Economics

An Economics Book Whose Time Has Finally Come

Image Credit: Joyce Brand

In the spring of 1961, the celebrated engineer, philosopher, and social thinker Spencer Heath gave a series of talks at Chapman College in California. At 84 years old, he had lived an extraordinary life with significant accomplishments in widely varied fields. The college president understood the importance of Heath’s insights and had the speeches, including the question-and-answer session after each one, professionally recorded on the best sound equipment available at the time.

Heath’s grandson, Spencer Heath MacCallum, had not been able to attend the lectures but transcribed all the tapes in preparation for a book. However, Heath died in 1963 without writing the book, and MacCallum went on to a career as a social anthropologist and entrepreneur with varied accomplishments of his own.

But Spencer MacCallum never forgot his lifelong desire to publicize his grandfather’s ideas. He had recorded and transcribed many conversations with Heath and preserved all his papers. When the technology became available in his later years, MacCallum returned to the speeches and expanded the Q&A’s with Heath’s own words to allow a complete expression of Heath’s unique insights into both economics and spirituality.

More than two years after MacCallum’s death, Spencer Heath’s long-awaited book Economics and the Spiritual Life of Free Men is now available on Amazon. Heath’s thought, more relevant than ever, is accessible to everyone.

Spencer Heath’s Innovative Ideas

Spencer Heath always considered himself a Liberal, what we now call a Classical Liberal, based on the Enlightenment ideals of reason, individual liberty, and religious tolerance. Even though he saw representative democracy as a necessary step up from absolute monarchy, he believed that coercive, political government was a pathology that would be replaced eventually with the voluntary, contractual provision of public goods.

“Every political government must raise its revenues precisely as it wages wars, overtly by force and covertly by stratagem — by the force of seizure by taxation and by the stratagem of public debt. Thus in history, no political government endures. Its days are finally numbered by the subsistence that it seizes and the lives it destroys.”

His interpretation of Christianity was based on the concept of a historical Jesus who was a prophetic poet.

“So, I take the parables in the New Testament as allegory; we don’t have to take them literally. The sure way to ruin the sense of anything is to take it literally.”

He saw the value of Christianity in the basic commands of the Golden Rule and Love Thy Neighbor. Love was not a sentiment but the behavior of serving and being served, with no need for creed or dogma. In his view, there was no conflict between the discovered laws of economics and the messages of the New Testament.

“The relation between the Christian religion in its purest and simplest form, and that of what has been built up in modern times as economic science, is like the relation between a physical body and the inspiration of life with which it is animated. It is a transcendent relationship in which mutual love objectified as mutual services by exchange can lift mankind out of its poverties of the flesh and of the spirit and its destructive rulerships and wars into a unity with the divine principle which animates the universal cosmos, causes the stars to sing together and carries all things forward into higher and diviner evolving forms.”

Heath believed that human society was slowly evolving by learning how to align our incentives to increase human flourishing, which meant becoming more creative and, therefore, more godlike.

“Economics in my lifetime has progressed from the ‘dismal’ to the pedestrian. It is almost drably utilitarian, has no utopian dream, no ravishing goals. Beyond its primarily materialistic aspect, we need to comprehend the basic exchange technology of the social organization in its overall aspect as an evolving (or developing) high form of life. In the golden-rule relationship, and none other, its members rise from being pensioners pressing against a diminishing subsistence, into their spiritual nobility of building not mere subsistence and utility but ever more order and beauty in their world.”

While political government creates perverse incentives, entrepreneurial provision of public goods creates well-aligned incentives to increase peace and prosperity.

“Capital that is taken out of the market and employed politically in public works yields no revenue and thus perishes. Political public works shrink mankind. Proprietary public works are self-developing and self-evolving.”

The administration of public services is best done by people who profit from the well-being of their customers. In contrast, asking inexperienced customers to do the work of making administrative decisions through voting for representatives detracts from the most valuable tasks the customers could do.

“It is certainly not my idea that the tenants or customers of any enterprise should be excluded from any ‘say’ in its direction and administration. I am sure there are no enlightened owners who do not welcome and earnestly seek every expression of the sentiments of their patrons as to how the enterprise can be conducted most valuably to them. This of course should not impose on the patrons any responsibility, nor would it be reasonable to expect them to take time out from their own respective businesses and affairs in order to give administrative services to any public or private enterprise by which they are being served.”

