C.S. Lewis warned us to be alert to the law of “first and second things” in an essay of the same name. We must continually ask ourselves “What is the first thing?” to avoid seeking a derivative good by mistake.

The law seems paradoxical, but is quite commonly observed in operation: “Every preference of a small good to a great, or a partial good to a total good,” wrote Lewis, “involves the loss of the small or partial good for which the sacrifice was made.” He gave a couple of instructive examples: “The woman who makes a dog the centre of her life loses, in the end, not only her human usefulness and dignity but even the proper pleasure of dog-keeping. The man who makes alcohol his chief good loses not only his job but his palate and all power of enjoying the earlier (and only pleasurable) levels of intoxication.”

In the current economic and financial crisis, it’s tempting to ask whether the law applies. It doesn’t–because our mistake, our misplaced concreteness, was much worse than valuing and pursuing a secondary good over a primary good. In the pursuit of mere money, and the mistaken belief that money earns the right to make more money, we have not been pursuing a first or a second thing. We have been pursuing no thing.

Money isn’t real, every first-year economics student learns. Money is a social construction, a medium of exchange standing in for real goods and real services. (The difference between goods and services? Goods are things that hurt if you drop them on your foot). But the freshman lesson is soon forgotten, and money is reified. We start to believe that it is a real thing worth pursuing and that moving it around is real work (forgetting the first-year physics lesson that real work involves moving real goods).

Much of this year’s financial crisis involves fictitious activity mistaken for reality, even when the books aren’t being cooked. Commentator Kevin Phillips has described in several recent books the whirlwind of unproductive activities generated in the final days of empires as the rise of the FIRE sector of the economy–Finance, Insurance, and Real Estate. Historically, Phillips argues, when the FIRE sector comes to dominate economic activity, when a nation “lets itself luxuriate in finance at the expense of harvesting, manufacturing, or transporting things,” it’s a sign of the end of an empire, as was true for the Romans, the Dutch, and the British before the Americans.

Phillips, along with other populists, decries the loss of manufacturing jobs, and that’s where he’s on strongest ground. A strong nation has an economy that grows things, makes things, and moves them around, and it uses energy to do it. They can use that energy to build an empire, and that empire will collapse once the real work is outsourced. [The Roman Empire was based on food energy, the Dutch on water, the British on coal, and the American on oil, in Phillips’ history lesson.]

Some futurists believe that a shift to a “service economy” will usher in an era of “dematerialization”–a time when natural resources are no longer necessary. I’d recommend they try to feed their families on Google for a week, as an instructive experiment. We can’t eat the 98% of GDP that is not agriculture. A pure service economy is a fiction, but it’s one you might begin to believe if your mental world is whirling rapidly around the FIRE sector. Real estate trading is a necessary activity, but economically speaking it is strictly unproductive. Real estate transactions are mere transfers of wealth.

Escalating land prices may make an individual owner feel wealthy, but it’s a fallacy of composition to believe they represent growth in real wealth for the economy as a whole, because those individual wealth gains are only ever realized if someone else is willing to cough up some dough. Real wealth is created by putting useful buildings on land, or by contributing to soil fertility. Merely holding the keys to a parcel while its price goes up is economically unproductive speculation.

Similarly, from an economic perspective, finance and insurance are–technically–unproductive activities. They are necessary to move wealth around, make mutually-beneficial trades possible, grease the wheels of commerce, and allow us to feel more secure by contracting to cover each others’ losses, but they don’t increase any real wealth .

Allowing the FIRE sector to dominate our economy is as corrupt as any Bernie Madoff pyramid scheme.
The love of money is the root of all evil because it is illusory–it’s not even the love of second things. The love of money, we should be clear, is the love of no thing.

Real economic wealth is now, and always has been, material. It may sound unspiritual to praise the material world, but a good, redemptive attention to the material world is a partial antidote our diseased infatuation with finance. Because the material world is a real thing, rather than no thing. And because it is made by God, it is a good thing–a second thing, a thing that can be corrupted, laid to waste, and misused like any second thing, but a good thing nonetheless.

Taking the material world seriously is a solution not just to environmental problems, but to economic problems as well. More on that in the next column!

A version of this article was first published in the May/June 2009 edition of PRISM magazine. PDF available.