Development of Conventional Economics out of Enlightenment Philosophy

Conventional economics is a social application of Enlightenment philosophy. Principles of Enlightenment emphasize superiority of natural physical laws over authority, on reason and optimism over blind beliefs, and on individual interests over community interests. This inevitably comes into conflict with social economics, which is presented by the Catholic Church. From these principles classical economists derive concepts of natural competition between firms, the market’s self regulation, and the concept of the individual as a profit maximizer. Economists prove their models by using logic and empirical support which make conventional economics a science.

Social economics is a reflection of Medieval principles of fairness. According to the Catholic Church, the main spokesman of social economics at that time, all prices should be fair. For example, the Christian shoemaker must sell shoes at a fixed price. By doing this he helps other shoemakers in his town. Indeed, excessive profit is a sin. There is no desire for invention. For instance, if a shoemaker invents a new technology which reduces the cost of the shoes, he can sell more shoes at a lower price. Since the quantity of his sold shoes increases dramatically, he increases his profit. The problem is that the good Christian shoemaker should not put out of business other Christian shoemakers. If you are in a market and find a way to sell at a higher price than other sellers, you are called a sinful person because you sell at “unjust” prices. Therefore, prices tend to be fixed and “fair.” The Medieval gild also assures that all members benefitted equally. It is the economy without innovations, but where well being of each member of society is more important than profits. Therefore, Medieval people have fair static economy.

Advances in natural sciences contribute to the development of economics. First science proves that the Earth does not need a constant regulation from outside and runs around the Sun automatically, and energy and matter cannot be created and destroyed. Regulation of firms by the “invisible hand of the market” is like movement of the Earth around the Sun. The system works automatically. Therefore, the business firms, being natural, do not need regulation from the monarch. Later, Darwin’s conclusion that only best species survive can be applied to support that only the most productive profit maximizing firms survive in the competition. Since nature runs automatically and better species are the result of competition that is natural to put your neighbor out of business by increasing your productivity.

Reason and optimism are part of Enlightenment philosophy and conventional economics. Human reason can calculate and try to forecast tangible amounts of material wealth like manufactured goods, but human reason is not certain about spiritual wealth. Enlightenment overthrows the concept of Divine Monarchy. Reason is used to destroy the concept that God gave power to rule only to few chosen people. Economic growth becomes a factor of discussion in economics. An increase of the material wealth by any legitimate ways without any consideration of fairness is the goal for a businessman. Although the concept of GDP was developed in 1930s, it is a reflection of Enlightenment philosophy. GDP which is the sum of consumption, investment, net exports, and government expenditures is the national goal and the source of estimation for the economists, but not the amount of hours of spiritual prayers.