Basic Economics
Economics is central to survival. As a society, we cannot consume more than we produce. That is not to say that we can have temporary periods of time where we do consume more than we produce. One may have stored a surplus and a present production is insufficient, one can reduce the surplus. We can trade or borrow with other groups or with their own group. If over some long period of time, one continues to consume more than one produces. In tribal times everyone was expected to pull one's own weight. On a sports team, every team member is expected to play their role. If these expectations are not met there is bound to be resentment. [The resolution of resentment is a function of politics and address later in a later section.]
The building of a surplus can be defined as having more than we need at the present. It is the foundation of wealth. In a hunter gatherer society, the group could gain only as much sustenance, as it needed for that day. If this was done repeatedly there would be no wealth. Predatory animals need to kill prey on a regular basis. They do not store. Humans seem to be the only creatures who attempt to the store more than what they need in a given day. This is because humans realize through experience that there may not be enough sustenance in the near future. Shelter is another form of wealth. Both sustenance and shelter are critical to survival. These are the drives to survive may wealth be the basis for our desire to accumulate wealth.
There are essentially two ways to acquire wealth. One is to be the first to find it labor for it or created it. The other is to steal it.
Therefore, if one is the first to find or create wealth then innovation or labor is the key. If one is to steal wealth, power (discussed later) is the key. This is one of the important concepts that make humans strive to labor effectively, be innovative and/ or be powerful. A critical function of the political process is to redistribute this wealth. From one perspective of the person this is being taken from this could be theft. From the perspective of the person receiving the benefit it is a simple redistribution recognizing some form of entitlement that benefits the group as a whole.
As human lives and technologies have become more complicated and intertwined over the centuries, the benefits of a bedrock of stable social norms and institutions have become increasingly obvious. There have been many strands of opinion and research about which social norms are most favorable for human development. Adam Smith highlighted two of these strands. In the Theory of Moral Sentiments, Smith argued that human beings are inherently sympathetic to the fates of others beyond themselves, but too imperfect to apply such sympathies beyond themselves, their friends and family, and perhaps their countries. The power and responsibility for achieving general happiness of the world population lay with God, with individuals and families presumed able to be fully sympathetic only with those close to themselves.
Trust
has long been seen as an especially important support for economic efficiency.
Trust among participants is an asset vital to dealing with the many
contingencies that lie beyond the power of contracts to envisage. It also helps
to ensure that contracts themselves will be reliable.
OECD has defined as “networks together with shared norms, values and understandings that facilitate co-operation within or among groups.” There is thus much evidence that good governance is a key foundation for economic growth; … that it has benefits for happiness that extend beyond its support for economic progress.
Generosity, (which will be discussed later) is an important source of happiness, also turn out to benefit physical health, with a variety of studies showing that health benefits greater for the givers than for the receivers of peer-to-peer and other forms of support.
Over the past century, there has been increasing realization of the importance of social norms for any joint activity, especially including the production and distribution of goods and services, as measured by GDP. (This can be represented by the social contract, the norms of a particular group. This can develop by consensus, often unwritten or by contract, like the U.S. Constitution.)
Trust has long been seen as an especially important support for economic efficiency. Trust among participants is an asset vital to dealing with the many contingencies that lie beyond the power of contracts to envisage. It also helps to ensure that contracts themselves will be reliable. As will be discussed later there are Extractive and Inclusive Economic systems. Simplistically Extractive are command and control economies with rigid hierarchies that limit the individual to benefit from their own innovations or labors. Inclusive are more lassiez faire allowing individuals more benefit from their own innovations or labors. (This is explored in depth in Why Nations Fail, Acemoglu, Daron; Robinson, James A.)
To feel secure, people need to feel that others care for them and will come to their aid when needed. To some extent, being in such a network of usually mutual obligations sets limits on each person’s freedom to make life choices freely, as the interests of others must always be borne in mind. It is apparent from our results that both features are important for a good life. Some degree of generosity is required.
Some of the last half of this discussion was sourced from WORLD HAPPINESS REPORT 2017 Editors: John Helliwell, Richard Layard, and Jeffrey Sachs Associate Editors: Jan-Emmanuel De Neve, Haifang Huang and Shun Wang.
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