The Economy & Us: Week 1 powerpoint slides (Tony
The Economy & Us: Week 1 powerpoint slides (Tony
Open Learning Course
The Economy and Us: week 1
A brief history of economic thought … and some influential
Some useful definitions; economics in its context.
Debunking: competition, efficiency and economic growth
Well-being and human needs – your chance to write the
Adam Smith: 1723- 1790
“By pursuing his [the individual’s] own
interest he frequently promotes that of
the society more effectually than when
he really intends to promote it. I have
never known much good done by those
who affected to trade for the public
An Enquiry into the Nature and Causes of
the Wealth of Nations, 1776
John Maynard Keynes: 1883 - 1946
“Practical men, who believe themselves
to be quite exempt from any intellectual
influences, are usually the slaves of some
defunct economist. Madmen in
authority who hear voices in the air, are
distilling their frenzy from some
academic scribbler of a few years back.”
The General Theory of Employment, Interest
and Money, 1935
John Kenneth Galbraith: 1908 - 2006
“ … the hallmark of the conventional
wisdom is acceptability.
… In some measure, the articulation of
the conventional wisdom is a religious
rite. It is an act of affirmation like
reading aloud from the Scriptures or
going to church. The business
executive listening to a luncheon
address on the virtues of free
enterprise is already persuaded, and so
are his fellow listeners, and all are
secure in their convictions.”
The Affluent Society, 1998
E F Schumacher: 1911- 1977
“An attitude to life which seeks
fulfillment in the single-minded pursuit
of wealth - in short, materialism - does
not fit into this world, because it
contains within itself no limiting
principle, while the environment in
which it is placed is strictly limited.”
Small is Beautiful, 1973
Milton Friedman: 1912-2006
“There is one and only one social
responsibility of business–to use it
resources and engage in activities
designed to increase its profits so long as
it stays within the rules of the game,
which is to say, engages in open and free
competition without deception or fraud."
Capitalism and Freedom, 1962
Here's the basic argument:
• The idea that economic systems are
inanimate machines operating
according to amoral laws is a belief,
not a fact.
• This belief has harmful effects—for
life on the planet, for human
society, and for you in particular.
• Understanding that economies are
vital, living, human-made, and
shaped by our ethical choices can
help to improve our decisions—both
individually and as a society.
Economics for Humans, 2006
Manfred Max-Neef: 1932-
“…It is particularly dramatic that the way
economics is being taught - not just in the North
or South - everywhere, is extremely narrow and
limited. … what is being taught is just neoclassical economics …
There is nothing else.”
Some definitions of ‘economics’ I
• Alfred Marshall: “Political Economy or Economics is a
study of mankind in the ordinary business of life …”
[Principles of Economics, 1890]
• Lionel Robbins: “… economics is the study of how
society allocates scarce resources, which have
alternative uses”. [Essay on the Nature and Significance
of Economic Science, 1935]
Some definitions of ‘economics’ - II
• J M Keynes: “The theory of economics does not furnish a
body of settled conclusions immediately applicable to policy.
It is a method rather than a doctrine, an apparatus of the
mind, a technique of thinking …”
• Manfred Max-Neef reminds us that Aristotle’s Politics
presents oikonomia (the Greek word from which the
economics is derived as: ‘the art of living and living well’.
Some words we shall use
• ‘Paradigm’: The ‘framework’ through which policy
is made and success is judged
• The ‘neo-classical’ economic paradigm:
– In a few words,
• individualistic consumers, seeking to ‘maximise utility’ in a
‘perfectly competitive market’.
• Economic growth is the ‘engine’, and is assumed, without
question, to be a ‘good thing’.
• Assumption that ‘private’ consumption is preferable to
Economy, society and the environment:
the conventional view
Economy, society and the
a better view?
• A theoretician’s paradise … and a way to
impress your listeners and readers?
– ‘Perfect competition’: most textbooks spend
around 30 (or more) pages presenting this and its
– It’s a bit of an empty box in real life!
For the ‘benefits’ to be achieved …
• There are some conditions which must prevail
– All participants - producers and consumers – must have
equal and adequate access to information about prices
and quality in ‘the market
– There must be no inequality of market power among and
between buyers and sellers.
– There must be no ‘externalities’ – costs which are borne by
others who are not ‘party’ to the transaction
• ALL – and others – are required!
Some adverse outcomes of ‘competition’
• The ‘race to the bottom’
– ‘competition’ – in the present economy – can
lead to widespread distress, poor quality, illtreatment of people and animals
• Duplication of services
– National services – such as post – can be
degraded by ‘fake’ competition (‘cherry picking’)
• Sounds good – but from whose point of view?
• Conventional wisdom dodges the hard
questions by using monetary costs as the
– It might – from a particular point of view – be
‘efficient’ for a manufacturer to move production
to a country where ‘labour costs’ are lower.
– But externalities appear: the cost of the decision
falls on the community now deprived of an
important component of economic activity.
Economic growth –
something more to debunk??
Anyone who believes exponential
growth can go on forever in a finite
world is either a madman or an
The Economics of the Coming Spaceship
Kenneth E Boulding, 1910 - 1993
Here’s a few reasons to question growth as an
end in itself
• Desirable and undesirable ‘outputs’
• The distribution of benefits is uncertain
• Our needs are more than measured economic
• Resource depletion
• Lifestyle imbalance
• Greenhouse gas emissions
• Personal debt
• The terms and ideas have some uses in the
• They can be a part of the means to deliver
some desirable outcomes – but we have to
clearer what these outcomes should be
• Effort is needed to identify
– all outcomes (desirable and undesirable)
– an ethical standpoint.
So … what should the main objective of
economic policy be?
Meeting human needs while respecting
• The ‘well-being’ economy?
• The ‘green’ economy?
Your chance … to have your say!!
Back to Max-Neef …
Fundamental human needs