Last night, on the previous thread, I posed the question that is my title today.
Today, I want to list some of the answers others have found, with a couple of comments. I’d be interested to know what you think.
The purpose of the economy is to allocate resources in a way which maximises society’s happiness.
says the book the book Prices and Information: A Simple Framework for Understanding Economics by W. Robert Reed and Max Schanzenbach.
Which sounds fair enough, till you start to think about what that means. How do you average happiness? Is society’s happiness maximised if I’m as happy as a lamb in clover and the rest of you subsist at a level that doesn’t quite reach misery? And is ‘happiness’ a goal that can be achieved through a society’s economic policies anyway? And even if it can, is ‘happiness’ an appropriate goal for homo sapiens? What is happiness? Self-indulgence or self-giving?
But given such questions can be teased out and resolved, this seems like as good a definition as any. In my view, though, the book goes downhill in the next paragraph:
There’s another way of stating the purpose of an economy that will help to show us to how to proceed: The purpose of the economy is to allocate resources to their maximum valued use. If a resource does not go to its most highly valued use, it is wasted and society is made “poorer.” Imagine a society in which no one liked liver and onions, but everyone liked burgers and fries. Suppose that initially resources like pots, pans, cattle, and cooks were all directed towards making liver and onions. Ugggh! What a loss! Think of how much better off that society would be if these resources were reallocated towards producing burgers and fries. While it is true that we would have fewer livers and onions (a lower valued use), we would be more than compensated by additional burgers and fries (a higher valued use). By giving up something we like less in order to gain something we like more, we make ourselves happier, and we do this simply by reallocating resources.
I could pick apart the example (higher medical costs, loss of happiness through early obesity and death, etc), but I’ll resist as much as I can. So I’ll content myself with the comment that – while this restatement gives one narrow definition of how to maximise happiness – it shoehorns society down the path of equating goods and services with happiness, more highly priced goods and services with more happiness, and the ability to buy the most highly priced goods with the most happiness. And I think that is just a nonsense.
So here’s another try:
[National economies] are to provide: a) for the defence of the nation-state, b) for the health and education of its inhabitants, c) for the edification, entertainment and happiness of its citizens.
I like this one. Happiness is in there, but there’s an acknowledgement that there are other things nations should try for. It doesn’t get to the heart of the question the way the first one does – it says what an economy does, not its purpose. The implied purpose, though, is similar to this next definition, taken from the Distributist Review:
The indispensible requirement for any economic system is that it must provide the material basis for life for a sufficient number of its citizens so that society can continue for another season. In addition, it must provide a sufficient surplus so that society can be re-populated and continue for another generation.
The purpose of the economy, in other words, is to allow society to survive. But as well as what an economy must do, the Distributist Review covers what an economy ought to do, and what it ought not to do:
[A]n economy ought to provide the material basis of life for as many members of society as possible, and ideally for all members. It ought to provide for a certain level of material comfort and security; it ought to reward work, ingenuity, thrift, and inventiveness; it ought to supply sufficient excess to fund common goods such as the national defense, religious works, education, etc.; it ought to provide the ground for liberty; it ought to provide the ground for social harmony, that is, each citizen ought to be able to believe that his efforts are fairly rewarded, and that no one lives off of the efforts of another. Having a list of things an economy should do implies another list of things it should not do. For example, it should not depend on slavery; it should not deprive work (including the “stored-up” work known as “capital”) of its just rewards; it should not reward sloth, that is, create wealth without work, wealth not based on some productive endeavor; it must not weaken social bounds or encourage class warfare, and so forth.
So what do you think so far? How much of that do you agree with?
And how do you think our society stacks up against each of these definitions?