Home > Uncategorized > Redefining economics in terms of multidimensional analysis and democracy

Redefining economics in terms of multidimensional analysis and democracy

from Peter Söderbaum, “Do we need a new economics for sustainable development?”, real-world economics review, issue no. 80, 26 June 2017, pp. 32-44.

A proposed new theoretical perspective starts with a partly different definition of economics:
“Economics is multidimensional management of (limited) resources in a democratic society”

Why “multidimensional” management? Multidimensional goes against the one-dimensional analysis of neoclassical theory and method. “Monetary reductionism” is no longer accepted. The idea that we should put a monetary price on all impacts, ecosystem services included, to make them commensurable and tradeable, is abandoned. Instead impacts of different kinds are kept separate throughout analysis. And non-monetary impacts are viewed as being as “economic” as monetary ones. This may make analysis more complex but also more relevant. In relation to environmental issues, Sweden has proposed 16 environmental objectives to monitor the quality and state of the environment as well as possible (Swedish Environmental Agency, 2016). At the UN level, world leaders agreed about 8 Millennium Development Goals in the year 2000. This process of broadening the agenda has continued with 17 Sustainable Development Goals (SDGs) sanctioned at the UN-level in November 2015. They are:  

  • No poverty
  • Zero hunger
  • Good health and well-being
  • Quality education
  • Gender equality
  • Clean water and sanitation
  • Affordable and clean energy
  • Decent work and economic growth
  • Industry, innovation and infrastructure
  • Reduced inequalities
  • Sustainable cities and communities
  • Responsible consumption and production
  • Climate action
  • Life below water
  • Life on land
  • Peace, justice and strong institutions
  • Partnerships for the goals

Each set of goals is further elaborated including a number of sub-goals and targets to be achieved in the next 15 years. “For the goals to be reached, everyone needs to do their part: government, the private sector, civil society and people like you”, it is argued (United Nations, Sustainable Development Knowledge Platform, 2016).

It is clear that the above list of objectives points to a disaggregated and multidimensional view of sustainable development. One dimensional aggregation in monetary or other terms does not appear meaningful. It can furthermore be observed that economic growth in traditional terms is part of the list but only one of the 17 SDGs. Performance in relation to the goals is finally made an issue for all individuals in all potentially relevant roles. This suggests that we need to abandon the neoclassical mechanistic idea of individuals and organizations in favor of a view where actors are responsible and accountable. To this we will return.

Why reference to a democratic society? When reading neoclassical introductory textbooks in economics it becomes clear that “democracy” is not a theme taken seriously. These texts rather reflect an emphasis on economists as experts, i.e. a kind of technocracy. In the mentioned textbook by Mankiw and Taylor “democracy” is not even part of the index or glossary. As I see it, democracy should play a crucial role at two levels:

  • Regarding the discipline of economics itself. We should not accept neoclassical monopoly and dictatorship
  • Regarding our understanding of individuals as actors in the economy. We should respect that individuals differ with respect to value or ideological orientation.

Economics as a discipline is in need of being democratized (Söderbaum and Brown, 2010). As scholars we should admit that a specific paradigm (theoretical perspective) in economics is not only theory; it is also specific in value or ideological terms. Gunnar Myrdal, a well-known institutional economist, argues that “values are always with us” (Myrdal, 1973; 1978) in the different stages of the research process from formulation of problems to presentation of results. Neoclassical theory is specific in ideological terms with its focus on markets and the monetary dimension. Applying Economic Man assumptions and looking upon organizations in profit-maximizing terms are other examples. The reasons for some of us economists to look for other theoretical perspectives are not only scientific (in some narrow sense) but also ideological. Those of us who claim to take environmental issues seriously and advocate institutional environmental (or ecological) economics as alternative perspective do so for scientific as well as ideological reasons.

If there are options at the level of ideology then democracy becomes important also when understanding individuals in the economy and respecting differences in their ideological orientations. Neoclassical economists with their CBA claim expertise in “correct values” in market terms for purposes of assessing impacts of investments in infrastructure. They claim ability to identify the best or optimal solution for society as a whole among competing investment projects. Applying Positional Analysis (PA) as an alternative method means that we in many situations have to refer to conditional conclusions rather than one single optimal solution. Alternative investment projects will be ranked differently depending upon the ideological orientation considered. And in many decision situations it is not realistic to assume that all stakeholders and concerned actors share the same idea about what is progress in society. Such ideas may differ between political parties in a democratic society for example.

  1. July 29, 2017 at 9:53 am

    Just a couple of comments.

