Friday, January 20, 2012

Among the Finest Inventions of the Human Mind

In Book I, Ch. 10 of Goethe's Wilhelm Meister’s Apprenticeship, we have the following famous dialogue between Wilhelm and Werner:
"Well, here is The Youth at the Parting of the Ways; it has just come into my hand,” said Wilhelm, drawing out a fold of papers from the rest; “this at least is finished, whatever else it may be.”

“Away with it, to the fire with it!” cried Werner. “The invention does not deserve the smallest praise: that affair has plagued me enough already, and drawn upon yourself your father’s wrath. The verses may be altogether beautiful; but the meaning of them is fundamentally false. I still recollect your Commerce personified; a shrivelled, wretched-looking sibyl she was. I suppose you picked up the image of her from some miserable huckster’s shop. At that time, you had no true idea at all of trade; whilst I could not think of any man whose spirit was, or needed to be, more enlarged than the spirit of a genuine merchant. What a thing it is to see the order which prevails throughout his business! By means of this he can at any time survey the general whole, without needing to perplex himself in the details. What advantages does he derive from the system of book-keeping by double entry! It is among the finest inventions of the human mind; every prudent master of a house should introduce it into his economy.”

“Pardon me,” said Wilhelm, smiling; “you begin by the form, as if it were the matter: you traders commonly, in your additions and balancings, forget what is the proper net-result of life.”

“My good friend, you do not see how form and matter are in this case one; how neither can exist without the other. Order and arrangement increase the desire to save and get. A man embarrassed in his circumstances, and conducting them imprudently, likes best to continue in the dark; he will not gladly reckon up the debtor entries he is charged with. But on the other hand, there is nothing to a prudent manager more pleasant than daily to set before himself the sums of his growing fortune. Even a mischance, if it surprise and vex, will not affright him; for he knows at once what gains he has acquired to cast into the other scale. I am convinced, my friend, that if you once had a proper taste for our employments, you would grant that many faculties of the mind are called into full and vigorous play by them.”

“Possibly this journey I am thinking of may bring me to other thoughts.”

“O, certainly. Believe me, you want but to look upon some great scene of activity to make you ours forever; and when you come back, you will joyfully enroll yourself among that class of men whose art it is to draw towards themselves a portion of the money, and materials of enjoyment, which circulate in their appointed courses through the world. Cast a look on the natural and artificial productions of all the regions of the earth; consider how they have become, one here, another there, articles of necessity for men. How pleasant and how intellectual a task is it to calculate, at any moment, what is most required, and yet is wanting, or hard to find; to procure for each easily and soon what he demands; to lay-in your stock prudently beforehand, and then to enjoy the profit of every pulse in that mighty circulation. This, it appears to me, is what no man that has a head can attend to without pleasure.”

Wilhelm seemed to acquiesce, and Werner continued.

“Do but visit one or two great trading-towns, one or two sea-ports, and see if you can withstand the impression. When you observe how many men are busied, whence so many things have come, and whither they are going, you will feel as if you too could gladly mingle in the business. You will then see the smallest piece of ware in its connexion with the whole mercantile concern; and for that very reason you will reckon nothing paltry, because everything augments the circulation by which you yourself are supported.”

Werner had formed his solid understanding in constant intercourse with Wilhelm; he was thus accustomed to think also of his profession, of his employments, with elevation of soul; and he firmly believed that he did so with more justice than his otherwise more gifted and valued friend, who, as it seemed to him, had placed his dearest hopes, and directed all the force of his mind, upon the most imaginary objects in the world. Many a time he thought this false enthusiasm would infallibly be got the better of, and so excellent a soul be brought back to the right path. So, hoping in the present instance, he continued: “The great ones of the world have taken this earth of ours to themselves; they live in the midst of splendour and superfluity. The smallest nook of the land is already a possession, none may touch it or meddle with it; offices and civic callings bring in little profit; where, then, will you find more honest acquisitions, juster conquests, than those of trade? If the princes of this world hold the rivers, the highways, the havens in their power, and take a heavy tribute from everything that passes through them, may not we embrace with joy the opportunity of levying tax and toll, by our activity, on those commodities which the real or imaginary wants of men have rendered indispensable? I can promise you, if you would rightly apply your poetic view, my goddess might be represented as an invincible, victorious queen, and boldly opposed to yours. It is true, she bears the olive rather than the sword; dagger or chain she knows not; but she, too, gives crowns to her favourites; which, without offence to yours be it said, are of true gold from the furnace and the mine, and glance with genuine pearls, which she brings up from the depths of the ocean, by the hands of her unwearied servants."

