8.1 What is economics? – what the different paradigms focus on

 

 

8.1 What is economics? – what the different paradigms focus on

Definitions – Economics can be described as the study of how people make choices between alternative allocations of resources – where what we call “resources” are the means available to attained desired ends. Key concepts are:

Allocation: Economics is concerned that allocation decisions about resources are efficient – so that the best use of available means are made - bearing in mind that resources are scarce and not all desired ends can be met.

In neoclassical economics, the mainstream, this question of allocative efficiency is the key focus. However ‘allocative efficiency’ is not the only dimension. Another approach, that of ecological economics, gives prominence to two other issues in considering the impact of the economic process on the ecological system and on society. These are:

Scale: how far can we go in any given activity and use of resources – what are the bio-physical limits of the ecological system? If we go beyond these limits, ecological economists argue that we are involved in uneconomic growth – because the additional benefits of economic activity are less than the additional costs. These costs take the form of a degraded and exhausted environment, impoverished resources and impaired “eco-system services” passed on to future generations.

Justice: how are the benefits and costs of economic activity distributed in society, including the benefits and costs of action to mitigate or adapt to environmental damage? Do the benefits go predominantly to one group and the costs to another?

A moment's reflection tells us that sustainability is itself a justice concept. As described in Chapter 1 the Brundtland Commission report, written for the UN, defined sustainable development as

“development that meets the needs of the present without compromising the ability of future generations to meet their own needs”

As mentioned in the previous chapter, this definition is about intergenerational justice and it seems, at the very least, inconsistent to assert the importance of inter-generational justice without a parallel concern for justice for people alive today.

In fact there are good reasons to suppose that all of society gains from a concern for distributive justice. For example, two authors, Richard Wilkinson and Kate Pickett have assembled a mass of evidence in their book “The Spirit Level” which shows that in rich countries a smaller gap between rich and poor means happier, healthier and more successful populations more generally. http://www.equalitytrust.org.uk/why

Although distributive justice is neglected in the economic mainstream, the evidence shows that it matters to general human well-being. The idea, that we do not need to concern ourselves with distribution if growth continues because greater production will provide more for everybody, is too simplistic. The evidence assembled by Wilkinson and Pickett shows that growth will NOT lead to happier, healthier or more successful populations. There is no relation between income per head and social well-being.