Library Communiveristy Open Learning Course

The Economy and Us: week 1Overview

A brief history of economic thought … and some influential figures

Some useful definitions; economics in its context.

Debunking: competition, efficiency and economic growth

Well-being and human needs – your chance to write the manifesto!

Adam Smith: 1723- 1790

“By pursuing his [the individual’s] own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.”

An Enquiry into the Nature and Causes of the Wealth of Nations, 1776

John Maynard Keynes: 1883 - 1946

“Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.”

The General Theory of Employment, Interest and Money, 1935

John Kenneth Galbraith: 1908 - 2006

“ … the hallmark of the conventional wisdom is acceptability. … In some measure, the articulation of the conventional wisdom is a religious rite. It is an act of affirmation like reading aloud from the Scriptures or going to church. The business executive listening to a luncheon address on the virtues of free enterprise is already persuaded, and so are his fellow listeners, and all are secure in their convictions.”

The Affluent Society, 1998

E F Schumacher: 1911- 1977

“An attitude to life which seeks fulfillment in the single-minded pursuit of wealth - in short, materialism - does not fit into this world, because it contains within itself no limiting principle, while the environment in which it is placed is strictly limited.”

Small is Beautiful, 1973

Milton Friedman: 1912-2006

“There is one and only one social responsibility of business–to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud."

Capitalism and Freedom, 1962

Julie Nelson

Here's the basic argument: •The idea that economic systems are inanimate machines operating according to amoral laws is a belief, not a fact. •This belief has harmful effects—for life on the planet, for human society, and for you in particular. •Understanding that economies are vital, living, human-made, and shaped by our ethical choices can help to improve our decisions—both individually and as a society.

Economics for Humans, 2006

Manfred Max-Neef: 1932-

“…It is particularly dramatic that the way economics is being taught - not just in the North or South - everywhere, is extremely narrow and limited. … what is being taught is just neo-classical economics …

There is nothing else.”

Some definitions of ‘economics’ I

• Alfred Marshall: “Political Economy or Economics is a study of mankind in the ordinary business of life …” [Principles of Economics, 1890]

• Lionel Robbins: “… economics is the study of how society allocates scarce resources, which have alternative uses”. [Essay on the Nature and Significance of Economic Science, 1935]

Some definitions of ‘economics’ - II

• J M Keynes: “The theory of economics does not furnish a body of settled conclusions immediately applicable to policy. It is a method rather than a doctrine, an apparatus of the mind, a technique of thinking …”

• Manfred Max-Neef reminds us that Aristotle’s Politics presents oikonomia (the Greek word from which the economics is derived as: ‘the art of living and living well’.

Some words we shall use

• ‘Paradigm’: The ‘framework’ through which policy is made and success is judged

• The ‘neo-classical’ economic paradigm:– In a few words,

• individualistic consumers, seeking to ‘maximise utility’ in a ‘perfectly competitive market’.

• Economic growth is the ‘engine’, and is assumed, without question, to be a ‘good thing’.

• Assumption that ‘private’ consumption is preferable to ‘public spending’.

Economy, society and the environment: the conventional view

Economy, society and the environment: a better view?

Debunking: ‘competition’

• A theoretician’s paradise … and a way to impress your listeners and readers?– ‘Perfect competition’: most textbooks spend

around 30 (or more) pages presenting this and its consequences

BUT– It’s a bit of an empty box in real life!

For the ‘benefits’ to be achieved …

• There are some conditions which must prevail– All participants - producers and consumers – must have

equal and adequate access to information about prices and quality in ‘the market

– There must be no inequality of market power among and between buyers and sellers.

– There must be no ‘externalities’ – costs which are borne by others who are not ‘party’ to the transaction

• ALL – and others – are required!

Some adverse outcomes of ‘competition’

• The ‘race to the bottom’– ‘competition’ – in the present economy – can

lead to widespread distress, poor quality, ill-treatment of people and animals

• Duplication of services– National services – such as post – can be

degraded by ‘fake’ competition (‘cherry picking’)

Debunking: ‘efficiency’

• Sounds good – but from whose point of view?• Conventional wisdom dodges the hard

questions by using monetary costs as the measuring rod. – It might – from a particular point of view – be

‘efficient’ for a manufacturer to move production to a country where ‘labour costs’ are lower.

– But externalities appear: the cost of the decision falls on the community now deprived of an important component of economic activity.

Economic growth – something more to debunk??

Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.

The Economics of the Coming Spaceship Earth, 1966

Kenneth E Boulding, 1910 - 1993

Here’s a few reasons to question growth as an end in itself

• Desirable and undesirable ‘outputs’• The distribution of benefits is uncertain• Our needs are more than measured economic

growth delivers• Resource depletion• Waste• Lifestyle imbalance• Greenhouse gas emissions• Personal debt

Caution!!!

•The terms and ideas have some uses in the ‘real world’. •They can be a part of the means to deliver some desirable outcomes – but we have to clearer what these outcomes should be•Effort is needed to identify – all outcomes (desirable and undesirable) – an ethical standpoint.

So … what should the main objective of economic policy be?

Meeting human needs while respecting environmental limits:• The ‘well-being’ economy?• The ‘green’ economy?• …?

Your chance … to have your say!!

Back to Max-Neef …Fundamental human needs