Currently our economy runs on the psychological foundation of behaviorism. Behaviorists claim that we can never know what someone is feeling, SO we can only measure actions (what has already been done). How does this fit into the idea of economics? Economists are concerned with the question- what did you by? Economists are NOT concerned with why you bought it. If we can ONLY measure a consumers actions, the more transactions the better! More transactions MUST translate as positive growth. For every transaction is meant to satisfy some sort of need. Therefore, the market with most transactions fare the best. This is where free market comes in. Free markets supposedly foster the least amount of waste. Waste in this retrospect refers to costliness, a market very few could enter, buyers with more information about a product than a seller, purchases affecting more than the parties in exchange and little competition. All these things are the opposite of a free market- this is a market of incredible waste because it would be terribly hard to make a buck in such a stifling environment. As a consumer it wouldn’t be very fun to live in a economy that’s geared to screw you over with little protection, massive expenses (due to no competition because businesses CAN charge you heaps), and no chance to try to do things out “your way.” Innovation would cease to exists- killed by external control factors. On the other hand- behaviorism does not take into account social comparisons. This is an important idea; highlight it in your mind that comparison is inevitable. This is another important idea, comparison is destructive. We all do, whether through facebook or church gossip we are constantly comparing ourselves to friends, family members, and famous people (like Alexander the great who conquered the known world at 25- damn him!). We all compare and, and it makes us all feel inferior. Science has proven that people feeling inferior status is bad for societies and bad for an individual’s health! What if economists were more concerned with this?
They are! First a little back ground in externalities. Externalities imply compensation. When a denim factory dumps a wholes bunch of toxic chemicals into a river the factory owner has to pay a tax for damages done to the environment (based on the assumption that money compensates for a dirtied up environment). The externality in this example was toxic chemicals. The compensation is the tax that the factory owner has to pay for making a mess of local rivers.
What if you could measure what people are feeling, then we could dismiss all this behaviorism rubbish. Well, you can with subjective well-being. What if economic policy was based on the thought that there are things out there that are bad for us, and should be counted as a negative externality...like comparison or inequality? It would be nice if everyone who parked their Lexus next to a Honda gave the Honda driver $200 to compensate for the comparison and status issues going through the Honda owners head. Comparison is a negative externality.
Currently their is a massive amount of studies being done on status. We would be dishonest to ourselves if we claim to have never felt inferior at least ONCE in our lives. In my case, countless times a day amongst academics!
Now that we know inferiority is an issue in which our society in rampant with what does that have to do with economics? Think about it. Why do we buy a giant TV? Because we think it will add to our happiness. Besides, your friends bought one and it has such great sound, wow it feels like your right there at the game! Without it your life experience is lacking, and your friends are defiantly gaining. Amazing TVless you are the looser in this transaction. But are you? Only because you think you are. In a free market the more choices the better. Why? Because that leads to more transactions! High Gross National Income, higher Gross Domestic Product. Free market has no moral judgment- its all about maximizing returns so we can buy more stuff (to cover more "needs"). We all know that extra income does not trickle down to the poor, although it would be very convenient to keep subscribing to this theory if one is plotting on becoming financially successful.
SO if our economy was more about creating happiness with the least amount of waste what would it look like? Probably Denmark. More economically equal societies fare better health wise, wealth wise and educationally. Are you surprised?
What will happen to innovation without a completely free market?! Do you really believe that innovation is nothing without inequality? This is a great lie. Radical financial inequality hurts US. Not we, not them, US.
So how do you increase happiness with the least amount of waste? What does modern psychology say? What can we do to build happier societies?
If this made no sense at least you can enjoy all the cute kitties!
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