In this chapter, we apply the above thinking to issues encountered and discussed in conventional economics, of both left and right. This page collects various problems, paradoxes and other issues that challenge the discipline of economics, and shows how our Rethink might tackle them.
Our Approach: First, we must recognise that unpaid activity can be as valuable as paid, so some of those who sign off as long-term sick might actually contribute more to Overall Multi-aspectual Good as those in the paid labour pool. But second, we need to understand long-term sick sign-off more deeply, beyond mere economic and psychological issues.
People signing off long-term sick is a multi-aspectual activity, with multiple reasons, of which those meaningful in the ethical and pistic aspect are not always obvious, and usually quite powerful. When people say "It's not worth slaving my guts out any more; it makes me ill" they are expressing not just biotic, psychical and economic factors, but several others, meaningful in other aspects. They no longer enjoy work, and it does not fit their lives and very being any more (aesthetic aspect). The laws about work and sickness allow them to sign off long-term sick. However, often, the deepest and most powerful reasons are mindset and attitude, especially to do with dignity, despair, meaning in life, etc. and with self-protection.
If the upward trend in long-term sick sign-off is deemed a problem, it will not be solved by mere economic and behavioural issues; governments and firms must attend especially to mindset and attitude - and not only in those signing off but in all those in their context, including management and politicians and media.
Our Approach: 1. Jobs are not sacrosanct, because unpaid work is also of great value. Often artificially created jobs actually substitute for, and reduce the value we obtain from, unpaid work. 2. See jobs not as necessary or good in themselves, but as a means to an end, and ask why it is always better to force unpaid work into jobs.
Summary: Microeconomics, macroeconomics, global economics, etc. are levels that need integrating into a single framework. Dooyeweerd can offer such a framework: each level is a functioning in different main aspects, which also defines its main responsibility for bringing Multi-aspectual Good.
Problem: In most economics courses, microeconomics and macroeconomics are taught separately, treated as two very different kinds of thing that cannot easily be brought together, and different authorities are cited for each (Keynes, Fisher, etc.). But this division is starting to break down, and economists become interested in how they interact; for example, the ECB [2020] has an expert group exploring how to link them. Moreover, other levels are becoming reognised, such as global economics, with which Carney [2021] struggles and which the SNA 2025 exercise finds cannot be treated as macroeconomics of nations, and that "The importance of recognizing inter-household flows and stocks ... are of crucial importance in compiling distributional results" [WS2 SNA Guidance Note].
Adam Smith thought the same norms applied to governments as to households and businesses, so is this a way to a common understanding of levels? Unfortunately not: Keynes argued that at least now they are different, not least because of "automatic stabilizers" [Konzelmann ===]. If government decides to cut its spending, for example, there is a multiplier effect and many, especially the poor, suffer, whereas this is not so for households. Governments work with a powerful national bank that sets interest rates, so governments can influence their own borrowing costs, while households do not. And governments can increase their own budgets by taxation and other means, while households cannot. While housholds are concerned about the amount of debt, governments are also concerned about the amount of inflation.
Our approach: We ask a different question, what is it that makes this difference valid rather than to be resisted? And by laws of which aspect does the difference emerge? Focus not on the entity that is a level, but on the multi-aspectual functioning of all agents. At each level, different groups of aspects may perhaps be most in evident in shaping the economic activity. This is (in addition to economic, which is common to them all:
Each operates, comes into being and continues to develop, primarily according to the laws of its primary aspect, which is different in each case. And the validity of the differences among the levels is ensured by the norms of the different aspects. Of course, for each level, all aspects are operative in some way, but the aspects given seem to be particularly important. In particular, at every level the ethical aspect of self-giving generosity is also important. This characterization of aspects may need to be modified by those who understand the levels better.
Summary: Various problems with GDP may be resolved by an aspectual approach in which Harmful economic activity is subtracted from, rather than added to, Good.
[This is largely an extension of Chapter 7.]
GDP was conceived by Kuznets [1934] as a way to obtain a single overview measure of the "economic welfare" of a nation. It is calculated by totalling all the monetary transactions that occur in a nation (or some representative subsets thereof). Despite Kuznets warning against doing so ("The welfare of a nation can scarcely be inferred from a measurement of national income"), GDP has been (mis)used as a surrogate measure of overall quality of nations, and as something to be protected and increased at all costs (this indicates harmful idolatry of GDP).
It is not surprising therefore that adherence to GDP has caused many harms, many problems, especially in environmental and health areas, for reasons discussed below. There is widespread agreement among economists that GDP should not be used as it is, but little agreement what, if anything, should replace it. Hough-Stewart [2022] suggests we need "coherence in our 'beyond GDP' metrics". Some suggestions are idealistic, some are partial. Few would make governments abandon their commitment to increasing GDP.
We enter this debate with caution but it is at least worth exploring where and how our Rethink might offer fresh insights.
