WHAT IS A GOOD ECONOMY
Economics tries to explain how the economy works. But economists are equally (and justifiably) involved with attempting to form it works best. This inherently requires the economist (and every citizen) to make value judgments about what kind of economy is more desirable. Most economists, unfortunately, are not honest about those value judgments; they like to pretend that their profession is “scientific” and hence value-free, but this is a charade.
Deciding what economic goals to pursue will replicate the priorities and interests of various people, communities, and categories. It is an inherently subjective choice.
Here is my list of key economic goals. In my view, the lot of those goals an economy achieves, the higher it is:
An economy ought to manufacture enough products and services to support its citizens and permit them to get pleasure from life to the fullest. Prosperity doesn’t just mean having a lot of “stuff.” It suggests that enjoying a decent balance between non-public consumption, public services, and leisure. (Incidentally, leisure is another valuable factor that doesn’t seem in GDP statistics.)
The members of an economy ought to be assured that their economic conditions are moderately stable. They shouldn’t need to worry concerning being able to support themselves (so long as they work if they’re able), to stay their home, and to expire good economic opportunities to their children. The economic insecurity and turmoil experienced by billions of people today impose real costs on them. Even people who may ne’er lose their job or home pay an excellent deal of time and energy worrying that they may. That fear is costly. By a similar token, economic security – having the ability to sleep at night without concern regarding your resource – is efficacious in its own right.
Economic progress needs us to suppose endlessly about how to build our work additional productive. This innovation includes imagining new product and services (products), and higher ways of manufacturing them (processes). An economy should be organized in a way that promotes and facilitates innovative behavior, or else it will eventually run out of creative energy and forward momentum.
Individuals have totally different preferences, hopes, and dreams (although those preferences are powerfully formed by social pressures). They should have a reasonable ability to make economic decisions – including the sort of work they do, where they live, and what they consume – in line with those preferences. There is a huge, ideological story that solely free-market economies really respect individual “choice.” this is clearly wrong: the alternatives of billions of persons are savagely suppressed by the economic hardship and social divisions that which a natural outcome of worldwide capitalism. Moreover, the services offered by the public sector (schools, health care, culture, parks) substantially expand the choices available to people (especially those with lower incomes). I accept that individual selection is a very important economic goal – and that I argue there are best ways to boost true selection than through free-market capitalism.
Inequality is harmful if it implies that massive numbers of individuals are deprived of the ability to figure and revel in their lives. In this sense, the goal of equality is bound up with the goal of prosperity (so long as we define “prosperity” correctly, as widespread wellbeing, rather than equating it with the growth of GDP). But I’m additionally convinced that difference is inherently negative in its own right. Even if those at the bottom of the economic spectrum still enjoyed some decent minimum standard of living, a concentration of wealth at the top will nevertheless undermine social cohesion, well being, and democracy. For example, economists have identified a phenomenon called “positional consumption,” by which people’s emotional well-being is negatively influenced by unfavorable self-comparisons to the lifestyles of the rich and famous. When this happens, inequality carries distinct negative consequences, quite aside from the implications of poorness. To this end, limiting the economic distance between rich and poor is an important economic goal. Equality additionally needs sufficient supplies to support those members of society who can’t work.
Humans depend on their natural environment. It directly improves our quality of life (through the air we tend to breathe, and the spaces we inhabit). And it provides required inputs that are essential to the work we do in every single business. All production involves the applying of human work to “add value” to one thing we got from nature. Maintaining the atmosphere is vital in its own right (all the additional thus if we accept that humans have some responsibility to the opposite species that inhabit our planet). it’s conjointly vital in a more narrowly economic sense since our ability to continue manufacturing products and services within the future will depend upon finding property ways to reap (without endlessly depleting or polluting) the natural inputs we’d like.
7. Democracy and accountability
We’ve seen that the economy is an inherently social undertaking. Different people perform different functions. Some people and organizations have nice decision-making power, while others have little. How will we make sure that economic decisions, and the overall evolution of the economy, replicate our collective needs and preferences? And how will we monitor and make sure that individuals and establishments do the work they are supposed to? Trendy capitalism contains a well-developed however slim notion of business accountability, through that firms are compelled to maximise the wealth of their shareholders. Competitive markets also impose another narrow form of accountability, enforced through the threat of lost sales and ultimate bankruptcy for companies that produce shoddy or unduly expensive products. Democratic elections allow citizens to exert some influence (through their governments) over economic trends – although the ability of elected governments to manage a capitalist economy is fundamentally limited by the unelected power of businesses and investors. None of those restricted sorts of accountability offer for thorough or consistent ways of subjecting the economy to democratic management. Yet given the overarching importance of the economy to our general social condition, we are entitled to additional real and sweeping sorts of economic democracy and accountability.
Is our present economy a good economy? In some ways, trendy capitalism has done best than any earlier arrangement in advancing every of those goals. In different ways, it fails my “good economy” to take a look at miserably. The rest of this book will endeavor to explain how the capitalist economy functions, the extent to which it meets (and fails to meet) these fundamental goals – and whether or not there are any best ways to do the duty.
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