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.