Economic Development and Environmental Protection

Economic Pursuit of Quality

Thomas Michael Power

• Publisher: Routledge
• Year: 2015
• ISBN:
  9781317472605
• Edition: 2
• Topic: Política y relaciones internacionales
• Subtopic: Política

This text takes issue with the notion that economic well-being of people derives only from quantitatively expanding commercial business activity. It argues that economic qualities flow from the natural and social environment, and that they are public, not private, in character.

Chapter One

The Power and Mystique of Economics: Sharing the Power, Eliminating the Magic

1. The Misdefinition of Economics

When economics or the economy is mentioned, most people immediately think of commercial business activity, dollar flows of income, jobs, and markets. They also think in terms of quantities: numbers of jobs, dollars of income, and prices. Economics, in ordinary thinking, is the quantitative weighing of dollar costs and commercial values.

The common perception is that qualitative concerns about the noncommercial or nonbusiness aspects of our lives are “noneconomic.” Thus, concerns about the preservation of natural areas or wildlife, about the quality of the air or water, or about the character of our communities are thought of as noneconomic, aesthetic, moral, or political concerns.

This book will attempt to show that nothing could be further from the truth. Economics, even market-oriented economics, is mainly about the provision or protection of qualities. Individuals’ and groups’ subjective judgments about quality dominate all economic activity. Ultimately, economics is not primarily about business, money, and markets. Its focus is far broader than that. In fact, a narrow, quantitative, market definition of economics so grossly distorts economic analysis that it ceases to be a safe or reliable guide to public economic policy. Only if economics is forced beyond these conventional limits is it actually useful.

This chapter outlines the general problems with which this book will attempt to deal, namely the destructive impact of that narrow, market-oriented, quantitative definition of economics. It then outlines the approach we will take to demonstrate the dominant role quality and noncommercial resources play in determining economic welfare. Finally, this broader approach is applied to the analysis of the local economy and the determinants of local economic well-being.

2. The Power of Economics

There is power in the language and concepts of economics, a power that intimidates and manipulates. Corporate executives and vulgar Marxists alike insist that only economics really matters, that economic forces are the dominant social forces to which we must conform our behavior, our institutions, and even our thoughts and culture. Most of us cower, even if resentfully, in the face of these assertions of economics’ natural predominance, or else we retreat to the high (but “soft”) ground of moral objection and cultural critique. “Not by bread alone …” we mutter at the barbarians, our economists, who have seized the centers of public-policy analysis.

At a purely literal level, the source of the power of economic concepts is straightforward enough. The implicit assertion is that we must first survive by “providing ourselves with a living.” That is the overwhelming social project that must consume a major part of our effort and imagination, lest we fail individually and collectively. Because it is the prerequisite for all other activity, we have to mold all other institutions, including our politics and culture, so that at the very least they are consistent with it. If we are not only to survive but to prosper, our noneconomic institutions must be more than just consistent with the economy; they must directly support it. And since most of our adult life is spent making a living and most of our childhood is spent in play and education aimed at preparing us for adult work, the economy also dictates, directly or indirectly, our personalities, behavior, and values.

We all feel that power, in debates over public policy as well as in individual and household decisions. It is debilitating at both the personal and the social levels; many people, even most, are paralyzed by economic arguments or concepts in exactly the same way that “math anxiety” strikes a significant part of the population. The syndromes are similar and both are cultural in origin, but “economics anxiety” has far more important consequences because mathematicians in general do not rule us or claim some natural dominance for their concepts and vision. Economists do. To many laypeople, economic analysis is simply mind-strangling. The complex and confusing formulations of issues and policies are a maze of interwoven riddles that no amount of concentration and effort can solve. Painfully contorted faces greet most economic discussions. Math anxiety has a role in all this, because economics makes heavy use of quantitative measures and mathematical tools: To the contorted faces is added the nervous sweat that grade-school mathematical “word problems” have always elicited.

Finally, economics produces a certain amount of embarrassment in many people. Most of us are not rich. Most of us struggle each month to make sure the bills get paid, the house gets painted, and the children get off to school. We do not feel we have been particularly successful in managing the household economy. Standing amid the muddle or shambles of our personal fortunes, we do not have much confidence that we can comprehend the infinitely more complex larger economy, local, regional, or national.

This helplessness would be simply a curious cultural and psychological problem were it not for the fact that the language and concepts that trigger it are said to represent the social forces to which we must bow. And not everyone is intimidated by economics. A clearly identifiable group in our society not only does not shrink from economic argument, it wraps itself in the language of economics and thereby appropriates to itself the imputed power of economics.