Summary: There are three problems with GDP, which an aspectual approach can address.
Coyle [2016n===] suggests four things that GDP cannot cope well with - innovation; free online services; the shift away from mass production to customization and variety; extended international production chains - and others have suggested similar. Notice that these are all problematic from the perspective of the economic aspect (and maybe human creativity) but we, seeing economics as interwoven with all other spheres (aspects), want a deeper and wider view. We focus on four main problems, which many have recognised:
1. GDP is a single quantitative measure. That it is impossible for a single measure to do justice to multiple factors, is much recognised and discussed [WEF; SNA2025; Dasgupta; etc.]. Chapter 5 offers an aspectual explanation, that each aspect offers a different kind of value, which is then transduced to the quantitative aspect, during which we must carefully take into account the unique kind of value in each. This suggests, as a first step, that GDP should be explicitly calculated for a sum of quantified value in each aspect:
GDP = Sum ( Va ) (1)
where Va is the value meaningful in aspect a transduced to a number. This presents GDP as a collection of clearly distinct components, about which judgment may be made separately. Solutions echoing this abound, advocating a set of component figures, maybe on a "dashboard" that presents allows them to be manipulated. For example, one could take into account environmental and wellbeing measures alongside economic, "to value the things that matter and then incorporate this value into the GDP accounts" [Coyle ===] as Masood [2016] tries to to this. HDI is an example.
But what components should the 'dashboard' include? Annual spend by departments of government? Sectors of the economy? Criteria in an index like the HDI? Or aspects? One advantage of using aspects is that problems of an aspectual kind of human or non-human functioning are common across all departments, sectors and criteria, all admitting to common set of types of solution, whichever sector or department they are in. For example, the lingual problem of misunderstanding tends be broadly similar across the board, even though different in detail in each context.
Another advantage might be that it overcomes problems introduced by using other categories. For example, HDI tends to value poor lives less than rich ones [Coyle 2016===] (though an inequality-based HDI was introduced in 2010).
Yet another advantage of categorizing the components of GDP by aspect is that it offers a clear distinction between Good and Harmful, because each aspect clearly distinguishes these and does so in its own way, whereas for example in sectors of the economy of something like education, the distinction is less clear. Dashboards may still be appended, giving the aspectual breakdown of both Good and Harm.
2. GDP is an aggregated measure, built up by, in essence, adding together all the money flows that occur in a nation over a year. Each one has a reason behind it, but all those reasons are lost in the aggregation. So GDP cannot give information about what is really going on in a nation and whether it is laudable or not.
3. GDP tends to ignore all functioning and value that does not involve, or is not measured by, money. The extant discourse recognises two types of this. One is that all free information available on the Internet, e.g. Wikipedia, is assessed as of zero value [WEF; Coyle 2016; SNA2025]. The other is that all the voluntary and household unpaid activity is assumed to be zero in value. Likewise, environmental health is assumed by GDP to be of zero value because it is not measured by money - whereas environmental destruction is often inesecably linked with processes that do involve money, so GDP increases as environmental destruction increases. WEF [===], for example, remarks that
"In Europe that [GDP] includes heroin and prostitution. However, volunteer work, housework or looking after an ageing relative count for nothing. GDP has skewed priorities. In poor countries, the informal sector is practically invisible to GDP. Yet in much of the world, the informal economy counts for most."
Using aspects, we can integrate the first type with the second, in that both types refer to value that is meaningful in various aspects in which we function, free information being of value by the lingual aspect, care in the ethical aspect, and household 'chores' in the aspects that make the household meaningful, including the biotic, psychical and social. The calculation
Va
above is not the money spent but the contribution to Overall Good transduced to quantitative form (as discussed in Chapter 5), so it inherently includes these unpaid and free values.
This offers a third advantage of using aspects as the aggregation categories in calculating GDP, insofar as we can measure value meaningful in them without reference to money and transactions.
4. GDP conflates Harmful and Useless economic activity with Good. The environmental destruction and heroin addiction mentioned above are Harms that are conflated into GDP; somehow, Diane Coyle and others argue, GDP needs to take proper account of environmental damage. First, consider Harm, which GDP misrepresents in two ways. One is that GDP is insensitive to evil that is being done. Kapoor [===] points out that GDP ignores inequalities in distribution, in both the developed and developing world alike. Another kind of evil is biodiversity loss. And there are other kinds, as discussed in Chapter 7.
