By Frank van Empel
Over a hundred years ago Darwin and Wallace in their theory of natural selection, or the survival of the fittest, explained how evolution could have happened in terms of processes known to take place today. It gives insight, but no quick fixes. As a matter of fact we can be fairly confident that the ‘nature’ (i.e. the genetically determined capacities) of human beings has not greatly changed since the Neolithic revolution, about 7.000 years ago. Apparently that is too short a period for major evolutionary changes.
Evolution is too slow for any policy or strategy. That’s why we try out a rather new concept, that’s only one character away from Evolution on a standard European keyboard: Ecolution. In the economy, nor in ecology or social affairs the survival of the fittest is a matter of consideration, governmental policies or political strategies, let alone business visions and missions. In politics and policies the main issue of business and societal reflection will become the fitness of those who survived.
We start with a few assumptions, in order to define the framework within which we like to discuss this issue.
- The economy is embedded in the ecology. It is part of the ecosystem and cannot function without natural resources.
- A well-functioning ecosystem is a conditio sine qua non for human welfare.
- On the one hand economic processes create wealth, which has a positive impact on human welfare. On the other hand, excessive demands of the economy create waste which has a negative impact. Besides excessive demands create the possibility of exhaustion of finite and non-renewable resources, which may be destructive for both wealth and welfare.
- The development of economy, ecology and human welfare towards a higher level is called Ecolution. It’s just one of many descriptions of this young, active and flexible phenomenon, that still has to find a place in analysis. The opposite is called ‘ecocide’: the destruction of the natural environment, especially when this is deliberate.
- Modern economics starts from Adam Smiths’ image of a market that thrives on competition between suppliers of goods, services, labour, capital and the more. Adam Smith paints the mechanism of this imaginary market in his famous ‘Enquiry into the Nature and Causes of the Wealth of Nations’ (1776) in the following, carefully chosen words: ‘It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest’. In other words: it is self-love that drives people, producers as well as consumers, and it is the impersonal prize-mechanism that brings them together. If demand on a sub-market, for instance shoes, exceeds supply, prices for shoes rise, until demand and supply are equal, and so ‘in a state of equilibrium’. If supply exceeds demand, the opposite happens.
- That is theory. In practice there is no equilibrium for much longer than a very short time. Before an intended equilibrium is a fact, most of the times it already is disturbed by the disequilibria in other market segments. Only a few economists deal with this kind of dynamics, that has much in common with chaos. ‘Our models become non-linear by this kind of reasoning,’ Prof. dr. D.B.J. Schouten from the University of Tilburg wrote in Macht en Wanorde (Power and Disorder), a jewel of economics as a science which is not translated in English. ‘They get much too complicated. We just cannot handle it anymore. The boundaries of economics as an exact science are in sight.’
- The Godfather of all economists, Adam Smith, did not care about linearity. On the contrary. His two masterpieces are a proof of non-linear thinking. Seventeen years before The Wealth of Nations (TWN) Smith as a professor of Moral Philosophy at the University of Glasgow wrote The Theory of Moral Sentiments (TMS). The original work arose from Smith’s lectures to students. If The Wealth of Nations is the Yang of modern economics, The Theory of Moral Sentiments is the Yin. Both works must be taken together, and considered as one. Quote from TMS: ‘How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it. Of this kind is pity or compassion, the emotion we feel for the misery of others, when we either see it, or are made to conceive it in a very lively manner. That we often derive sorrow from the sorrow of others, is a matter of fact too obvious to require any instances to prove it…’
Both works taken together form a dichotomy. In the Theory of Moral Sentiments Smith investigates the sympathetic part of human nature. In the Wealth of Nations he investigates its selfish part. In the slipstream of TWN follows a long parade of famous economists from all kinds of ‘schools’, for example: the classical economists David Ricardo, John Stuart Mill, Karl Marx and Thomas Malthus; the neo-classical economists Alfred Marshall, Knut Wicksell and Irving Fisher; Gamers John Nash and John Van Newmann; monetarist Milton Friedman…
The by many economists neglected TMS-Parade is much shorter, but has famous names as well: Michal Kalecki, John Maynard Keynes, Amartya Sen, George Akerlof, Joseph Schumpeter, Mark Gvanovetter, James Buchanan, Mancur Olson… They are on the right track, but lag behind neo-classical economics in persuasion power and political support. A counter-offensive will be necessary to get a grip on the environment. ‘A whole new environmental economics needs to be developed going far beyond the narrow vision of mainstream Micro-economics in order to come to grips with the issues relating to “sustainable development”,’ Prof. P.R. Dubhashi agrees.
