Capitalism, Socialism and Beyond: How May the Values of Economics Be Analysed?

[JackDaydream]

Schumacher's, 'Small is Beautiful: A Study of Economics as if People Mattered' was written in 1973, but I think that it raises important questions about economic values, ethics and politics. His aim was to think about 'the possibility of evolving a new lifestyle, with new methods of production and new patterns of consumption'.

In particular, Schumacher looks at the idea of economic growth within capitalism, saying how the richest societies 'pursue their economic advantages with the greatest ruthlessness'. On the other hand, he suggests that socialism is concerned with 'non-economic values and the possibility it creates for the overcoming of the religion of economics. He looks at the tension of values:
'In macro-economics (the management of whole societies) it is necessary to always have both planning and freedom_ not by way of a weak and lifeless compromise, but by a free recognition of of the legitimacy of a need for both. Equally in micro- economics (the management of individual enterprises there should be a full responsibility and authority; yet it is equally essential that there should be a democratic and free participation of workers in the management decisions.

Schumacher sees the tension between control and a free market economy. This is related to the values of economics and what is the best possible system? He draws upon Buddhist economics, especially the idea of 'Right Livelihood' in thinking about the nature of work. Also, the Buddhist perspective focuses on simplicity, non-violence and, not ultimate rejection of wealth but 'The Middle Way'.

Schumacher's ideas may be useful for thinking about the future of economics, especially as Western consumer materialism is breaking down. He was writing at the time when ecological issues were emerging and the issues of environmental have come to play a great significance in thinking about politics. I am aware that the issues underlying the debate between capitalism and socialism are complex but I think that his writing does lead to the question is it possible to go beyond both? Also, I am querying the underlying issues about individualism, and inequalities of wealth.

He did see technology as having an important role but so much has developed. Economic and political control may have involved different variables. So, is the free market economy and individualism the biggest threat or does it present itself on new elitist concerns, with many people being mere faceless numbers in mass society? Of course, all these issues may vary throughout different countries in the world, so I am asking you how do you see this in the context of where you live?

[Pattern-chaser]

Schumacher's ideas may be useful for thinking about the future of economics, especially as Western consumer materialism is breaking down. He was writing at the time when ecological issues were emerging and the issues of environmental have come to play a great significance in thinking about politics.

The environment has long occupied a position of huge import and significance, but it's only recently that we realised the true magnitude and consequences of the damage we've done. Now, it's so big an issue that it overwhelms most other topics. In this topic, it steam-rollers over capitalism and socialism, ignores them, and demands that we stop doing (even) more damage — 'net-zero' — and then, we start to try to fix what we've broken, to the extent that that is possible.

On the face of it, Capitalism opposes environmental issues on every level, while socialism has no obvious effect one way or the other. But both of them pale into insignificance, as I already said, when we start to consider climate change, and all associated issues. It's survival that matters, and survival — ours, and that of all the other living things — over-rides trivia like human preferences and politics.

IMO, of course.

[JackDaydream]

Schumacher's ideas may be useful for thinking about the future of economics, especially as Western consumer materialism is breaking down. He was writing at the time when ecological issues were emerging and the issues of environmental have come to play a great significance in thinking about politics.

The environment has long occupied a position of huge import and significance, but it's only recently that we realised the true magnitude and consequences of the damage we've done. Now, it's so big an issue that it overwhelms most other topics. In this topic, it steam-rollers over capitalism and socialism, ignores them, and demands that we stop doing (even) more damage — 'net-zero' — and then, we start to try to fix what we've broken, to the extent that that is possible.

On the face of it, Capitalism opposes environmental issues on every level, while socialism has no obvious effect one way or the other. But both of them pale into insignificance, as I already said, when we start to consider climate change, and all associated issues. It's survival that matters, and survival — ours, and that of all the other living things — over-rides trivia like human preferences and politics.

IMO, of course.

For some time, I thought that the issue of climate change was so large, making the division between capitalism and socialism irrelevant. However, I now think that this division is more strong than ever before, especially in the concerns about the distribution of resources. In the last year or so, especially in the aftermath of the Covid_19 pandemic a larger gulf is developing between the rich and the poor.

In England, so many people are being plunged into poverty increasingly, with rising unemployment and energy bills. The Welfare State is being challenged by the amount of people needing benefits. Behind the scenes, there are endless panics about the drainage of the economic scenes which is leading to plans to try all sorts of measures to get back to work, as well as all kinds of cut back measures in many public and private sectors. Nevertheless, there is a strong socialist opposition to this, apparent in the strikes which are taking place. Tomorrow is budget day with a London tube strike and there are possibly many more strikes coming.

Of course, in the last few years there have been the international effects of the pandemic and the Ukrainian situation. But, behind the scene it is likely that the panic is about depleting resources, especially about petroleum running out at some point. It is likely that the powerful elite are likely to protect their families and lineage. The present gap which is developing between the rich and the poor is happening in that direction, with the danger that the elite will thrive amidst potential poverty of the masses.