    “Economics is multidimensional management of (limited) resources in a democratic society.”
    1. Many resources and some of the most important are not limited. For example, imagination, voting, data, and even democracy itself.
    2. Would the management itself be carried out democratically? If so, decision making will be slow. Sometimes very slow. How will the need for speed in decision making be addressed? After all, there are instances where the future direction of a nation, region, or even the entire planet will change based on the speed with which decisions are made.

    The level of coordination and cooperation required to meet such goals has never been achieved in human history. The nearest humans have come to it was during the time when humans lived as hunter-gathers, and the human population of the planet was at most a million or two. And during massive wars. How do we achieve it without war and with a human population soon to exceed 7 billion?

    • robert locke
      July 29, 2017 at 12:06 pm

      There is a certain wisdom in the German two board system, the Managing Board, which runs the firm, and the Supervisory board, which is elected by stockholders and employees, selects the management board and sets its salaries. The US system led to director primacy management which eliminates any semblance of democracy in firm governance or distribution of emoluments.

      • July 30, 2017 at 6:00 am

        Definitely a move forward. If it can be implemented in such a hostile environment as the USA.

  2. August 1, 2017 at 12:25 pm

    «Economics as “social engineering”» or «Economics as social science»?… «That is the question»… It is a fact that Roman engineers and Medieval architects built large numbers of large physical structures (bridges, aqueducts, cathedrals…) without a correct (…) understanding of the law of gravity. But, IMHO, it is better to engage in “social engineering” with an adequate understanding of the laws of of dynamics of the economic subsystem in which we all live. And in this “adequate understanding” I totally agree with the need for a multi dimension analysis.

    • August 3, 2017 at 6:19 am

      Fonseca-Statter, my question back to you is which laws of which “economic subsystem” do you want to use as a basis for social engineering? In other words, what ways of life do you want to create with social engineering? This is not a single option project. Economics is cultural. And culture has taken and will in the future take an unknown number of forms. Some of these we know well. Others remain mysterious to us. Pick one!

      • August 3, 2017 at 3:54 pm

        Ken, very good question… One first point I usually draw attention to is that Roman engineers did not need an explanation of a theory of gravity to build their bridges. When making my previous comment I was thinking in terms of a multi layered analytical framework, (inspired in Georges Gurvitch…). The «primeval» layer would be that of the informal economy of reciprocity (still going on in many parts of the world). One intermediate layer would be that of the «monetary economy». The «top» (or more visible) layer of this framework of analysis would that of institutional governance.
        My basic thesis is that we, humans, are the only biological species that seems to have the compulsion (and be capable of) producing a surplus, Year after year… To me, the best (or more concise) explanation for the long term tendencies of the process of capitalist accumulation is to be found in Karl Marx (but one could be found in J.S.Mill and a working explanation could also be found in Keynes).
        The basic «law» that I have in mind, is that «left to its own devices, an unregulated and monetized market economy, will tend to concentrate wealth at one pôle of Society and, at the same time, run out of opportunities – relatively speaking – for further accumulation».
        In the meantime, the exponential growth of productivity (in all sectors of activity) is creating a situation where the meaning (and the systemic functions) of money are changing so fast that we seem to be ending up with what I call «zombie economy»… It keeps moving but no one is really certain of where it is going…
        So, what I would like to see is «the polity» in each country being capable of overcoming/controlling (being determinant) over the «genetic code» of capitalist behavior. In a sense, a «revolution» where the baby is not thrown out with the bath water… But, and that is my answer to that question, when asked in my lectures, «my vote is as good as yours».

      • August 4, 2017 at 1:20 pm

        Fonseca-Statter, about 12,000 ago humans invented agriculture. Before that humans lived as hunter-gathers. With agriculture came new needs. Agriculture provided food and shelter security. Security of the village or township lead humans to invent government. And as the villages and population grew, to invent economies and economics. It was the invention of agriculture and then government that allowed humans to create surpluses of resources. Economics explained how these surpluses were to be shared. This lead to the greatest concentration of resources in the local and regional princes, and later monarchy. Capitalists merely took the place of the princes, of the monarchy in terms of wealth and surpluses. After beheading most of the monarchs, of course. In this they were mere aids to the campaigners for democracy. So, we’ve never really needed capitalism. It took the role of the worst of us, the monarchy. And then helped democracy get started in the west, but only a little. Doing everything it could to destroy democracy, afterwards. If capitalism mostly hurts us, we don’t need it. And it won’t be missed when we kill it. Except by the kings and queens. And we can always behead them.

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