The ‘narrow vision’ of mainstream micro-economics has to do with its unsound assumptions mentioned above, its preoccupation with the short run rather than the long run, with much more static state than dynamic changes, with money and wealth rather than welfare and well-being. ‘The preoccupation with theoretical and mathematical equations rather than the problems of the day has reduced Economics to “esoteric irrelevance”,’ says Prof. Dubhashi. Eminence grise, Amartya Sen described the selfish calculating neo-classical economists even as ‘rational fools’.
Professor P.R. Dubhashi, from GOA University, India, sums up some weak axioms of neo-classical (micro) economics, the most common economic theory for more than three decades, in designing economical, financial, political, institutional, governmental and personal strategies for the future.
A scientific attack on neo-classical axioms for strategic decision making and planning:
- The concept of ‘homo-economicus’, the individual economic agent, whether consumer or producer, making choices or taking decisions is a faulty one. An individual does not exist in isolation. He or she is a member of a family and society and his or her choices and decisions are influenced by interpersonal relationships and community values. The economic activity is embedded in a web of social institutions.
- The assumption that an individual makes ‘rational’ choices and takes ‘rational decisions’ is not valid. The behavior of the individual is influenced by many factors including moral and ethical considerations and is not purely ‘hedonist’ in character. ‘Impulse buying’, spontaneous consumption decisions, adventure and desire for the unknown are not always ‘rational’. But they do characterize individual decisions.
- The assumptions relating to a perfectly competitive market are inconsistent with the conditions in the real world. One of the assumptions is that there are innumerable buyers and sellers none of whom by themselves are able to influence the market. In the actual world however, there are conditions of monopoly, oligopoly and imperfect competition based on differentiated products. As J. K. Galbraith has pointed out, corporations of today are so powerful that with the aid of advertisements and money power they are able to reverse the proposition that supply is according to demand. Corporations manipulate demand to be in accordance with supply.
- The assumption of ‘perfect knowledge’ is not valid either. Consumers are often badly informed about the products and services they buy.
In order to keep our own Ecolution Theory both simple and valid, we let it rest on four assumptions:
- People have rational as well as irrational preferences;
- Individuals and firms are not one-dimensionally focused on making profits, but definitely want to add value and usually are willing to share it with the local community or with society at large;
- People act in line with the multitude on the basis of limited information;
- Individual people and firms work together out of self-interest. After all mostly ‘working together’ gives a bigger plus than rivalry, opposing and competition.
‘Opposing’, ‘competition’ and ‘rivalry’ are words that do not refer to a world where everybody works together to get the maximum out of available resources in a green and clean way. On the contrary, they are combative expressions that refer to Darwin’s survival of the fittest and the accompanying evolution theory.
The neoclassical foundation of economics and the main part of Game Theory make people think about the others in terms of competitors, opponents and rivals. We however claim that depletion of resources – the end of natures’ supply – will lead societies back to the Moral Sentiments side of the spectrum, where necessary co-operation decides the outcome. This u-turn of economics is elaborately researched and described in ‘Only Winners’. The Only Winners philosophy invites people to think in terms of allies, partners and friends. A totally different world, with other values: trust instead of suspicion, empathy and sympathy instead of selfishness, ecolution instead of evolution. All of this out of self-interest, namely the survival of the species man.
The above is related to JES! Towards a Joint Effort Society, isbn 978.94.90665.111, Frank van Empel & Caro Sicking, Studio nonfiXe.
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