The same principle applies to the concentration and distribution of economic power. Extreme concentration of wealth, whether by legal or illegal means, imparts enormous power to a few individuals, but substantially abridges the overall power of the society. It is no longer acceptable for economics to ignore the issue of social power which underlies the entire workings of the economic system. Until recently the distribution of power has been regarded by most economists as an issue for study by political scientists and sociologists.
The exclusion of power from economic discourse was largely the effort of positivists to insulate mainstream economic thought from contamination by Marxist analysis. This was achieved by strengthening the intellectual boundaries between economics as understood in the capitalistic world and distancing economic analysis from the influence of power processes.
The recent work of economists such as Thomas Piketty on economic inequality, growing awareness of the inextricable relationship between politics and economics, highly visible attention to the influence of money and corporations on elections and public procurement, the legal and political basis for the expanding definition of intellectual property rights, and the impact of regulatory capture on public policy and markets in fields such as finance, energy and pharmaceuticals necessitates restoring the issue of social power to a central place in economic theory.
Modern economies are conscious living systems increasingly fueled by human and social resources that are not subject to inherent material limits. Material resources are consumed in the process of utilization. Human capital and social capital grow in quality, utility and value through usage and experience. Imitating the 19 th century preoccupation of the natural sciences with the objective study of external reality, Economics tends to neglect the subjective dimension of reality which plays such a central role in human life.
During the 20 th century physicists and biologists largely abandoned this view, but it still remains the guiding philosophy of Economics even today. The argument that subjective factors are too difficult to measure is increasingly challenged by the development of alternative measures and justifies much more serious efforts by mainstream economists to evolve new methods, rather than ignore this essential dimension of reality. The natural and social sciences differ in another significant respect. The quest of natural science is to discover the immutable natural laws governing the world around us.
The role of the natural scientist is as impartial, objective observer free from value judgements. The social sciences study the world and behavior of conscious human beings, whose habits and propensities are goal-oriented and at least partially subject to conscious choice. They change over time, undergo voluntary modification and conscious evolution. And yet, the most tenacious commitment to this idea today persists in the social sciences. All scientific inquiry begins with a study of phenomena as they exist to understand their characteristics, structures and the processes by which they function.
Yet this quest is informed by the values, mindsets and contexts of the scientists themselves—from their gender, to race, educational background and location in the world. A fundamental challenge in the social sciences is to discover the social processes by which people meet needs, fulfill aspirations and achieve goals. Impartial knowledge of what pertains is not sufficient.
It must necessarily be examined in the light of the values and goals humanity seeks to realize. Of all the social sciences, Economics has been most strongly influenced by the philosophy of positivism and the influence of Hume, who insisted that science would not retain its credibility if it confused the study of phenomena as they are with the study of what we think they should become. In order to strengthen the scientific boundaries of the discipline, economics became partly an empirical science and partly a logical science influenced by applied mathematics.
In doing so, it was compelled to adopt overly simplified and, in some cases, mythical assumptions and generalizations that lent themselves to quantitative analysis. Over time the distinction between premises and reality has become increasingly obscure, resulting in the illusion that the models actually represent the real world, an error akin to assuming that in vitro laboratory experiments on chemicals and microorganisms are a reliable proxy for human clinical trials in pharmacology. Philosopher of science Karl Popper cautioned against misguided naturalism in the social sciences.
He argued that practical impact, not just theoretical understanding, must be considered primary in the social sciences. He emphasized the ethical dimension of social sciences—and called on scientists to accept moral responsibility for social outcomes. It is noteworthy that Adam Smith regarded himself as a moral philosopher, not an economist. Smith was looking for ways to enhance human welfare, not seeking to formulate universal laws of economy true for all nations, all times and all people. Economics needs to become value-conscious.
It needs to make explicit the goals, values and premises on which its knowledge is based. The objective of New Economic Theory NET is to formulate theoretical and practical knowledge required to maximize economic security, human welfare and individual well-being of all humanity in a manner consistent with universal human rights, cultural diversity and civilizational values and what it will mean to live in harmony with nature.
Economic security ensures minimum material needs.
Human welfare encompasses a wider range of material and social needs related to safety, health, education, social security. Individual well-being encompasses higher level social, cultural, psychological and spiritual aspirations for freedom of choice, respect, free association, enjoyment, creative self-expression, individual development and self-realization. And sustainability means achieving this in ways that restore the natural systems on which we depend.
The goal is not to discover immutable, universal, natural laws of economy based on any existing precedent, model or theory, but to identify the laws and first principles of a social system suitable for promoting global human welfare and well-being. The objective of this paper is not a critique of mainstream economic thinking but rather a call to evolve new theory that transcends its limitations.
The following is a partial summary of major problems, limitations and failures of mainstream economic theory:. These shortcomings are the result of mental and social constructions, implicit assumptions and values which need to be consciously recognized and subject to examination, e. These shortcomings arise as a result of more fundamental theoretical limitations:. Mainstream Economics consists of a few main theories supported by a patchwork of concepts, theorems and models lacking the common foundation, consistency and integration that characterize knowledge in the natural sciences.