3. The Distribution of the Power of Economics

It is mainly the business community that has captured the language and power of economics. This capture has been so successful that to the vast majority of people, “economics” means business and finance.

This gives this particular group considerable cultural and political power: If economics represents inevitably dominant social forces and the business community is the social group that manages our economy, then clearly the business community should dominate all other groups. That the power of economics becomes very unequally distributed can be seen in almost any public-policy debate, contemporary or historical; economics almost always seems to identify rationality with the protection of the financial interests of the business community.

Consider environmental protection. We are regularly reminded that it costs something substantial (in terms of jobs, productivity, incomes, and consumer prices) to protect or repair a damaged environment. The “economic” message is that if we try to hold business firms responsible for environmental damage, it is we who will lose. Better to leave businesses alone than to burden them with increased costs. The same is said about health and safety regulations in the workplace. Economic justification is lacking, we are told, for most such regulation. The public-policy conclusion is that, to ensure prosperity, we must “get the government off businesses’ backs.”

Labor unions fare no better than health and safety regulations. Unions, economics seems to tell us, are antieconomic while the business firms they confront are quintessentially economic. Unions saddle the economy with rigidities in the form of work rules and job-security arrangements, which lower labor productivity and management flexibility. In addition, unions use coercive monopoly power to raise wages faster than productivity. This, we are told, causes inflation, makes American goods noncompetitive, and eliminates jobs. Obviously this is an antieconomic result. Better to leave businesses free to conduct their own affairs, unhindered by unions.

Similarly, economics seems to protect businesses from charges of discrimination or exploitation. Women and blacks are paid substantially less than white males, not because of any implicit sexism or racism but because women and blacks have inferior work habits and histories. Or the supply of blacks and women in the job markets in which they apply exceeds the demand. It is the rational economic forces of supply and demand that lower their wages, and attempts to override those forces will be counterproductive: Minimum-wage and equal-pay rules will raise the cost of hiring women and blacks, and businesses will not be able to hire as many of them. The net result will be zero pay for some of them instead of low pay. Better to let businesses continue to hire them at very low wages. At least that maintains job opportunities.

It would be easy to go on in the same vein. Economic analysis almost always seems to give the same answer: Any public policy that imposes a financial burden on business is antieconomic and socially irrational. The financial interest of the business community is the same as the economic interest of the larger community.

For workers, minorities, women, environmentalists, and poor people, economics almost always seems to give the “wrong” answers. It explains why things have to be the way they are. It explains the rationality of the status quo. For business firms, economics gives the “right” answers. It elevates this small sector of our society to a preeminence. This is the sector that organizes and manages the stuff of survival, and it would be the essence of social irrationality to burden or harm this sector in any way. Social rationality, as expressed in economics, demands that we strongly support, not hinder, our business minority.

4. The Historical Origins of the Power of Economics

The equating of “economics” with business, finance, and market-oriented activity is not simply the result of sloppy thinking, sloppy language, or general intellectual laziness or cowardice on the part of those of us who are not part of the business community.

Economics developed as a distinct field of study specifically seeking to prove the social logic of an unfettered market. That is, its initial intellectual project was to demonstrate how it was that a free market, unhindered by government and medieval guild restrictions, could transform private, profit-seeking business interests into the social interest. As a fledgling social science, economics consciously and specifically sought to champion the profit-seeking behavior of the business community.

Economics did this not because a dominant social group sought intellectual justification for its apparently antisocial behavior or because economists were the “hired guns” of a dominant group. Quite the opposite: The first economists denounced the status quo. Early texts, such as those of Adam Smith, Thomas Malthus, and David Ricardo, were anything but dispassionate and scholarly. They were polemics against the wisdom and public policy of the time.

Under attack were the medieval economic institutions that had been retained by the emerging nation-states of Europe. The medieval centuries had left behind a strong distrust of individual pursuit of private financial gain; such activity was seen as divisive and potentially antisocial. Economic actors were expected to regulate themselves through guild restrictions and to be regulated by those who spoke for the larger society, namely the state as represented by crown and/or parliament. Wage levels, the price of basic goods, the level of exports and imports, the movement of workers, the number of firms producing particular goods, interest rates, advertising and marketing, investments in major industries—these and more were subject to state control (or attempted control).

The dominant social class was not the business community. Rather, it was a shifting mix of landed gentry, royalty, military leaders, and church officials. Successful merchants could marry or buy their way into ruling circles, but they were looked on with suspicion. Those who produced goods or developed resources were treated with the disdain accorded everyone else (such as peasants or urban workers)—people who got their hands dirty.