The other is that by conflating Harm with Good, (use of) GDP in making policy or decisions can actually generate Harm. Because GDP can be increased by encouraging rather than suppressing harmful and useless economic activities, most governments of affluent nations actively subsidise and encourage damaging sectors like aviation and fossil fuels, leaving it to others to make amends for the harm. Too often, these 'others' are those in poorer nations, future generations, animals or the planet, especially since much of the harm is hidden or indirect. Kapoor again:
"For example, GDP takes a positive count of the cars we produce but does not account for the emissions they generate; it adds the value of the sugar-laced beverages we sell but fails to subtract the health problems they cause; it includes the value of building new cities but does not discount for the vital forests they replace. "
More hidden is the distinction between Good and Harm in services, in which they are indirect, especially financial services, in which they doubly so.
There seems to be less recognition of the fact that GDP includes (the amount ot) Useless economic activity. Schumacher [===] gave the example of the biscuit lorries, and we have given indicative figures above, that suggest that up 70% of the UK economy might comprise Useless economic activity. Would it not be better for the UK if that human effort and innovation were directed towards Good?
A limitation on most 'dashboard' approaches is that their components tend to be positive Good (such as those in HDI: education, quality of life), and do not properly address Harm and Uselessness. We suggest bringing in Harm and Uselessness explicitly into GDP (whatever it is called). Instead of merely trying to incorporate "things that matter" by their positive value of various kinds we advocate separating out Harm and Uselessness from Good because focus only on the positive blinds us to the negative so it becomes ignored and, moreover, harmful activity might undermine even things that matter.
Governments should indeed abandon their unquestioning (idolatrous) commitment to GDP, but we need not reject it as such. On a practical level, Hough-Stewart [2022] points out the confusion of alternatives and Masood [2016] remarks, "GDP is too entrenched to be successfully replaced" and says that, "instead, it needs radical reform." Reform implies that there is some germ of validity in it.
The validity of a single quantitative measure was discussed in Chapter 5, for example to provide an overview. The real problem is not that but what it actually gives an overview of: the desiderata that politicians use it for, or merely the amount of money flowing? The latter, of course (as Kuznets warned)! But perhaps the former is not entirely false, in that the money flow from which GDP is calculated is some kind of expression of the average value that people put on things in life - in all aspects.
Another possible germ of validity of GDP is that, insofar as three conditions pertain listed below, GDP might be a proxy for the idea that a society with more money flowing (higher GDP) can generally do more Good ("can" not "does"), so GDP can be a measure of this possibility if used with care. This may be why "GDP is so tightly woven into the economic fabric that anything more complicated than a single number will put politicians and the media off."
Yet another is that it brings goods and services together, both of which can, from our perspective, enable increase in Overall Good. Moreover, of services, it brings together both personal or household services like haircuts, but also financial services. To conflate these is valid as long as all contribute to Overall Good, directly or indirectly, as we discussed in Chapter 6. But this very validity is also a problem, in that much of this does Harm not Good, and we do not want to conflate those, as we discuss next.
These assume three conditions: (a) that all economic activity included in GDP really does increase Overall Good and not Harm, (b) that its diverse values can be measured quantitatively, and (c) that unpaid Good economic activity is included in GDP. None of these are true at present, but we present a conceptually simple modification of GDP that might address some of these and increase its genuine validity for use as a desideratum.
The possible validity is swamped by politicians and others misusing it. Politicians in democracies use boosting GDP as a reason why the public should vote for their proposed policies: "The likely effect on GDP growth statistics is thus used as justifications for contentious policies" [Coyle 2016,10]. Not only are politicians implicated but also are the public, and media pundits, because all take for granted that growing GDP is an important aim that should be followed at all costs. There is a mindset problem here.
We discuss how GDP may be modified to overcome some of the problems with it. Let us restrict ourselves, as Kuznets did, to GDP as a measure of the 'health' of an economic rather than of the wellbeing or status of a nation. The main principle behind our approach is to subtract Harmful economic activity from the Good; notice the word "subtract" in Kapoor above. So Currently GDP is
GDP = Total Good + Total Harm. We propose subtracting Harmful economic activity, not adding it.
GDP = Total Good - Total Harm (2)Total Good and Harm are defined as the sum of the value of Good and Harmful functioning in every aspect of economic activity, including repercussions ("externalities") thereof. Expressed as equations:
Total Good = Sum( Value( Ga ) )(3a)
Total Harm = Sum( Value( Ha ) )(3b)
where Value() is the quantised value of either Ga or Ha, which are the Good and Harmful repercussions of activity that are meaningful in aspect a, as defined in Understanding Harm.
This calculation has at least two interesting implications. One is that unpaid activity, e.g. household, may now be included in GDP. This further implies that nations in which a lot of human activity is unpaid, such as in the Global South, would be seen to have larger GDPs than currently believed. Likewise, the positive value of rainforests and the like, such as in maintaining biodiversity and generating oxygen for the world, and also the value of such things as free information, would also be valued positively.
