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The Third Metric Brings Neoclassical Economics Back to Basics

06/05/2013 05:00 pm ET | Updated Aug 05, 2013

"Greed is good" -- a maxim that is boldly branded on the forehead of many neoclassical economists. Consumption and production are regarded as the sole ends of life. Sacrifice, self-reflection and all that is sacred is looked upon with disdain. So, it is indeed noble that Arianna Huffington has launched an initiative called The Third Metric, which seeks to define success beyond the narrow parameters of wealth and power so that it encompasses virtues such as wisdom. Yet, The Third Metric merely restores what once was rather than create something entirely new, as it is underpinned by historically considerable philosophical and theological reasoning.

In his Confessions, St. Augustine remarked: "Our hearts are restless till they find rest in You." St. Augustine was referring to God, and up until approximately around the Keynesian revolution, human activity was seen by philosophers and many economists not as an end in itself, but as a way of uniting ourselves to our final end, that being God Himself.

This approach dates all the way back to Aristotle -- who, coincidentally, also coined the term "economics" -- and his idea of eudemonia. Eudemonia is a Greek word that roughly translates into "human flourishing," and it is interpreted to mean a life that reflects virtue in accordance with reason. Virtue here includes the characteristics that Huffington wants success to encompass, such as well-being, wisdom, wonder, empathy and the ability to give back. Yet virtue here shouldn't be interpreted in an entirely sentimental sense as may be implied, but should indeed include other facets of life such as talent, productivity and intelligence. This is in conformity with what the Ancient Greek philosophers believed, and they used the term arête to conceptualize this. The problem, however, is that modern society has taken a highly lopsided approach to success, interpreting success through the temporal lens of wealth and power rather than the more balanced view that considers success as wealth and power along with other vital characteristics that help a person's emotional and spiritual development.

Although many people will agree that human beings should always aim to attain the highest good, there is certainly contention as to what exactly that good entails. Aristotle noted this contention, and St. Thomas Aquinas put it best in his Summa Theologica when he remarked that although Man's perfect happiness resides in God, there are many who believe that Man's perfect happiness "consists in riches, and others in pleasures, and others in something else."

Yet, is working till you drop living the "good life"? Is continually acquiescing power conducive to human flourishing? St. Thomas Aquinas certainly disagreed. On the issue of wealth, he argued that Man's perfect happiness could not reside in wealth or money because it is evidently not one's last end. If one is hungry, for example, then wealth is merely sought to satisfy that hunger. It is not an end in itself, although many people treat it as such. Neither is money the source of Man's perfect happiness, as Aquinas remarks that it is sought only for something else. What we are after is our last end, our happiness, and it can neither be increased nor lost because it is perfect. Aquinas argued that the more we grasp God, the more we despise temporal things, for we realize their insufficiency to give us the happiness that we innately desire. Alexander the Great is often portrayed in literature and films as weeping when discovering that upon conquering what he saw to be the whole world, he found that there were no more worlds to conquer. So we see that the bankrupt philosophical underpinnings of neoclassical economics that contends that one can be infinitely happy by acquiescing more power and wealth is found to be at odds with what human beings should aspire to be.

Paradoxically, complementing GDP and real GDP per capita with The Third Metric would actually help the economy do better. As Huffington notes, stress costs U.S. businesses $300 billion annually. Imagine how much lost productivity would be regained if businesses invested in their employees? This statistic shouldn't be too surprising in light of the economic doctrine the law of diminishing returns, that is to say that you get "less bang for your buck" as time progresses all other things being constant. But I think it would also promote macroeconomic stability in addition to regaining productivity because it tears asunder the myth that people need to continually buy things to make them happy. If there was anything that caused the subprime mortgage crisis, it was individuals overleveraging themselves to get that fancy car or bigger house and large corporations overextending themselves in acquiring other firms (as in the case of the Royal Bank of Scotland fiasco).

What we therefore need is a thorough shaking up of neoclassical economics as it is taught now, and The Third Metric helps us do just that. We need to return to the views of our classical forebears who saw a free economy as a way individuals could continually perfect themselves, using the skills given to them by God to shape the world around them for the better. Current discourse has given greater prominence to concepts such as "happiness economics," the Easterlin paradox and the limitations of GDP, and it is safe to say that it has finally vindicated the wisdom of old, the wisdom of Aristotle and St. Thomas Aquinas.

This post is part of a series produced by The Huffington Post in conjunction with our women's conference, "The Third Metric: Redefining Success Beyond Money & Power" which will take place in New York on June 6, 2013. To read all of the posts in the series and learn more about the conference, click here. Join the conversation on Twitter #ThirdMetric.