But the medieval economic institutions were breaking down. Worldwide trade was becoming increasingly important. The operations of the state and military were becoming increasingly dependent on markets that neither could control. Merchants and manufacturers were rising in importance despite the resistance of the traditional ruling classes. Early economists championed the cause of this emerging business class against the landed gentry and other forces of tradition. Early economic writings attacked the traditional constraints on market-oriented economic activity and urged that the pent-up productive forces of the new business class be let loose.

The arguments of early economists intentionally collided with contemporary notions of moral behavior. Adam Smith was a moral philosopher and theologian who set out to prove the counterintuitive and socially subversive notion that unhindered private pursuit of personal gain would result in far more social gain than would regulation of individual economic activity. This was an attack not only on existing economic policy, but on the long-held Christian suspicion of and disdain for worldly accumulation. Christ had had few good things to say about merchants and rich people. The medieval church’s preaching had been almost entirely “otherworldly” and antimaterialist, despite its leaders’ penchant for comfort.

The early economists thus had a very difficult intellectual, moral, and political challenge. In a very real sense, they were intellectual revolutionaries, supporting the “bourgeois revolution” and laying the base for the industrial and corporate revolutions that followed.

The important point for our discussion is that economists, from their first days as practitioners of a separate social science, were not intent simply on helping a particular class gain economic and political power. In understanding and demonstrating the social logic of private market activities, they began as critics, not apologists. Their task was to challenge the received corporatist vision that blended medieval institutions with the bureaucratic apparatus of the nation-state. To do that, economists had to explore the “invisible hand” of a free-market, private-enterprise economy. For most of the last two hundred years, they worked diligently on this project. But with the passage of time and the emergence of business leaders as the dominant class, “business economics” has to a large extent abandoned its critical mission for a largely apologetic defense of the new capitalist system. The result has been the close association of economics with commercial markets, businesses, dollar income, and profits.

5. Rejecting the Equation of Economics with Markets and Business

From a historical point of view it is easy to understand why economics, even as a critical social science, originally emphasized market phenomena and business. From a political point of view it is even clearer why the business community appropriated to itself the language and concepts of economics. But accidents of history and self-serving posturing certainly cannot be trusted to guide a social science or policy.

Clearly, economics is not only, or even primarily, about business and commercial markets. If it were, it would suggest that in “primitive” societies, where commercial markets and businesses did not exist, there were no economic problems and individuals engaged in no economic activities. Similarly, in socialist countries where the commercial market and private enterprise have been severely limited or eliminated, such a definition of economics would suggest that economic problems had vanished. If only it were so easy!

Economics is the study of the way societies develop and use the scarce resources at their disposal to pursue their diverse goals. It could be safely equated with the study of markets and businesses only if two conditions were met. First, all societies would have to depend primarily on markets and businesses to allocate resources and distribute goods and services. Second, all valuable goods and services, all things of value to any society, would have to be bought and sold on commercial markets. The first condition has never been met. The second cannot be met, even conceptually. The fact of the matter is that in all societies there are some important goods, services, and resources that people do not want handled by commercial markets. And in every society there are valuable goods, services, and resources that cannot be handled very well by a commercial market.

The first group of valuable things that in our own society we do not want provided through a commercial market includes basic education, roads, human lives (consider slavery or the selling of children), parks, political offices or positions, votes, sex, and the like. Basic food, housing, energy, and medical care are increasingly provided outside the...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• Preface to the New Edition
• Preface to the Original Edition
• Acknowledgments
• Chapter One: The Power and Mystique of Economics: Sharing the Power, Eliminating the Magic
• Chapter Two: The Dominance of Quality in Economic Pursuits: Survival Needs, Food, and Health Care
• Chapter Three: The Dominance of Quality in Economic Pursuits, Continued: Clothing, Housing, and Stone Age Economics
• Chapter Four: The Economic Pursuit of Quality in a Noncommercial Setting
• Chapter Five: Profaning the Sacred? Economic Valuation of the Natural Environment
• Chapter Six: Beauty and the Beast: Quantitative Evidence on the Economic Importance of Environmental Quality
• Chapter Seven: The Economic Base: Distracting Vision, Distorting Reality
• Chapter Eight: Economic Growth and Local Economic Well-Being
• Chapter Nine: The Self-Defeating Strategies of Quantitative Growth
• Chapter Ten: The Local Pursuit of Quality: A “Can’t-Lose” Economic-Development Strategy
• Chapter Eleven: Grander Visions, Grander Problems
• References
• Index
• About the Author