These ideas about the private provision of public goods and the nobility and functionality of service to one’s fellow man for profit are finally being realized in an unexpected location.

Ciudad Morazán: Realization of a Dream

In 2013, the desperately poor country of Honduras passed a law and constitutional amendment to authorize the most advanced semi-autonomous zones in the world, the ZEDEs (Zones for Employment and Economic Development). An Italian businessman who had spent twenty years building a conglomerate in the country saw an opportunity to serve Hondurans further by building a city directly based on the ideas of Spencer Heath and Spencer MacCallum.

He created the ZEDE, Ciudad Morazán, as a city designed to provide Honduran workers with good jobs and a vastly superior quality of life. He knew that Spencer Heath’s vision of a voluntary, contractual city that encouraged entrepreneurship was the best chance for safety and prosperity in Honduras. As a secondary goal, the community could also provide unique benefits to digital nomads from all over the world. As a result, the Honduran families, the digital nomads, and the security guards who protect everyone live together as one community.

Although the ZEDE is subject to the Honduran Constitution, national oversight, and criminal law, it has a great deal of autonomy to build civil and commercial institutions. The city’s owner is responsible for providing most of the public services to the tenants. As a for-profit city, Ciudad Morazán must attract voluntary tenants to survive. Because the relationship between the city and all tenants is contractual, the owner can be forced into third-party arbitration if it doesn’t fulfill its promises, unlike regular municipalities.

Ciudad Morazán provides the public services of infrastructure, security, and conflict resolution under competitive, free-market discipline. For example, there are no zoning laws, so the city can make better, more flexible use of the land to please its customers, the tenants. It builds warehouses, factories, offices, homes, roads, sidewalks, parks, public buildings, and everything needed for a full-service city.

Because of competitive pressure, Ciudad Morazán has had to find innovative ways to provide services like sturdy housing, water treatment, drainage, and waste management at lower prices than in surrounding areas.

Security is an essential service due to the high crime rate in the region. Although there is a wall around the city, the crucial difference is that the ZEDE law allows a private police force that keeps both criminals and corrupt police from preying on the residents. The private police are responsible for protecting the tenants’ life, liberty, and property, but they have no special privileges or immunities.

Unlike other cities, which must accept anyone who wants to live or do business there, including criminals, Ciudad Morazán selects the residents through an application and vetting process. Moreover, since the relationship is contractual, the tenants agree to the rules and regulations before they decide to apply. This helps enforcement of the relatively few and commonsense rules.

The ZEDE encourages entrepreneurship with the ease of starting small businesses. In contrast to the complex and expensive process of creating a small business in Honduras, registering a new business in Ciudad Morazán only takes 24 hours and costs less than $100. Potential enterprises don’t have to worry about high costs, burdensome regulations, or dealing with corrupt bureaucrats. They are also protected from the criminal gangs that extort business owners in the surrounding area.

Another privilege of a ZEDE is to regulate the use of currency in its jurisdiction. In line with its commitment to the freedom of its tenants, Ciudad Morazán leaves the issue of currency unregulated so that any two parties can use whatever money they prefer for their transactions. This means that alternative currencies like cryptocurrencies can be used by willing traders but cannot be mandated by legal tender laws.

All these innovations and differences between Ciudad Morazán and other cities are inspired by the ideas of Spencer Heath and Spencer MacCallum, who built on his grandfather’s vision.

Conclusion

Before 2020, small numbers of people worldwide were working on creating and promoting special jurisdictions that increased human flourishing. The success of cities like Hong Kong, Singapore, Shenzhen, and Dubai had shown how economic freedom could create immense prosperity. Yet there needed to be more interest in experimenting with different systems of governance that could take those gains even further.

The overreach of governments worldwide during the pandemic has awakened increasing numbers of people to the dangers of coercive, political governments using crises to expand their power. As the harms of government responses to Covid-19 have become more evident and attitudes have become more polarized, more people are looking for better ways to live together in peace.

As the free cities movement to create small jurisdictions with better rules for peace and prosperity is growing, there is a mounting need for the ideas of thinkers like Spencer Heath. The reconciliation of economics, spirituality, and freedom has never been more critical.

The post An Economics Book Whose Time Has Finally Come was first published by the Foundation for Economic Education, and is republished here with permission. Please support their efforts.

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