19. The Satisfaction of Economic Demands
Every economic function is motivated by psychological factors. While we may focus on the motions of bodies, the bodies are moved by the mind, and this is the origin of all action, including work. As such identifying the best man for a task is in effect identifying the best mind for that task and that, in aggregate, the best man for a job or an occupation is the one who is most mentally suited for it. Is should therefore be evident that economic success requires a connection between work and mind.
Munsterberg suggests that leisure activities do no constitute anything of economic value. A sportsman who climbs a mountain is performing intense physical energy, but that this is not an economic activity because mountain climbing "does not satisfy economic desires." (EN: I strongly disagree with this - economics is not all about exchanges, but the satisfaction of human desire, and money isn't always a means to that. Consider that the sportsman might have engaged in a different activity, in which money was exchanged, to satisfy the desire for adventure and it would have qualified as "economic" - the decision to do something for yourself rather than pay someone else to do it is still an economic decision, a sort of "opportunity cost" in which the actor benefits by not spending money and the market does not benefit from the money he would have spent. Or to use another example, the leisure activity of fishing is an economic alternative to buying a fish for dinner and going to a play to gain a few hours' leisure. The sporting fisherman's leisure activity satisfies his desire for food and entertainment, and he may even be aware that he his doing this instead of spending money to achieve the same benefits to himself.)
Munsterberg asserts that "so far not the slightest effort" has been made in investigating economic behavior. There is a large volume of literature on theories of economic value and investigations of supply and demand in the marketplace, but they have not investigated the psychological motives that drive consumption - that is, it is acknowledged that people consume and it has been measured what they consume - but no one seems to consider why in any systematic way.
He also suggests that economists do not understand psychology. In their theories "whenever the philosophers or political economists discuss the problems of value and of the satisfaction of human demands, they are using psychological terms, but the whole meaning which they attach to these terms, feeling, emotion, will, desire, pleasure, displeasure, joy, and pain, is essentially different from that which controls the causal explanations of scientific psychology."
And on the other side, psychologists are entirely esoteric. The psychologist studies human beings "as a naturalist studies the chemical elements" - with a cold detachment that leads him to make observations and generalizations, but in a disconnected manner that fails to consider their context. The consider various qualities of the mental realm and their consequences, and take delight in exploring the dysfunctional mind, but they do not glean their meaning and how the normal mind operates in a functional manner in the humdrum activities of ordinary everyday life.
He next drags historians to the whipping post: they have traditionally focused on the major events that have shaped the history of all humanity, but have ignored the daily life of man. They have done so because the daily life of man seems unimportant. In that way history offers us much guidance for how we ought to conduct our affairs if ever we are a head of state in a time of war, but very little guidance for the non-momentous occasions of an unimportant life.
Many academics are the same way, and it is to their detriment and that of their students that little education is provided that would be useful to a person in the conduct of their daily lives. It may seem inglorious and beneath the dignity of a scholar to ponder the vulgar and the common, but it would be helpful it they would.
(EN: I feel compelled to interject that, as a consequence, everyday life has been abandoned to religion and pseudo-psychologists, who are at best men who mean well but don't have the expertise to avoid doing harm, or who are at worst perpetrating a scam that is harmful to others for their own financial benefit.)
Back to economics: there is a valid method of scientifically examining the human mind, and economists have "a vague feeling" that it is important to their field of study. The economic behavior of mankind is at heart about human behavior, and understanding the motives and methods that drive human behavior is necessary to having valid understanding of economics. However, to this end, economists have been entirely superficial, more interested in the behavior than its motives, and have not made very good use of psychology.
Moreover, the ball is in the court of the psychologists: the discoveries of science cannot be used before they are discovered. They must find the right starting point and prescribe the right methods to practitioners, that they may be put to use. He mentions a few studies that might constitute a beginning: the ability to sense the difference in intensity of light, and the way people feel about financial risks and losses, but this has merely scratched the surface.
In sum, there is much more work to be done by psychologists to explore phenomena that have the potential to impact economic life, and much work for the economists in translating these discoveries and finding a way to put them to practical use.