Redefining Economics

Submitted to the Nottingham Economic Review

The underlying assumption that economic growth is necessarily good is so deeply entrenched in the dominant discourse that it rarely, if ever, is challenged. The logical explanation is that economic growth, measured in terms of percentage increase in the gross domestic product of nations, entails higher standards of living for all and almost always leads to social prosperity and material welfare. This again follows from the belief that more income buys more goods and services, and that is better for a consumer and subsequently, better for the economy. There is a shocking disregard of the consequences of growth to the environment and repercussions for local communities in the entire modern discourse.

A standard economic textbook takes words such as growth, consumption, globalization and markets at face value and defines them always in a positive light. This process of consistent socialization of modern values has proven to be a very palatable formula. It is hardly surprising then that students almost never question why consuming more goods is a sign of their social and material success. With such a dogmatic definition of growth at their disposal, it is nearly impossible to find economists who are not researching for ways to achieve growth. All of development economics is peppered with models, assumptions and conclusions that spell out ways to achieve more and more growth.

But what does growth mean in the post-modern context? We’re living in a world today where environmental collapse is not an impossibility, where human constructed paradigms of life are being continuously challenged and where it is slowly dawning upon us that we may have wreaked havoc upon nature with our selfish plundering. The more we expand our communities and increase our scales of production, the more we get out of touch with nature. Our factories are run with the objective of producing more, our stores are in business with the objective of selling more and more and more people wake up in the morning every day with the objective of making more money to be able to spend more in order to be able to consume more. More, more, more! Our desire for production and consumption has become so reckless and unrestrained that many have never contemplated how this could be affecting our lives, our societies and the environment.

The Story of Stuff is a 20 minute animated presentation by Annie Leonard available on the internet that takes a look at aspects of production and consumption that economists take for granted, namely extraction, distribution, use and disposal of goods. Annie refers to it as a linear system and points out that “we cannot live in a linear system in a finite planet indefinitely”. In the past three decades alone, one-thirds of our natural resources have been used up. It is interesting to observe that people cite developed economies such as UK and USA as examples of why growth is good and how increased incomes have led to improved standards of living. What we don’t realize is that if everybody in the world consumed at the levels of USA we will need 3 to 4 more planets. Economics treats the production and consumption cycle as grossly linear; one ending in disposal or waste. Goods and services are manufactured with obsolescence in mind. Is it surprising that the concept of waste is uniquely human? There is no other species in the world that produces waste that is not used by another organism productively.

Modern economists have treated the subject as a physical science rather than a social science by not studying it in the context of other disciplines. Economics has been stripped off its human side and measures the world by artificial concepts such as GDP and consumer utility. The contemporary economics discourse misunderstands the world in a way that is not only unrealistic but also dangerous.

Thankfully there have been some people who recognize the folly of our ways and call for urgent attention to the subject. In June of 2000, a group of economics students from Sorbonne University in France campaigned against the neoclassical version of economics being taught and practised today. Their petition labelled economics as becoming “highly dogmatic, obsessed with imaginary worlds, and treating mathematical formalization and logic as ends in themselves”. The alternative they sought was a discipline that focused less on mathematical models and more on combined learning with other disciplines such as ethics, feminism, and ecology. The “invisible hand”, they claimed, was not really doing a good job of allocating scarce resources efficiently but worked to deplete resources such as oil and coal rapidly. For instance, feminists argue against the validity of GDP as a measure of prosperity when it doesn’t take into account invisible labour or unpaid work done by millions of women in households in rural areas everywhere.

Some critics of neoclassical economics argue against the notion of a rational consumer making decisions based on pure rationality. They say that this theoretical self-interested everyman is a gross misrepresentation of human nature which is more complicated when it comes to ideas such as philanthropy or impulsivity. Drawing on the earlier comment on ethics in economics, some post-autistic economists formally incorporate moral values in preferences affecting utility or welfare and analogize norms of society to budget constraints because norms also impose limits on behaviour. Historically in the Western governments, by aligning themselves with such schools of thought that promoted free markets and trade liberalization, policies were implemented that have created wider gaps between the rich and poor countries. International organizations such as the World Bank or the IMF have served as purveyors of these misleading paradigms.

Herman Daly is one such economist who has been ostracized from his academic fraternity because he doesn’t “worship at the altar of unlimited growth”. He believes that one of the main problems with economists today is that “they think that the only way to solve environmental problems is to get richer and don’t consider for a minute that growth may cost more than it’s worth.” Referring to John Stuart Mill’s steady-state model he champions a steady-state economy where production and consumption are linked with the ecosystem’s capacity to accommodate humans without falling into peril itself.

There are many examples of such economists who are calling for a shift in the paradigm by looking at alternative ways to study and practice economics. By redefining economics to address social and environmental costs of production and consumption, these mavericks may steer the discipline towards a more realistic and socially just direction.