This sally somewhat nettled Wilhelm; but he concealed his sentiments, remembering that Werner used to listen with composure to his apostrophes. Besides, he had fairness enough to be pleased at seeing each man think the best of his own peculiar craft; provided only his, of which he was so passionately fond, were likewise left in peace.

“And for you,” exclaimed Werner, “who take so warm an interest in human concerns, what a sight will it be to behold the fortune which accompanies bold undertakings distributed to men before your eyes. What is more spirit-stirring than the aspect of a ship arriving from a lucky voyage, or soon returning with a rich capture? Not alone the relatives, the acquaintances, and those that share with the adventures, but every unconcerned spectator also is excited, when he sees the joy with which the long-imprisoned shipman springs on land before his keel has wholly reached it, feeling that he is free once more, and now can trust what he has rescued from the false sea to the firm and faithful earth. It is not, my friend, in figures of arithmetic alone that gain presents itself before us; fortune is the goddess of breathing men; to feel her favours truly, we must live and be men who toil with their living minds and bodies, and enjoy with them also.”
This is of course the passage where Goethe (actually, Werner, as we cannot attribute the beliefs of a character to their author) famously proclaims that one of the greatest inventions of mankind to be double entry bookkeeping. Don Lavoie would seem to agree:
The practice of accounting, that is, of the calculation of profit/loss accounts in terms of money outlays and receipts, both ex ante and ex post, has enabled human beings to orient their productive activities to one another in such a manner as to permit social production as a whole to be carried on with a very high degree of complexity." ("Economic Chaos or Spontaneous Order? Implications For Political Economy of the New View of Science," Cato Journal, Vol. 8, No. 3, Winter 1989, pg. 630-1)
We see, though, that this is a passage that discusses the poet's relationship to commerce, and Werner chastises Wilhelm for his negative portrayal of commerce, arguing that, instead, the poets ought to view such a vital activity as truly beautiful. Werner points out that commerce is in fact orderly (compare this to the socialist complaint about it being disorderly, to which Lavoie was in part giving answer with his comments on accounting, which is similar to the point made by Werner), that commerce brings out the best in men, makes them benefit themselves and others, and bring forth the earth's riches while bringing the world peace (as suggested by the goddess of commerce being described as having an olive branch rather than a sword). In the end, Werner argues, commerce is not about arithmetic, but about human gains.

How is all of this brought about? By accounting -- by double entry bookkeeping. This allows each business to order itself, and thus to bring about a spontaneous economic order. Of course, this cannot be done without money prices. As the Austrian economists argued, economic calculation cannot be accomplished without money prices. This is accomplished through "the system of book-keeping by double entry! It is among the finest inventions of the human mind; every prudent master of a house should introduce it into his economy." Doing so would no doubt help us all order our own economies quite a bit better than the slap-dash way we do it. Goethe recognized, through his character Werner, that this one development, which did in fact take place at the foundation of modern capitalism, has allowed us to order our lives, create wealth for everyone, and materially improve everyone's lives. Without money prices, one cannot have double entry bookkeeping, and without double entry bookkeeping, we could not have economic order.

It seems apparent Wilhelm is not quite convinced, but he does at least have a certain decency about him: "he had fairness enough to be pleased at seeing each man think the best of his own peculiar craft; provided only his, of which he was so passionately fond, were likewise left in peace." A very libertarian thought.

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