefit from the lessons of history and religious beliefs.

Ancient Greek Philosophers’ Influence on Economics

The views of Ancient Greek philosophers have withstood the test of time and continue to impact modern economic analysis. Pythagoras believed in the power of math and numbers, while Xenophon advocated for market-based principles such as division of labor and expanded trade. Plato’s emphasis on reason and rationality over empirical observation still resonates today. Aristotle’s approach, on the other hand, relied more on empirical discovery than abstractions. The philosophies of these thinkers have shaped the way economists approach economic analysis even today.

Christianity’s Economic Influence

Christianity and economics are intricately linked as evident from the economic context of a majority of Jesus Christ’s parables and the use of economic terminology in the religion’s central concepts like redemption and sin. Christianity’s emphasis on protecting the weakest members of society is also discernible in the Old Testament. The coexistence of good and evil is accepted as a fact in Christianity, and it is believed that individual evil should not be prioritized over the common good. These principles form the basis of laissez-faire government and free-market capitalism. However, unbridled commerce is not effective in curbing evil, and more regulation is necessary in such cases. From this summary, we can infer that Christianity has played a significant role in shaping economic thought and policy.

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