The second implication, which astute readers might have noticed, is that this makes negative GDP possible. This would indicate that the economic activity of a nation is doing more harm than good, and that nation should change direction. This could be an economy devoted to drugs, tobacco, crime, fossil fuels, etc. Or it could be an economy devoted to generate mainly "baubles and trinkets" in goods and/or services, and generate much Harm in doing so. Negative GDP thus fulfils Adam Smith's original condemnation of the idle wealthy, but more fully than he might have anticipated since he did not properly allow for Harmful economic activity.
It might also help ensure that financial services are given their true, rather than a grossly inflated, value, especially if all that cause harm are subtracted and all that are useless are excluded from GDP.
We also need to consider how to bring Useless economic activity into the equation. The simplest way might be to ignore (treat of zero value) all Good-but-Useless activity, and retain only Good-and-Useful activity in the calculation of Ga above.
That is our current and interim suggestion for modifying GDP, pending further discussion. If a 'dashboard' were to be created for this, it would display and allow control of Good, Harmful and Useless in each aspect for e.g. what-if analysis. Though measuring only the health of an economy, not the wellbeing of a nation directly, it is likely to align with wellbeing much more closely than current GDP does, because it includes explicit reference to value / Good in each aspect.
It is an approach that is integrated, holistic, philosophically sound and normatively sensitive.
Another challenge comes from ethics theory. By reducing Good and Harm to numbers, do we not get into the territory of utilitarian ethics, e.g. of decisions whether to switch rail points so the train kills 3 consultant surgeons rather than 10 children?
Exactly how all the above is to be worked requires discussion and research.
Problems:
Our Approach:
There is much more to say than this brief outline suggests. But With such an approach austerity may become a valid tool of economic policy, beneficial rather than detrimental in its effects in all spheres of life. not least in reducing our ecological footprint.
Current:
Investments by firms in manufacturing plant or people; investments by people in housing; investments in stocks, shares or bonds, expecting some future return; investments by insurance companies and by foreign entities in anything that might make them money. Even if unjust, such as the English system of leasehold, where freeholders can arbritrarily increase the ground rent to extort money from those living in houses. Even if harmful, such as rainforest clearance or fossil fuel companies. It is all seen as "investment", and governments love it and act to protect it at all costs, because they think they can get a little extra cash into the country. Investment is, in principle, risky, i.e. we might not get the return on investment we anticipated, so sometimes interest is expected that monetizes that risk, so that if we make a portfolio of investments, the probability is that we obtain some overall positive return.
Sadly, when we google "problems with investment" we find scores of pages telling us "8 Common Mistakes in Investing" - or three or twenty. All are from the perspective of the selfish investor, and most are about investing in stock or commodity markets, with almost no concern for whether those markets are Good or Harmful or Useless. We have not been able to find literature on fundamental problems with investment as such; we need that, because our approach rethinks that. [If any reader knows of any, please let us know; thank you.]
Our Approach:
First, we try to understand the aspectual dynamics and meaningfulness and potential of investing - the donating of resources in anticipation of some future Good that otherwise might not have happened. The resources donated is usually people's effort and/or money, and the outcome might be people, ecology, knowledge, money, energy-savings or anything else. It always involves risk that the hoped-for good might not materialize. As such, we hear strong echoes of the ethical aspect of self-giving. This suggests that there are two opposite kinds of investing, one going with the grain of this aspect and one going against.
One is investing in order to achieve some future good, for example governments investing in schools or tree-planting, firms investing in recycling their materials, households investing in insulating houses, and humanity as a whole investing in reducing deforestation. These tend to work well, especially in the longer term - and we put this down to going with the grain of the ethical aspect of reality.
The other is 'investment' to make gain purely for self (oneself or one's company or nation), trying to minimize or avoid risk, and with little concern for what Good or Harm it might do in other spheres of life. This is dysfunction in the ethical aspect, and we predict that this is less likely to generate Overall Good in the longer term. The vast majority of this is monetary investment, in the stock market, futures, cryptocurrencies or real estate. The Harm done by it includes, variously, enriching some at the expense of impoverishing others, the lethal stress that many on stock trading floors suffer, unnecessarily increased climate change emissions (especially in cryptocurrencies), societal attitude turning towards self-gain at the expense of others, waste to good talent, idolatry of money, increased greed and fear - these latter two, paradoxically, being "the two biggest hindrances to investment success" [Mills].
Of course, most investment decisions are neither one nor the other, but a mixture. Moreover, often a company or football team invests for, and obtains, some Good but, on recognising that success, its attitude changes to be more self-absorbed, and further investment might not bring proportionately more Good. Our hypothesis is that inasmuch as the investment is of the second kind (self-centred) the Harm will outweigh any Good especially long-term. That hypothesis needs to be tested by research - which sadly seems to have never been done.
(Note: we are not talking only about so-called ethical investments, but more widely about the very ethical aspect of self-giving itself. Many ethical investments are of course motivated by that, but many are merely juridically curbed versions of self-centred investing.)