[GE Morton]

Schumacher sees the tension between control and a free market economy. This is related to the values of economics and what is the best possible system? He draws upon Buddhist economics, especially the idea of 'Right Livelihood' in thinking about the nature of work. Also, the Buddhist perspective focuses on simplicity, non-violence and, not ultimate rejection of wealth but 'The Middle Way'.

I suspect you, and perhaps Schumacher also, don't understand what a "free market economy" is. It is not an an economy that promotes any particular values. There are no "values of economics." Nor does it assume or promote any particular lifestyle or livelihood. It is, simply, an economic regime in which each person is free to exchange his services and the products of his labor with any other person, on any mutually agreeable terms, without interference from any third party --- as long as that exchange inflicts no losses or injuries on any third party.

Values, interests, lifestyles are features of individuals, not economic systems per se. They are subjective, idiosyncratic, and volatile. A free economy is indifferent to them; it is only concerned with the means individuals employ to pursue their values and interests, whatever those may be.

A free market economy does assume a society consisting of individuals from diverse backgrounds, with varying strengths, talents, and interests, who have no kinship or other tribal affinities or shared personal histories, and who are not bound by any sort of contract or other pre-existing obligations. It also assumes that all members of the society have equal moral status, and that any moral or legal constraints on actions apply equally to all.

[JackDaydream]

Schumacher sees the tension between control and a free market economy. This is related to the values of economics and what is the best possible system? He draws upon Buddhist economics, especially the idea of 'Right Livelihood' in thinking about the nature of work. Also, the Buddhist perspective focuses on simplicity, non-violence and, not ultimate rejection of wealth but 'The Middle Way'.

I suspect you, and perhaps Schumacher also, don't understand what a "free market economy" is. It is not an an economy that promotes any particular values. There are no "values of economics." Nor does it assume or promote any particular lifestyle or livelihood. It is, simply, an economic regime in which each person is free to exchange his services and the products of his labor with any other person, on any mutually agreeable terms, without interference from any third party --- as long as that exchange inflicts no losses or injuries on any third party.

Values, interests, lifestyles are features of individuals, not economic systems per se. They are subjective, idiosyncratic, and volatile. A free economy is indifferent to them; it is only concerned with the means individuals employ to pursue their values and interests, whatever those may be.

A free market economy does assume a society consisting of individuals from diverse backgrounds, with varying strengths, talents, and interests, who have no kinship or other tribal affinities or shared personal histories, and who are not bound by any sort of contract or other pre-existing obligations. It also assumes that all members of the society have equal moral status, and that any moral or legal constraints on actions apply equally to all.

My own understanding of the idea of a free market economy is that it involves the freedom for people to use their own abilities and talents to the maximum benefit. I am not suggesting that the idea is problematic entirely because it may be that such freedom is also one which makes it possible for the provision of the disadvantaged to benefit. Even many in Third World countries aspire to the goals of the West.

As far as I see Schumacher's understanding he draws upon the ideas of Keynes and the idea of economic growth. He also looks at this in relation to awareness of the use of fossil fuels, so his critique was an early identification of the relationship between economic growth and the environment. The whole idea of 'Small is Beautiful' was about the connection between the forces of production on a large scale. However, that was before the urgency of the nature of climate change was identified.

One point which I would query in your post is the idea that economics is simply what it is rather than bound up with values. I am not sure that it can be neutral or value free because it is bound up with the underlying structure of social life and organisation. Such neutrality would almost make economic ethics as questionable for thinking about at all. Also, you speak of moral agents and agency but that makes them appear as separate beings rather than as interconnected in the larger systems. Economics is about exchanges of resources so it doesn't seem to make sense to focus on individual agency as opposed to the wider aspects.

[GE Morton]

I suspect you, and perhaps Schumacher also, don't understand what a "free market economy" is. It is not an an economy that promotes any particular values. There are no "values of economics." Nor does it assume or promote any particular lifestyle or livelihood. It is, simply, an economic regime in which each person is free to exchange his services and the products of his labor with any other person, on any mutually agreeable terms, without interference from any third party --- as long as that exchange inflicts no losses or injuries on any third party.

Values, interests, lifestyles are features of individuals, not economic systems per se. They are subjective, idiosyncratic, and volatile. A free economy is indifferent to them; it is only concerned with the means individuals employ to pursue their values and interests, whatever those may be.

My own understanding of the idea of a free market economy is that it involves the freedom for people to use their own abilities and talents to the maximum benefit.

Well, first, the freedom to use one's abilities to "maximum benefit" doesn't establish a free market economy. A "market" denotes the exchange of goods and services. A market is "free" if no third parties impose constraints upon desired voluntary exchanges, as long as no third parties are injured by them. And whether the participants in an economy use their talents and abilities to "maximum benefit" is irrelevant to whether that economy is free. It is free as long as desired exchanges are not prevented by unwarranted constraints imposed by third parties.

