The Economics of Betterness

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Today I’d like to introduce one of the many inroads being made into discussions about economics done differently - specifically, economics which focuses the well-being of human beings, as opposed to the maximization of industrial output.  Umair Haque is one of a number of people contributing to a definition of economy which places the promotion of human well-being at its centre; an economics of better, as opposed to an economics of more.  That’s what consumer economy means – people buying stuff.  The point is the stuff, whether or not it makes your life better or happier; but maybe making lives better and happier should be the point instead.  

  

 For centuries we’ve equated more with better, first as simply an economic principle and then as a general cultural philosophy driven by that economic principle.  And for a while, that was useful, because up to a point, more certainly does mean better.  If you’re a woman living on a dollar a day or less and watching your children die of starvation or enter into prostitution, as millions of women around the world are, then more money does mean a better life.  But once those basic needs are met – secure food, clothing, shelter, and I’m going to add the presence of some family or community or social network around you to that list of basic needs – then more money does not mean better, it just means more. It’s called the Easterlin Paradox,  that happiness and satisfaction do not necessarily improve as material wealth improves. After that point at which material gains no longer lead to increased satisfaction, the equation of more with better becomes not only inaccurate but potentially harmful, because of what we want more of, where it comes from, and how we are affected by it.

 With all our incredible intelligence and creativity, maybe we should be talking about something other than acquisition, especially acquisition within a system under which we must overlook all manner of costs which are not included in a product’s price or value, but which are very real nonetheless.  Markets themselves are not the problem; believing in their omnipotence is.  Money itself is not the problem; the way we value it and the products and processes to which it is or is not assigned is the problem.  This is not to say that there was never any benefit for anyone to our current system; certainly for two centuries or so it did a lot of good for a lot of mostly white people, while also doing a lot of harm to a lot of mostly brown people.  But now, even for those of us living in countries in which some have benefited significantly from contemporary capitalism, we’ve reached a point of ‘diminishing returns’. For example, the equities market, normally considered a safe investment, is shrinking for the first time over the last decade.  Real asset returns have been shrinking, not rising, for decades; ditto real-dollar wages,  median household income, and basic human satisfaction with both one’s present situation and any hopes for the future (10).  

Haque comes at the problem from a business standpoint, because that’s what he knows, so his suggestions here are business-based as opposed to like legislative or grassroots or community-based.  He believes that at least part of the reason we are all so much less happy, less healthy, less educated, is that the economy is measured  with what he calls the industrial age paradigm. Apologies to those of you who have taken Econ 101, but the equation a macroeconomist would use now to measure an economy is this: output equals consumption, plus government expenditure, plus investment, plus net exports (Y = C + G + I + NX).  It asks questions only about the maximization of output.  If we were to really measure how well a nation was faring, we would have to design an equation that measured a broad variety of indicators, and a growing number of people are doing exactly that, including Umair Haque: “real human welfare equals natural capital, plus financial capital, plus intellectual capital, plus human capital, plus social, emotional, and organizational capital” (16).  And I think that the process of defining these alternate forms of capital is an extremely important first step towards valuing things differently.  From a feminist perspective, it is useful and necessary to include unpaid labour, domestic labour, cooking and cleaning, child raising, elderly care, in those expanding definitions of capital as a way to value and measure that work without assigning it market value like hourly wages.

Haque’s suggestion is a form of economic measurement he calls “eudaimonia”, from the Greek for “good life”.  Based on Aristotle’s insistence that the highest good was the goal of human endeavour, eudaimonia measures not the ease of one’s life, but how meaningfully rich and satisfying that life is.  It does not necessarily refer to material wealth, although the sovereignty and security of basic needs is included in that; it refers to wealth of relationships, of emotions and ideas, health, passion, and fulfillment, to a “life that matters because it resonates with meaning, accomplishment, and purpose” (13-14).  All these things can be expressed in economic terms: the wealth of your relationships, for example, is your social capital, which you spend in ways like getting your friends to pick you up from the airport – if you have no solid relationships, no real social capital, you have nothing to spend, no one to ask.  Your education and skills contribute to your human capital; your thoughtfulness and compassion contribute to your ethical capital.  There are lots of people talking about these kinds of ideas, and innumerable different categories of alternate capital, and as we start talking more seriously about applying these ideas to our actual national economies, more categories will surely develop.  That these alternative conceptions of capital are often diffuse, notoriously difficult to quantify and measure, and vary considerably across cultures and demographics make them no less important, and part of an insistence on “objectivity” explicitly means not focusing on these forms of capital.  And that’s a problem because whatever GDP has been doing, most of these other capitals have been falling. Education, happiness, fulfilment, interpersonal and interfamilial relationships, mental and physical health, job security, food sovereignty, new ideas and new patents – flatlined or falling, across the board (17-19). In fact, a Naval  physicist found that “rate of invention of new and different tools peaked in 1873 and has been dwindling gradually ever since then” (Heinberg, Peak Everything, 42).  Haque quotes a study that find the number of patents has shot up recently, but that the quality has significantly dimished.  New patens are, by and large, not about the invention of new ideas but cornering the marketplace, what he calls “creating gridlock” - that “patents are less expressions of true intellectual wealth than tools for strategic control” (18).  Think Monsanto, patenting neem seeds and brinjal.  And through all this, the traditional macroeconomic equation could and does continue to show growth, because it measures negative transactions right alongside the positive, and makes no distinction between the two.  