In addition to recognising the ethical aspect, we may ask what is the valid meaningfulness of what we are investing in, and the multi-aspectual functioning of the investing as such, especially the pistic and ethical aspects of mindset and attitude. Some examples:
Problems with our approach: The above sounds very stark, for-or-against, but we do not want it to be; it needs discussion and research of its hypothesis.
Our Approach: Understand which aspect(s) governs this behaviour. We would first note that the loss is seen as a failure, even a personal failure. In this case, we predict it is likely to be two aspects at play, other than the economic:
Research is needed to establish whether that is the case.
Summary: The roots of both the Tragedy of the Commons and the Free-Rider Problem are exposed, leading to ways to address them.
[Section edited]
Garrett Hardin introduced the Tragedy of the Commons (ToC) as follows:
"Picture a pasture open to all. ... As a rational being, each herdsman seeks to maximize his gain. Explicitly or implicitly, more or less consciously, he asks, 'What is the utility to me of adding one more animal to my herd?' This utility has one negative and one positive component. The positive component is a function of the increment of one animal. Since the herdsman receives all the proceeds from the sale of the additional animal, the positive utility is nearly +1. The negative component is a function of the additional overgrazing created by one more animal. Since, however, the effects of overgrazing are shared by all herdsmen, the negative utility for any particular decision-making herdsman is only a fraction of -1. Adding together the component partial utilities, the rational herdsman concludes that the only sensible course for him to pursue is to add another animal to his herd. And another; and another ... But this is the conclusion reached by each and every rational herdsman sharing a commons. Therein is the tragedy."
The ToC can apply to any resource shared in common, such as unpolluted air, clean water, rainforest, climate and so on. It is our treatment of environmental 'resources' seen through the lens of the economic aspect and - especially that of the selfish Rational Economic Actor. When the Rational Economic Actor is the primary presupposition in economics practice and theory, as it has been for decades and still is, it is a major tragedy.
The Free Rider problem (FRP), similar to the ToC, is when some people consume but do not pay the proper costs of consuming, so that others have to pay. (Examples: People who jump on trains or buses without buying a ticket and evade inspectors; those who drive around the government-built road system, without paying vehicle taxes; the able-bodied who park in free spaces that are reserved for the disabled; a lighthouse built by a coastal town which benefits all shipping not just its own; a crowd watching fireworks from a distance; those supported by government benefit schemes.) The FRP is exacerbated by common, public goods being "non-excludable" (it is difficult to stop free riding) and "non-rival" (consumption by a free rider does not reduce the availability to others), so there is neither incentive nor means to reduce free-riding. In the extreme, if everyone free-rides, then nobody pays and the whole system shuts down (unless somebody subsidises it).
The two are related, and may be seen as opposite sides on the same coin. FR applies when everybody should contribute to the commons, but ToC applies when everybody should restrain themselves from taking too much from the commons. Both ToC and FRP, if viewed purely through the lens of the economic aspect, are major problems, and for a similar reason, the selfishness of the economic actor. It is this dysfunction in the ethical aspect which makes them into a tragedy and a problem. With good functioning in the ethical aspect, neither is problematic and both would work well. Ostrom [2010] argued from anthopological studies that in actual fact the community that utilizes a common resource usually develops rules about its use. These are social agreements - but they are developed according to the attitude of the community, which is shaped by ethical good-functioning of willingness to forgo some of their own benefit, and pistic functioning of belief that this is normative.
In more detail, if we ask what determines which rules are devised, and why rules are held to, we meet the aesthetic, juridical, ethical and pistic aspects (people seeing the whole picture, being fair, being generous, and believing it is right to do so). We see these aspects as important in overcoming both the FRP and the ToC in practice, and that they should be incorporated into both models. This is why some social incentives might work, such as (public or private) naming-and-shaming. [Note: Aspectual understanding of Ostrom] These are what Trainer [===, 140] calls for when he calls for a new culture, with "kindness and conscientiousness", "smiles and gratitude" and the operation of reputation.
Interestingly and sadly, Trainer then argues for the effectiveness of these solely in terms of self-interested rewards to the giver! This troubling inconsistency may be overcome by replacing his presupposition of Rational Economic Actor with the multi-aspectual functioning person, as we do. They do indeed have an impact back on the giver, but not causally but because humans function in all aspects simultaneously and with agency so that, on receive something meaningful one aspect, such as kindness, we might respond in another aspect, such as with a smile, but might not.)
We may ask the deeper question, of why is ToC a tragedy and why is FRP problematic? In reverse, why does it seem not problematic that a town should build a lighthouse to help all shipping, not just its own? Though philosophical questions, they are also practical, in that they give us reasons to avoid it. Answers is to do with their meaningfulness and which norms they transgress, and we may find answers in many aspects.