One point which I would query in your post is the idea that economics is simply what it is rather than bound up with values. I am not sure that it can be neutral or value free because it is bound up with the underlying structure of social life and organisation.

Well, an economy presupposes a social setting, and every stable social setting will have some sort of structure, but those don't imply any values. Values are held by the participants in an economy, and vary from individual to individual. Economics is concerned with the efficiency with which those diverse interests and goals are pursued and the products thereof exchanged. Economics doesn't prescribe any values; it acts upon the values brought into the economy by its participants.

Such neutrality would almost make economic ethics as questionable for thinking about at all. Also, you speak of moral agents and agency but that makes them appear as separate beings rather than as interconnected in the larger systems.

Those are not mutually exclusive. Yes, moral agents are separate beings, with separate and distinct interests, goals, and values. But they realize they can more efficiently pursue many of those goals by cooperating with others. The group, however, has no interests or goals other than those of its diverse members.

[Good_Egg]

Yes, moral agents are separate beings, with separate and distinct interests, goals, and values. But they realize they can more efficiently pursue many of those goals by cooperating with others. The group, however, has no interests or goals other than those of its diverse members.

Economics is a model - a simplified way of thinking about production, consumption and trade. It assumes rational agents. Doesn't matter whether those agents are individuals, families, companies or nations.

Real life is more complex. In practice, agents sometimes act out of other motives than rational self-interest. Nonetheless, the model tells us something. It explains some features of reality, particularly those involving large numbers of people whose inter-relationship is shallow and transactional.

Be careful with the term "free market". In the absence of constraint, markets have a well-documented tendency to collapse into monopoly. The benefits of competitive markets thus depend on non-market forces preventing monopolies developing.

You're right that economics has no inherent values. It can seem to have. If economics as a discipline suggests that some outcome which you consider desirable (prosperity) will follow from certain behaviour, it can be tempting to say that economics values or advocates such behaviour. But of course it does not; it no more has values than the law of gravity has values.

[GE Morton]

Be careful with the term "free market". In the absence of constraint, markets have a well-documented tendency to collapse into monopoly. The benefits of competitive markets thus depend on non-market forces preventing monopolies developing.

In free markets monopolies persist either because they are so efficient that no competitor can succeed against them, or because they are protected by government. In the first case no correction is necessary. If they are inefficient competitors will appear and end the monopoly, unless it is protected by government.

[Good_Egg]

Be careful with the term "free market". In the absence of constraint, markets have a well-documented tendency to collapse into monopoly. The benefits of competitive markets thus depend on non-market forces preventing monopolies developing.

In free markets monopolies persist either because they are so efficient that no competitor can succeed against them, or because they are protected by government. In the first case no correction is necessary. If they are inefficient competitors will appear and end the monopoly, unless it is protected by government.

Two questions:

Why is it in the interests of the competitor to compete rather than to collaborate with the formerly-monopolist business to maintain inflated monopoly prices ?

What prevents the monopolist from selling at a loss until the competitor goes bust and then carrying on as before ?

[GE Morton]

Why is it in the interests of the competitor to compete rather than to collaborate with the formerly-monopolist business to maintain inflated monopoly prices ?

Because the competitor can gain a larger share of that market by reducing prices slightly.

What prevents the monopolist from selling at a loss until the competitor goes bust and then carrying on as before ?

As soon as he raises prices, a new competitor will enter the market, and he'll have to reduce prices again. Ad infinitum.

[Ecurb]

I suspect you, and perhaps Schumacher also, don't understand what a "free market economy" is. It is not an an economy that promotes any particular values. There are no "values of economics." Nor does it assume or promote any particular lifestyle or livelihood. It is, simply, an economic regime in which each person is free to exchange his services and the products of his labor with any other person, on any mutually agreeable terms, without interference from any third party --- as long as that exchange inflicts no losses or injuries on any third party.

Values, interests, lifestyles are features of individuals, not economic systems per se. They are subjective, idiosyncratic, and volatile. A free economy is indifferent to them; it is only concerned with the means individuals employ to pursue their values and interests, whatever those may be.

A free market economy does assume a society consisting of individuals from diverse backgrounds, with varying strengths, talents, and interests, who have no kinship or other tribal affinities or shared personal histories, and who are not bound by any sort of contract or other pre-existing obligations. It also assumes that all members of the society have equal moral status, and that any moral or legal constraints on actions apply equally to all.

The free market economies that actually exist are inevitiably regulated and protected by governments. Corporations, for example, exempt owners from personal liability. If "each person is free to exchange his services and products....", why should his liability be limited? Of course the limited personal liability protects individuals, and promotes adventurous investing and aggressive business tactics. But is it really "free"?

In addition, the property laws that are enforced by the government clearly limit freedom. The free market is, in fact, dependent on government-enforced coercion.

This is not to say that these features of the so-called free market are objectionable. It is merely pointing out facts about "free" markets.