 Over the past 30 years there have been over 80 academic studies conducted with the specific goal of analyzing the relationship between a company’s economic robustness and their social responsibility – or at least the public perception of it. 53% of those indicated a positive relationship between social responsibility and the health of the bottom line, and only 5% a negative one (http://hbswk.hbs.edu/item/2369.html).  In the world of economics, being a social philosophy and not a hard science, that’s an extremely strong and solid relationship, though I don’t know what kind of debates exist about whether or not a company is robust because they are socially responsible, or because they are more able to afford those socially responsible decisions because they are financially robust (the old correlation-causation chestnut). Whatever the reason, the relationship is hard to overlook: securities analysts, which tell firms which stocks to buy and sell, used to give lower ratings to companies with higher levels of real or perceived social responsibility.  Now, though, and in a recent shift,  social responsibility is considered by security analysts, to be a positive and will recommend accordingly (29-30).  This may not seem significant, but it indicates a shift in perception about what is prosperous, even if for now the goal is still defined by profit.  It helps open the door to define prosperity differently.

Writing about a new form of economics is not just about money, is it about human rights.  It’s about the right of all people to work at something meaningfully productive, the right to a purposeful existence.  That may seem overly broad and nebulous, but for me, it’s is a useful frame for the discussion precisely because so much is contained within it – a purposeful existence could mean any number of things to any number of different people, but it’s virtually certain that no matter what makes their lives purposeful, the mere feeling of purpose and fulfillment by more people is going to improve the health of a community. 

And let’s not forget that the economy is a human construction – it was created by people and is nothing more than a measure of the movement of a specific form of capital.  It’s already been drastically overhauled a number of times, most recently after WWII when the global financial infrastructure like the IMF and the World Bank were designed.  It’s entirely within the realm of the conceivable to redraw the definitions again, nearly a hundred years later, to suit a new century with dramatically different needs and problems. There are already economists all over the world designing systems of national accounting that includes the full spectrum of human wealth, not just financial, and the list of ‘well-being indicators’ is growing all the time.  The goals of these new national accounts measures is to ensure that simple bottom-line profit will no longer be sufficient for businesses and companies. They would have to also prove that they are increasing – or at least not decreasing – the possibilities for education, good health, fulfilling relationships, and creativity for their employees, customers, and the community in which they are based.  They would have to prove that the gains in their financial wealth was acquired through that kind of positive capital movement, not negative, and the accounts system will recognize and measure both.  A company which continues to make its profits through negative exchanges would no longer be financially viable, because they would be required to account for more than just the unexamined movement of capital. 

  
 In the economics of betterness, wealth-creation means something other than just capital inflows to the company; it means a contribution to the commonwealth.  Under that definition it’s not enough for the company to increase, say, its intellectual capital by just owning a bunch of patents and trademarks, wealth creation is about making their employees, customers, and constituents demonstrably smarter (33).  It’s about positively contributing to the pool of human capital, and of course a serious discussion about how to make businesses behave this way involves much more than a new mission statement or new regulation.  We have to fundamentally reconsider the structure of the way we do and define business, and that means setting some loftier goals, having some higher ambition, than simple profit.  In business terms, Haque demands not just a vision statement, but an actual vision that is superordinate to the business organization itself: it must outlast than the organization, it must transcends the commitment the organization makes to its shareholders, and it must be meaningful to the constituents outside the organization (45).  And that in turn requires us, dare I say it, to have some faith in the ability of humanity to be something more than the selfish competitors we’re constantly told we are. And that, for me, though the business stuff is interesting and useful, is what’s really compelling about this line of discussion: it demands that we demand more of ourselves, collectively; we have to agree that humanity is capable of better.  No more “practical politics”, no more saying “that’s human nature” as though we’re all born one way and stuck with it, no matter what. As though we don’t already spend an enormous amount of energy trying convince people to behave in this way or that way. It may even, as Bill McKibben recently wrote, require us to be a little naïve, and a little less cynical, and a little more angry and hopeful.  Before anything can change we have to agree that it’s even possible for things to be different.  And they can, of course they can; things have been different before.  Though right now the stated goal of our economic system is to have everyone buying more, we could just as easily design a system where that wasn’t true.  And while I’m leery of anything approaching utopianism, I do think that the elevation of all humanity to a level where everyone is cared for, where everyone has the opportunity to contribute meaningfully to their society, is a worthier goal.

All citations are page numbers from Haque, Umair.  Betterness: Economics for Humans. Harvard Business Press Books, 2011.