The answer from the economic aspect is that the pool of resource might run out. The ToC is framed as limited resource, and economics then answers that resource-fed behaviour will change. However, such change occurs all the time, so the economic aspect does not tell us why ToC is a tragedy. This inability of the economic aspect is even clearer with the FRP. If resources are plenty (non-rivality), then, from the perspective of the economic aspect there is little problem. We must seek the answer in another aspect. Both become a problem when viewed from the juridical aspect. Both free-riding and the selfish rational decisions of a herdsman seem unjust. It is the juridical aspect that begins to supply an answer. Non-excludability is also a juridical concern, to do with just sanction, though also the formative aspect of achieving the sanction. (Christians sometimes refer to Paul's injunction "If a person will not work, neither should they eat [maybe referring to communal food]".)
But this does not explain why we intuitively applaud a town that builds a lighthouse for the good of all shipping, and that the people of a nation should give generously to the poor (whether by voluntary sacrifice or government tax and benefit system). It is the ethical aspect that explains that. Also the ethical aspect, with pistic belief, that explains why each herdsman will voluntarily agree to limit their own self-interested extra animal. It is often these aspects, more even than the juridical and economic, that motivate and lubricate the coming to agreement on rules, though it may be the more visible social and economic aspects that are employed in arguments during discussion.
Likewise, government-provided road systems. Some road use is necessary, and its cessation would be problematic from a juridical perspective. But much is mere convenience rather than necessity [Note: Road Statistics] so the juridical necessity is weakened. =====, like firework enjoyment, is of the aesthetic aspect. Both may be seen as
What about firework-watching? It feels different. Whereas the lightouse benefits those in danger and the benefit system enables the poor to live, most firework-watching benefits those who are neither in danger nor poor. It is a non-essentials. All that the economic tells us is that if nobody pays then firework watching will cease, but not why this is a problem. Why this is a problem is explained by the aesthetic aspect, that enjoyment contributes to Multi-aspectual Good - partly similar to much non-essential road use.
However, is the aesthetic aspect sufficient justification to provide them despite free-riding? This raises the issue of Harmful activity. Most firework-watching causes little harm to humans, but can cause some harm to animals; most road use causes considerable harm, even though the drivers to not know it: every mile we drive contributes towards the one third of all climate change emissions that come from road use. In economics practice and theory, we must start to address the question of when, or whether, my aesthetic enjoyment or convenience outweigh damage to the planet - the ultimate common pool resource. The issues of aspectual Harm and non-essentials are discussed in Chapter 7.
In such ways, awareness of the post-economic aspects, which retrocipate upon the economic, can help us understand such problems more adroitly and offer some guidance on how to avoid them. We will leave readers to discuss guidance.
What is national debt? Why does it matter? Are we at the end of an era of the dominance of the USA and its dollar? The =====
Why do we have to see it differently? Because conventional understanding is circular. We want to break this circle.
Paper that UK Chancellor relied on that said that highly-indebted economies would have lower growth, but which was wrong. they grew.
Konzelmann [2019] argues that national (or government) debt is unlike household or business debt (and should not be made a reason for austerity policy). Whereas household debt affects only those within it, national debt affects all. Moreover, governments can print money and take other measures that households and businesses cannot. That is valid insight, but there may be a deeper difference, on which aspects most make if meaningful as a problem, in addition to the economic. Individual and household debt are largely a juridical issue: owing someone something. Government debt however, while having a juridical component, is more of a formative and pistic issue (along with economic(. Governments take out debts in order to enable people to achieve things (formative aspect), which things are deemed important (pistic). ===== However, does not that apply to household debt too?
How we differ:
scrap: National debt in terms of functioning:
"We the world agree [social aspect] and declare [lingual] that nation X can give its citizens more resource [economic] to function more towards Good (or Ill) than they could otherwise, in expectation [pistic] that some of that Good will redound on us and we will take the risk that it does not [ethical]."
===== what missing from that? The resource comes from the world?
Personal debt assumes the social agreement on currency and possibly the declaration. But it retains the economic, pistic and ethical/juridical.
It also offers a good test for our approach.
