Wednesday, July 16, 2008

What does the economy produce? Hunger, humans or happiness?

It occurred to me recently that the economic system does not really produce anything. From our individual perspective it appears that many goods and services are produced... but what then? Adam Smith famously said that 'consumption is the sole end and purpose of all production', so everything we produce is subsequently consumed, leaving us with...?

We might think that this makes no sense. We produce goods to consume them - that is the purpose and the point. But what happens then? We consume goods and services and then we supply our labour to produce more goods and services, which are ultimately consumed and so one and so forth.

The economist would say that we produce utility. That is, some kind of happiness or satisfaction in each of us from the act of consumption. But much research suggests that happiness is determined internally once some basic human needs are met. So if all this production and consumption is not producing happiness, what is it producing?

From a physical perspective, some ecological economists have suggested that all the functions within an economy are interdependent. We think the production as a one-way street, but the consumption of food, housing and entertainment is necessary for the supply of labour, which goes back into production. It could be imagined that there is no real production in the economy. It is simply a system that enables humans to fulfil their basic biological desire to reproduce and support a growing population. We could then say the economy produces people, but that again would be arbitrarily confining the system, since as suggested earlier, people are a functional part of the whole.

Maybe this is a strange way to view the world. A system without purpose that produces nothing. But in fact, Darwin would suggest that is a good way to describe it. That is how he described biological systems - a system based on variation, inheritance and selection, with no forethought or purpose. We are just animals after all.

Anyway, for those out there who like to blame the political, economic or banking system for the world's ills, and think there must be some alternative, relax. There isn't. Many of the world's problems, from poverty and human rights issues, to environmental issues stem not from our institutional systems, but from greater biological evolutionary systems that blindly created humanity in the first place. Any political or economic system will suffer the same fate.

So please relax and enjoy yourself - because happiness comes from within.

1 comment:

  1. Maybe you could write for Exxon...

    Please excuse my attempt at humour (only if you didn't laugh)

    In many ways I agree - we are part of a larger biologal system. However, all biological systems are always swinging in and out of equilibrium. The questions as I see them are:

    1) Can we evolve a system that brings us to equilibrium?
    2) or do we need the biological system to find it for us?

    There are of course many natural examples of these processes. I.e. predators and prey controling their own equilibrium and say an aboriginal soceity with strict population control...

    Don't get me wrong, I'm not against enjoying myself. I'm just also for my children's childre enjoing themselves too

    (nice blog btw).