The merchant of Avon: the best guide to 21st-century economics is a 16th-century poet.

• Author: Turner, Frederick

The core questions of economics are what value is and how it is created. These are mysterious questions, not accessible to the mathematical methods used by the academic discipline of economics, which deals admirably with how "utility" - the technical term for value - is exchanged, stored, communicated, regulated, and gauged, but which remains prudently silent on the nature and origin of utility itself. One of the functions of poets is to go forward, living off the land as it were, when the expeditions of professional scholars and scientists must turn back, having exhausted their supplies of fact and tested theory.

In the realm of value the insights of poets can be exceptionally useful, for poets spend their lives making value out of combinations of words that have no economic worth in themselves, being common property, infinitely reproducible, and devoid of rarity value. William Shakespeare, for instance, became one of the richest commoners in England - a media tycoon of his day - essentially by combining words in such a way as to persuade people to pay good money for them. Poets must be always exploring the subtle chemistry of the meaning of words, and the old and new ways in which human beings come to desire and cherish that meaning.

Where poets blaze the trail, economists and business people can follow, usually without knowing who made the path in the first place. In this essay I want to make a large claim, and one that may appear fantastic to those who make a sober living: that Shakespeare can be a wise guide to 21st-century economics.

Shakespeare was a key figure, perhaps the key figure, in creating that Renaissance system of meanings, values, and implicit rules which eventually gave rise to the modern world market, and which still underpins it. Using Shakespeare's dramatic and poetic definitions of such words as bond, trust, good, commerce, market, save, value, means, redeem, dear, interest, honor, company, worth, thrift, use, will, partner, deed, fair, owe, ought, treasure, risk, royalty, fortune, venture, grace, and so on, English-speaking merchants transformed the planet and made the language of a small, cold, wet island the lingua franca of the world.

Shakespeare made us see the business company as like a theater company, a troupe of actors, whose interactions generate the plot of the play and the interest that draws the paying audience; he taught us practically how life with others is not necessarily a zero-sum game but an arena where all may profit and competition increases the payoffs for everyone. By now many other cultures and languages have absorbed those rich and peculiar notions of trade, reciprocity, the deal, and so on, and the practices of democratic politics that arise out of them. Shakespeare's economic language has survived the huge challenges of socialism, communism, fascism, and the other statisms that arose in reaction against its new vision of things.

But its positive contributions have not yet ceased, I believe. Until now they have been largely unconscious and unacknowledged, a habit of thought and feeling absorbed with the 200 or 300 Shakespearean phrases that most English speakers know but do not know they know. For Shakespeare to make his full contribution to the next century, his wisdom must be analyzed more explicitly. This has not happened so far in the area of economics because his critics and interpreters, excellent though they often were, had a notable blind spot as far as money was concerned. Until the 20th century Shakespeare critics were gentlemen scholars who aspired to the old values and lifestyle of the aristocracy, with its contempt for trade and its superiority to money matters; and in the 20th century their successors were university intellectuals whose political loyalties were usually to the left of the general population, and who, as liberals, socialists, or Marxists, likewise despised the market and its values. Thus much of Shakespeare's business wisdom has been passed over in embarrassed silence, and some major misinterpretations have crept into our understanding.

For instance, the gentlemanly and leftist dislike of usury - best defined as interest at a rate higher than one would like to pay - led to a deep and unnecessary discomfort with The Merchant of Venice. The Jewish moneylending capitalist, Shylock, was particularly difficult. The critics' values told them to despise him, as do some of the bigoted Christians of Venice in the play. Yet as good liberals, they also hated ethnic stereotypes and prejudice. They were thus forced to deny the fact that Jews of Shakespeare's time did tend to be strongly represented - and for good reason - in banking, jewelry, commodities, currency exchange, and related money industries, and to excuse what they took to be Shakespeare's anti-Semitism on the grounds that it was not as bad as that of his contemporaries.

What they ignored is that Shakespeare did not disapprove, as his critics did, of the taking of interest. In fact, he evidently regarded it as the foundation of Venetian prosperity, and he has Antonio, one of his most positive characters, invest money at interest to support the newlyweds Lorenzo and Jessica, one of whom is Jewish. Most striking of all, Shylock is punished at the end for not taking the exorbitant interest he has been offered on his bond, but insisting on the worthless pledge of the pound of flesh. In other words, Shakespeare's anti-business critics are completely blind to the implication that Shakespeare is the very opposite of the economic anti-Semite, that he regards the spread of "use" or interest as a creative and valuable, if not very exalted, form of real progress. Shakespeare himself was a large investor in bonds and other interest-bearing securities. His famous words "neither a borrower nor a lender be" are put in the mouth of the "wretched, rash, intruding fool" Polonius, the time-pleasing state bureaucrat in Hamlet who so richly deserves his rather nasty fate, stabbed while spying on a private conversation.

Shakespeare's core insight is that human-created value is not essentially different from natural value. The value that is added by manufacture, and the reflection of that value in profit, are but a continuation of nature's own process of growth and development. Consider the following exchange between the shepherdess Perdita in The Winter's Tale and the disguised king, Polixenes.

Announces Perdita: "...the fairest flowers o' th' season/Are our carnations and streaked gillyvors/Which some call Nature's bastards; of that kind/Our rustic garden's barren; and I care not/To get slips of them." She refuses to grow the gaudier summer flowers, hinting that there is something improper in...