In May, our monthly WEAll Talk featured Mariana Mirabile asking the question, ‘what is blinding economists?’
She broke down the thinking behind current economic theories, like ‘economic growth is always good’.
Micro and macroeconomics
An interesting comparison she made is the microeconomic vs. macroeconomic thinking around marginal cost and benefit.
In microeconomic thinking, we ‘stop’ when the marginal cost meets the marginal benefit. For instance, if we’re trying to stay fit, we don’t eat an extra slice of pizza, because the cost of eating that slice of pizza will no longer benefit our bodies. Since it no longer makes sense for our goal, to eat that extra slice, we stop eating.
At the macroeconomic level, we don’t think this way. Instead, we always think that ‘more is better’. Take fishing for example: when does the marginal cost of fishing meet the marginal benefit? Why is it that we continue to fish, when doing so continues to deplete the fishing stock in the ocean?
Mariana argues that this is a main component of what makes economists ‘blind’.
‘More is better’ was not an issue in the past. It is today
In the past, we were too few people, with too few technologies, to harvest or pollute faster than the planet’s capacity to replenish itself and absorb our waste. We now face a different reality, we have harvested and polluted so much that ‘more’ may no longer be ‘better’.
Mainstream economic theory has not adapted and hinders us from asking fundamental questions
In mainstream economic theory, we assume that the economy is the ‘whole’ and the environment is an ‘input’ to it. If we instead saw the economy as a sub-system of the environment (which it is), we would realize that ‘more’ stuff means ‘less’ of ‘something else’, and that ‘something else’ is the environment, from which we depend on. Only at this point, with this change in perspective, the question of whether ‘more’ is ‘better’ becomes pertinent.
Changing the story
Stories determine our beliefs. And the beliefs that we hold are powerful: they inform policy, societal structures, and ultimately the results that we get. Questioning the foundations of our economic thinking (and of our thinking in general) is then the first step towards a wellbeing economy.
“The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic.”
Listen to Mariana’s entire WEAll Talk, including a rich discussion at the end below.
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