Lending and giving:
--- from SMcG: # smcg 3 November 2022: # compound intwewst: is it a righteous thing? jur: honour debt. # 3w debt crisis cos of compound int. they had already paid due debt. # aes: unable to escape fr the debt cos of compound int. unbalanced w they repay cf w they owe. [jur proportional] # debt as % of gdp # if debt is creational what is the good and why the evil # imbalance btw saving and borrowing rates; they used to be coupled, but now they are not. but debt decouples them
--- from audio: [11.00] global econ what is really nasty is how quickly things have changed governments now have to pay bigger interest rates # UK gove 2.6 trillion £. Rushier Sharma. Problem is borrowing from abroad. Foreigners stop trusting. Britain Liz Truss unfunded tax cuts. Investors fled, pound followed, cost of borrowing shot up. gov fell. # Emerging and developed markets distinction blurred. # Budget deficits of 5-6% of GDP in UK and USA. Taking on new debts of this amount each year, 5-6% of the value of everything their economies produce in that year. Those deficits adding quickly. In both countries, total debt have risen above 100% of GDP. # But US and UK not alone. Lots Govs borrowed heavily to rescue their economies after 2008 crash. And even more heavily in response to pandemic. [13.52]
Our Approach: 1. To begin understanding, separate out all aspects of the functioning of all stakeholders, and understand exactly why inflation is problematic in each aspect (and maybe even good in some aspects). 2. Especially remember the hidden impact of mindset but especially attitude (ethical aspect). Hypothesis: The main reason inflation occurs is self-protection and greed (dysfunction in the ethical aspect). Producers protect themselves by raising prices; consumers protect themselves by demanding higher income - both despite the fact that 87% of them could still survive with a cut. [87%: a figure based on observation; please come up with the more appropriate figure.] 3. Then see the retrocipatory impact of this on functioning in all other aspects.
There is need for research there.
E, which is less than the aggregated claims of creditors, how does one distribute the Estate? That depends on what motivates the way it is distributed. Various rules are motivated by different aspects, and the aspects help us understand the 'why' of each rule.
Both austerity itself and the debates about austerity are problematic. Konzelmann [2019] offers a good discussion of the multifarious problems of austerity and its application by governments. By both discussion of economic theory, especially Keynesian, and examining cases of the application of austerity over the past 100 years, in the UK, Germany, USA, Japan, Ireland, Greece and Iceland, she shows how application of austerity both causes hardship and also usually proved counter-productive to the economy (it reduced rather than increased GDP growth).
The austerity debate is predominantly shaped by the left-right war; most are for or against it ideologically, and few there are who can see the good and bad in it. Konzelmann is one of those though mainly against it.
Another problem with the austerity debate is that ecological footprint and other ecological isuses are largely ignored. Given that the ecological footprint of most Northern European nations is around three earths and that of the USA is five earths, people in these economies need to drastically reduce our consumption - and this might feel like austerity to those of us who have to do so. In this light, policies aimed at austerity would seem to be Good Thing, even though we might squeal. The conundrum, however, is that the Green Parties argued against policies of austerity. Why? Why exactly is austerity bad? And is there anything good in it?
Our Approach. We ask different questions. We ask about the meaningfulness or austerity, the aspectual functioning of austerity, and the presuppositions underlying the debate.
In entering the austerity discourse, we try not to take conventional sides but try to understand what is meaningful to both sides to make them take the position they do. We ask "What valid insights might each side offer? What is austerity and why does it matter? What actually happens in austerity?" We seek to uncover the presuppositions of each side and how these might contradict their arguments (immanent critique). And we seek understanding of the dynamics of austerity in all its aspects, drawing on the idea of multi-aspectual function of economic activity set out in Chapter 6 and differentiating good, harmful and useless as in Chapter 7.
Konzelmann [===] looks into austerity in some depth, revealing much that could be usefully re-conceived using our Rethink.
1. Meaningfulness of austerity. Why (in what ways) was austerity meaningful to governments: what motivated the gvernment's decision? Konzelmann [2019, chapters 5-8] examines a number of cases of applying austerity, to find out what each sought to achieve. Each was motivated differently, made meaningful by different combinations of aspects, as set out in the following Table.
2. Presuppositions of Governments. Early austerity policies presupposed government finances to be like those of households, but they were different in important ways. See section on levels. Another presupposition is that government debt is a problem as such. We believe that it is problematic (though for different reasons than usual), but perhaps more important are factors meaningful in other aspects, such as the attitude and mindset of who holds the government debt (e.g. whether they are "hostiles"), which is ethical and pistic issues rather than economic.
3. Economists' presupposition. Arguments against austerity by Konzelmann [2019] and others are based on the presupposition of the validity of GDP growth as a valid goal or desideratum for a national economy, and shows that in most cases the application of austerity actually reduced GDP growth, and hence was self-defeating. However, as most economists accept these days, GDP is deeply flawed both as a measure and as a goal. Becoming aware of the inconsistency in this presupposition allows us to seriously consider such possibilities as de-growth, especially for the sake of climate and environmental responsibility.
4. The multi-aspectual functioning of austerity. Things tend to work well when we function well in all aspects, and this is true of the application of austerity as for anything else. As seen in the Table, dysfunction in the ethical and pistic aspects (attitude and mindset) underlay many of the applications of austerity. This has a deleterious impact on functioning in other aspects, not least the economic (explaining why austerity is counter-productive) but also the juridical (oppression), psychical (psychological stress) and aesthetic (fragmentation of society), etc. Konzelmann reveals "political, economic, ideological and sociocultural" factors in austerity: meaningful in the juridical, economic, pistic, social and formative aspects - and yet other aspects apply too, not least the biotic aspect (e.g. ecology, health). Instead of trying to predict fiscal multipliers etc. (purely quantitative-economic factors), we should take all multi-aspectual functioning into account.