However useful elements of the patchwork may be for shedding light on specific issues and fields of activity, they do not constitute in whole or in part a coherent theory of wealth creation, welfare and well-being. Moreover, they fail to address wider and more fundamental issues that need to be considered in order to place new economic theory on a sound basis.
This group includes development, ecological, evolutionary, post-Keynesian, post-Marxist and numerous other schools of economic thought. In spite of their legion numbers, mainstream theory entrenched in academic citadels continues to effectively drown out most dissenting viewpoints.
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This assemblage of alternative models and theories is an important development, but it is not sufficiently comprehensive to replace prevailing orthodoxy. We need theory that integrates complementary aspects of the truth, rather than ignoring or rejecting all dissent as superfluous. We need an integrated framework for the social sciences, similar to what we find in the natural sciences.
The call for new economic theory is based on the premise that the persistence of poverty together with rising levels of unemployment, inequality and ecological degradation reflect the limits of the present conceptual system, rather the practical limits of sustainable human development. Economic theory shapes society by shaping understandings, policies, institutions, values, aspirations and beliefs about what is possible.
Theory of innovation : a new paradigm of growth - Semantic Scholar
It also provides implicit justification for the application and distribution of social power and the explicit economic arrangements used to support it. Economics should be explicitly goal-oriented and value-based. It must shed the poise of ivory-tower scientific objectivity and accept responsibility for the wider social and political consequences of economic activity.
The only legitimate goal of economic theory is to maximize the welfare and well-being of all human beings. The validity of theory should be judged based on its efficacy in achieving these goals. It should be based on recognition of the true value of human beings as the most precious and perishable of all resources and the source of all creativity and innovation.
It should be founded on a global ethic that seeks to maximize the development of human capacities both for their contribution to human welfare and to our sense of fulfilment as productive human beings. The objective of economic activity should be sustainable security, welfare and well-being of all human beings, not merely growth and not merely prosperity for a minority of people or some countries. Among these, the implicit power exercised by money over public policies and the distribution of benefits in democratic society needs to be fully exposed.
As freedom is a sacred value according to current democratic political theory, equality should be explicitly recognized as a sacred value by new economic theory. The institution of democracy has been conceived as a means to promote individual freedom, though in practice it too often sacrifices real freedom to the tyranny of a majority, an electoral minority or a plutocratic elite. NET should provide the theoretical framework and environmental policies needed to make markets effective instruments for achieving real social equality. Political economy needs to be restored to its rightful position as the arbiter of economic outcomes.
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Values express intention and commitment, but they are not merely utopian ideals or ethical principles. They represent the highest abstract mental formulations of life principles with immense power for practical accomplishment. NET will need to examine the fundamental values on which economic thought is based. It will need to make explicit the values it consciously seeks to promote. It will also need to recognize the tensions and apparent contradictions between values and explain how they can be reconciled in practice.
NET should be based on universally recognized human values, including. New economic theory requires a change in conception regarding the nature of the reality we seek to understand and appropriate ways of knowing it. NET must be founded on an epistemology that more fully encompasses and accurately reflects the full spectrum, multi-dimensional complexity, organic vitality, and evolutionary character of social reality. NET needs to be based on the premise that economy is an inseparable part of a greater whole that encompasses all fields of knowledge and social activity.
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Economic theory and policy need to be founded on a knowledge of the principles and processes that guide and direct social awareness, aspirations and values; the release of social energies and initiative; the organization of social power that channels these energies; and the attitudes and skills which convert the organized energies into tangible benefits for society. Great economic accomplishments have always been spurred by significant development of non-economic forces and factors.
New theory must integrate economy with all other fields of social life. It must break down the arbitrary divisions that presently divide the social sciences and replace the concept of externalities with a growing awareness of the complex nexus of political, legal, commercial, organizational, technological, social, cultural, and psychological factors that determine economic performance and results.
Rather than seeking to isolate and insulate economy from other social factors, NET needs to identify and make explicit all the factors which influence economic performance in order to identify the inherent weaknesses and limitations in political, legal, economic, educational and social policies that constrain the development of human welfare and well-being.
The enabling and limiting conditions include geography and physical environment, peace and security, political and social freedom, stable democratic government, conducive and transparent legal framework and implementation, effective and dynamic public administration—rapid, transparent decision-making, public policies for ease of doing business, physical infrastructure for transport and communication, levels of education and training, social values and work ethic.
Society is a complex living organism in which all its component elements are interlinked, interdependent and integrated. Systems thinking has made important contributions to our understanding of complex systems and functioning by providing insights into the dynamics and patterns of interaction between innumerable nodes of activity.
A New Paradigm of Growth
A reductionist scientific method is inappropriate for holistic analysis of evolutionary systems of which humanity is an integral part. They must be addressed as entire systems, rather than as piecemeal. They are such that small inputs may result in disproportionate effects. The problems they present cannot be solved once and for ever, but require to be systematically managed and typically any intervention merges into new problems as a result of the interventions dealing with them. It has helped decode the network effects that lead to the concentration of power among the largest nodes in a network.
It has also enhanced our understanding of the impact of economic activity on the environment.
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