Economics and Chrematistics

How Ethics and Approaches to Economic Management Influence Crises.

To better understand the underlying causes of modern economic crises, let’s turn to Aristotle, the renowned Greek philosopher of the 4th century BC. Aristotle defined two entities in the socioeconomic relationships of citizens in society.

One entity is economics, which is a system whose purpose is to satisfy the essential needs of people (communities) engaged in various forms of material production through the exchange (barter) of these assets based on their equivalence in terms of labor expended, quality (craftsmanship) of manufacture, durability of the product, and so on. Money became a kind of universal commodity equivalent to facilitate such exchange. According to Aristotle, such an instrument as money was necessary precisely and exclusively to ensure the convenience of exchange.

The second entity, however, is chrematistics (from the Greek χρηματα — money), which is fundamentally different from economics. This is the art of accumulating wealth, or, in modern parlance, “making money.” The main forms of chrimatics are usury and various types of speculation.

Aristotle gave an example of speculative activity: “A certain Thales, foreseeing a rich olive harvest based on astronomical data, even before winter had passed, distributed a small sum of money he had as a deposit to all the owners of oil mills in Miletus and Chios, contracting them cheaply, since there was no one to compete with him. When the olive harvest came and many people needed oil mills at once, they were forced to buy time from him for their own needs on terms he preferred, and Thales collected a large sum of money.” Little has changed today, except that the scale and the main speculation have shifted to the financial sector.

Aristotle called usury—the lending of money at interest—”the most perverse form of enrichment,” since it “derives its profit from the money itself, not from the things for which money was introduced.” Money that generates money for the purpose of achieving wealth, rather than satisfying people’s real needs, leads to the corruption of society, destroys the community, and leads to chaos.

Aristotle directly contrasted chrematistics with economics, as the former does not follow nature, but is aimed at the pure exploitation of human base instincts. Aristotle saw the propensity of a certain segment of people to accumulate wealth as a real threat to the existence of society itself and warned that these two entities were so close that chrematistics could be mistaken for economics. In fact, this is precisely what happened. Few people mention chrematistics today, yet more than 90% of so-called economics is, at its core, the banal activity of accumulating wealth and “making money.”

“Economics” and “Chrematistics” have different ethics, different moral and ethical values. In the former, it is creative activity for the benefit of society (community) based on the shared use of available resources (including natural ones) based on the principles of reasonable sufficiency in meeting the needs of the members of this society (community).

In the latter, however, this “reasonableness” and “sufficiency” are completely consumed by the endless accumulation of wealth for some at the expense of others. And this wealth is achieved through an alternative ethic, where morality has no place and “all means are good” to achieve the goal, even to the point of committing any crime. It is precisely the ethics of chrematistics that leads to imbalances in society.

With this approach, socioeconomic crises are inevitable, as humanity observes with enviable regularity. As is known, any system, including an economic one, strives for a state of equilibrium (in sum, to mathematical zero), but if one of its elements (“business”) constantly wants to be in a state of profit (+1), then this is achieved exclusively at the expense of other elements of this system: “households” and “the state” (-1).