7. Values at the economic level

Abstract

Economics is a social science, which studies how societies and individuals make choices regarding limited productive resources. There are two major branches of macro economics that focus on the decisions of governments and countries and micro economics that study decisions regarding individuals and businesses. To get a basic understanding of the economic history of the past, the most prominent economical figures have been elaborated upon within the first section, discussing the roles of these economists in the evolution of economics. John Locke wrote about the theory of property which resulted in the homestead principle.Thomas Paine transformed the principles of John Locke and inspired the American Revolution with his pamphlets regarding liberalism. This all lead to the start of economics as a discipline in 1776, when Adam Smithpublished the first treatise about classical economics. Lastly, Karl Marx deepened the previous works andfound it undesirable to have few property owners in the community only making profit from owning property. After the classical economists, the marginal revolution happened, replacing the classical labor theory of value with the marginal theory of value. The publishers of this theory developed their own theories but were integrated and united under the name neoclassical economics. Capitalism was a continuous development and became dominant in the western world. During this time, John Maynard Keynes came with the Keynesian economics theory, advocating an increase in governmental expenditures and lowering the taxes, tostimulate the demand and pull the economy out of the depression. The government would effectively stabilize the market by applying his theory. Post-World War II the nature of economics transformed since mathematics was applied inall disciplines. Neoliberalism is a term used to describe the political Policiesthat are associated with unrestrained political and economic Policies that are associated with unrestrained free market global capitalism. It was popularized in the 1980s and is still prominent today. Upcoming are transformative economics, aiming at socio-economic reorganization and change. Aiming to change the economic model for the better, alleviating its negative effect.

Such transformations of negative effects within economic models however should be distinct as a discrepancy in ideologies of well-organized economies prevails. Various economic systems exist in today’s societies of which three classifications are most recognized. A prevalent economy type is named the market economy in which natural economic forces such as supply and demand are the main drivers. such drivers indirectly determine the production of goods and services, investments, pricing, and the overall efficiency of businesses as governmental regulations are limited. Such unseen economic forces are considered part of the the invisible hand, reinforcing the laissez-faire approach meaning ‘let do/let go’. This approach states that governments should have no hand in business and if they do, it most often leads to market inefficiencies. Opposite of this economic type, is a highly centralized economy considered a planned or command economy. The center of this economy type controls both the input and output of a firm while additionally designing the entire production plan. As the government controls the means of production and distribution of wealth, an inherent lack of competition hinders innovation and keeps prices from resting at an optimal level for consumers. The last economy type is a mixture of the previous two, defined as the mixed economy. Proponents of this type argue that corrective measures are required to secure full stabilization. Regulatory Policies are considered necessary to modify the market allocation of resources in case of externalities, decreasing costs, collective goods, or market failures.

Unexpected events happen within all economic system types and often times influence the economy in different ways. Externalities are a first example ofa positive or negative change in the economy, caused by not fully reflecting the influence of a certain action on all third parties. Four main types of externalities exist, namelypositive consumption externalities, positive production externalities, negative consumption externalities, andnegative production externalities. Another consequence of changes in the economy could be the emergence ofmarket successes or market failures. Market failure refers to the moment when the allocations achieved with markets are not optimal. Market success, on the other hand, is the ability of a collection of idealized competitive markets to achieve an allocation of resources which is Pareto-optimal. Pareto-optimal isunderstood to be a situation in which no further exchange of resources or money would make a certain person better without making another person worse. To prevent negative externalities of market failures from happening, several actions could be taken. First, doing interventions could lead to more stable markets.Furthermore, people themselves may have a certain sense of responsibility or feel a certain pressure from fellow human beings. This feeling of responsibility or pressure could demotivate people from taking certain actions that may lead to a negative outcome. Finally, big companies and organizations could be anexample for people of how things should or should not be done.

Even though this equilibrium of pareto-optimality is idealized, social-economic science argues that money should not be the only concept people and organizations value in the economy. All policy models have underlying values such as security, achievement, or universalism. These underlying values can have a greatinfluence on the economy and the decisions made by individuals. To properly understand an economy, the underlying values need to be known. To change our economy towards a more sustainable system, the values on which it is based need to change.Transformative economies like Agroecology and food sovereignty,Commons, Social and solidarity economy, and Feminist economics all focus on values that help ensure environmental justice and a good life for all, within planetary boundaries. Different initiatives such as B Corporations and Doughnut economicsh can support all types of organizations in making change andcommitting to a more sustainable future.

The current digital age has a significant influence on the economy. The emergence of e-commerce has led to new opportunities for companies and a changing shopping experience for customers. The digitization of money has led to new concerns and priorities, such as cybersecurity. A new payment, being the cryptocurrency, has rapidly gained popularity in the last decade. Interestingly, the secure, anonymous and transparent payment method is not controlled by central authorities. A downside of increasingly using electronics is the growingamount of e-waste. With less than 20% of the current e-waste being recycled, there is still much environmental and economical improvement to be gained. On a yearly basis $10 billion can be saved by recycling e-waste.

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