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Economics and the good, the evil, and the transformation

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In this two-part series, Prague Daily Monitor and Prague Connect present an insightful interview with ‘economics superstar’ Tomáš Sedláček. Dubbed one of the ‘five hot minds in economics’ by the Yale Economic Review, Sedláček is the chief macro-economic strategist for ČSOB Bank and a member of the Czech National Economic Council. He also spoke at the recent World Economic Forum in Davos, Switzerland.

Sedláček will be the guest speaker at Prague Business Leaders Networking 2012 , an event sponsored by The Prague Daily Monitor and Prague Connect (see details below) that takes place on 21 March.

Part 1:

Ask a fish what water is

When Tomáš Sedláček enters a room, he brings in good energy.

And he’s hard to miss.

Tall, with a healthy crop of red-orange-yellow curls and an ever-present smile. He loves to laugh, and that’s a good thing, because Sedláček also loves to debate weighty topics, like economics and its link to ethics and philosophy.

Hold on a minute, economics and what? Ethics? And philosophy?

Absolutely. For Sedláček, the three are inextricably inter-related. And, as he adds, so are economics and art, sociology, politics, law, and psychology.

It’s not exactly a traditional view of economics, especially for a Charles University lecturer with an PhD in economics (with honors). He holds the unorthodox view that the old, standard operating procedures – approaching economics as a rational science, as “mathematics” — have led directly to the current global economic crisis.

To help explain how everything connects with economics but remains “difficult [for us] to join together,” Sedláček wrote a book about it, titled Economics of Good and Evil. It was an immediate best-seller in the Czech Republic (see box), and has recently been translated into English. It has earned some great reviews from Quincy Jones (yes, that Quincy Jones, the music producer), to Mark Allen, IMF Senior Resident Representative for Central and Eastern Europe.

The book’s thesis is that although economics is categorized as a mathematical inquiry and an empirical science free from values, it’s actually a cultural product — a story or a parable, a way to help us in an effort to understand the world around us. Sedláček examines how ancient myths, the Bible, pre-20th-century economists and thinkers, and even current films like “Fight Club” regard interest rates, money, or profit, and how they have gotten us where we are today.

The young, bearded iconoclast sits down with us to explain his ideas a bit more. He also leaves us with vital questions that contemporary world economies, in their rush to make more and more, faster and faster, have forgotten to answer.

“Can we know the future? What’s the difference between price and value? What is money?” he asks. “If you ask an economist, you will not,” he emphasizes, “get an answer. These questions are like asking a fish ‘What is water?’ A fish is so surrounded by it, hence it doesn’t even realize what water is.”

In his typically irreverent but amusing language he dubs our society the Society of Expert Idiots. “Everyone knows a lot about a little bit, but nobody sees the broad picture. We’ve lost sight of the forest,” he claims.

“Is economics really the ‘Queen of social sciences,’ as we were taught in economics school?” he asks. “Well, a hundred years ago, sociology was ‘the Queen;’ before that, it was psychology.”

He never smokes his cigarette, warming up instead to his thesis: “Actually, I’m grateful to the crisis. It disturbs us from our quiet. It forces us to find non-standard answers.”

He has been known to compare the crisis to a hangover—financially speaking, we’ve spent our whole paycheck on an economic bender Saturday night.

Welcome to Sunday morning. Fortunately, Sedláček is here to recommend treatment.

Helpless experts

So, who has the magic bullet that can cure our economic ills? At the World Economic Forum at Davos did he find some magical cure among the experts when he presented his ideas as part of a panel on “Economics for the 21st Century” Jan 26?

He laughs, a grin spreading across his ruddy cheeks. “It was interesting to see this high a number of people so helpless,” he chuckles. “It was an amazing array of limited creativity. But everyone agrees that this is unsustainable.” He acknowledges that although “Davos is the Mecca of the capitalist parade, everyone has been humbled.”

He pauses to light his cigarette and answer a call on his mobile. Then he shares a surprising discovery he made at the Forum: “the Occupy Wall Street movement’s message outside the gates has really penetrated to the top,” he says, nodding to affirm it. “We need new models now … and the Occupy Movement has had great confirmation, an admittance that we need a transformation, and the message must be great” if its aims are to ultimately be successful.

“Ten years ago if [I] said the green topic would be mainstream now, you would be laughing at me. Ten years ago, twenty years ago it was a hippie topic. But the green is now in the mainstream of thought.” Indeed, look at the titles of some of the Forum’s conference reports: “Financing Green Growth in a Resource-Constrained World,” and “Well-Being and Global Success” (which actually mentions happiness and family relationships as benchmarks).

“That’s a significant new beginning,” he says, but cautions, “We can’t quite find [the way] yet; we’re restructuring the whole model, and that takes time. We’re re-thinking capitalism because we need something more.” Indeed, the title of this year’s Forum was “The Great Transformation: Shaping New Models.”

“We don’t need [just] a partial upgrade,” he continues. “It’s like you’re driving a car — you know — we’re asking the questions: Are we there yet? The car has driven us there but what if we need to climb a mountain and can’t use a car? Should we change the vehicle? Do we need a different religion? Should capitalism become a religion?”

A religion?

“Oh, yes,” he nods, “it could be a religion. To a degree, we’re having a crisis of faith” and, after all, he explains, “credit and faith in Latin mean the same thing. The credit crunch has become a belief crunch. We’re not making technical mistakes, we’re making philosophical mistakes.

“You can’t take a bite out of just one part like it’s a bar of chocolate,” he says. “If you looked only at economy, it would collapse in a matter of months.”

To get serious about a Great Transformation, he believes, “Economics, art, everything, has to be connected, all around.”

Next week: Transparently untransparent: Tomáš Sedláček on corruption in the Czech Republic in part 2 of our exclusive interview.

Tomáš Sedláček welcomes your questions and discussion at the Prague Business Leaders Networking 2012 to be held on 21 March at Kempinski Hotel Hybernska in Prague.

Tomáš Sedláček (1977) is a Chief Macro-economic Strategist at ČSOB. He served as a non-political expert advisor to the first deputy prime minister and minister of finance of the Czech Republic, with special responsibility over fiscal consolidation and the reform of the tax, pension, and healthcare systems. He also served as an economic advisor to then-president of the Czech Republic, Václav Havel.

Sedláček earned his PhD degree with honors at the Faculty of Social Sciences of Charles University, where he lectures on ethics in economics, history of economic thought, philosophy and economics, and related topics. His thesis on ethics in economy won the Hlávkova Nadace award. He wrote many impact studies on EU enlargement and lectured on the subject of EU accession. In cooperation with Georgetown University and Harvard University he wrote or co-authored a number of case studies on management, ethics, and decision making in transformation.

He is member of the board of directors of The Leadership Forum, a founder of The Economics Club and other non-profit organizations, a member of the program committee of the Forum 2000 Foundation, and an elected member of the board of directors of the Czech Economic Society. He publishes in scientific as well as daily journals.

Economics of Good and Evil: The Quest for Economic Meaning from Gilgamesh to Wall Street,by Tomáš Sedláček. Czech version published in 2009; expanded English version published 2011, by Oxford University Press. German version published last month; editions are also planned in Chinese, Polish, and Italian. Economics of Good and Evil is also a theatre piece produced at The National Theatre, Prague.

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