4. The possible validity of austerity. Austerity as it has been practised has usually been both harmful and counter-productive, not because austerity is inherently evil, but because of our aspectual dysfunctioning. This leads to the question, "If we functioned well in all aspects, could austerity prove beneficial? In which circumstances? And how should it be applied?" A strong indication of the possible validity of austerity is that the kernel norm of the economic aspect is frugality. This is what is needed if the affluent cultures are to reduce their disastrously large ecological footprints, as well as tackle their crises of obesity, psychological breakdown, etc. If, as Chapter 7 argues, Useless economic activvity should be reduced, then austerity reduces the burden of non-essentials on the economy. Insofar as governments have a responsibility to set up structures to encourage Good rather than Evil functioning, then applying austerity could be useful in encouraging these.
But when should austerity be applied? One is when the people refuse to do what is Good and are wedded to what is Evil - as is arguably so today in many affluent cultures, to a smaller or larger degree. If Dooyeweerd is correct, frugality is good inherently [see Chapter 4], even in situations of seeming plenty; this offers strong philosophical underpinning for Keynes' [1937] famous dictum that "The boom, not the slump, is the right time for austerity at the Treasury."
How should it be applied? With mercy and justice. Certainly not absolutizing the economic norm of frugality, but in harmony with the norms of all other aspects. We must take into account the functioning in all aspects, as mentioned above, especially the juridical and ethical. This would suggest that austerity should be applied to the wealthy rather than support for the poor - as Konzelmann [2019] suggests was the case for Iceland. She points out that money flowing through the poor tends to be used on necessities, while money flowing through the wealthy tends to be used on non-essentials, often luxuries, which often are produced in systems of oppression. This is not always so, of course, but usually is. This is why austerity that reduces support for the poor rather than the wealthy is harmful.
This page is part of a Reframing/Rethinking of Economics by the RLDG.
Created 22 September 2023.
Last updated: 26 September 2023 GDP. 14 October 2023 GDP eqns simplified. 30 October 2023 GDP financial services. 27 November 2023 gdp bits from ze26. 28 November 2023 more from ze26, incl. aggregated. 2 December 2023 put probs b4 validity of GDP. 14 December 2023 Inflation. 29 January 2024 austerity. 7 February 2024 konz in nat debt; rw austerity. 1 March 2024 Tragedy of Commons and Free Rider here. 27 March 2024 gdp integr. 2 April 2024 Brought from r8-slm: Mincro-macro, austerity, investment to here. 22 April 2024 investment, innovn and trade/aid brought here from r6. 25 April 2024 loss aversion. 15 May 2024 rearranged into sections for day-to-day and theoretical; added long-term sign-off; jobs. 17 May 2024 Harm in GDP; Coyle.
Who
Main reason / motivation
Aspects
UK Treasury, 1920s and 30s
To reduce public debt and maintain confidence in the currency
Mainly quantitative-economic (debt amount);
pistic (confidence)
Weimar Germany, 1920s and 30s
To curb hyperinflation and maintain confidence in its currency.
Mainly quantitative-economic (debt amount);
pistic (confidence)
USA, 1930s
To relieve poverty and increase living standards.
Ethical-juridical (relieve poverty);
aesthetic-economic (living standards)
Chile, Pinochet, 1970s
To remove a Marxist economy and to preserve the interests of American multinationals.
Pistic (ideology);
Ethical dysfunction (self-centeredness)
USA, Reagan (USA), 1980s ("selective austerity")
To reduce the size and importance of the welfare state, encourage more paid work, increase military power.
Pistic dysfunction (idolatry of military power;
anti-government ideology);
formative-economic (paid work)
Ireland, later 1980s
To reduce public and fiscal debt without harming social welfare.
quantitative-economic (debt amount);
ethical (social welfare)
Japan, 1990s
To counter fiscal deficit while still supporting society and industry.
Quantitative-economic (deficit amount);
formative (industry);
social (society)
Ireland, after the 2008 crash
To be able to fund its own debt (not now having its own currency), while also reducing debt.
Pistic (dignity);
quantitative-economic (debt amount)
Greece, after 2008
Fear of its Eurozone partners lest Greece's problems spread elsewhere and threaten the entire zone.
Pistic (sanctity of Eurozone);
Ethical dysfunction (selfishness of Eurozone partners)
Iceland, post-2008
To reduce gap between wealthy and poor
Quantitative-juridical-ethical (Concern for the poor, but seen through the lens of the quantitative aspect)
UK, post-2008
To eliminate government debt;
Reduction in size of the state.
Quantitative-economic (debt amount)
Pistic (anti-state ideology)