Let
us start with the general definition of modern economics. It is defined as a
study of how efficiently scarce resources can be utilized in the process of
production, consumption and distribution and market is projected as the
effective mechanism to achieve this goal of efficiency. Here two concepts -
scarcity and efficiency- are at the root of study of the economics and thereby
market. Scarcity implies that supply of resources is limited in terms of their
wants or use. Therefore, resources are to be used efficiently implying that as
much as possible should be produced with available limited resources. Thus it is
clear that the emphasis of the modern economics is on the quantity as more and
more quantities are produced with limited resources at your disposal, efficiency
is said to have achieved and such an outcome is said to be optimum or welfare
maximizing.
However,
in the backdrop of two developments the prevailing approach and thereby the
prevailing general definition of economics is under threat. One such development
is the admission of the proponents of the same economics that market is bound
to fail in its pursuit of efficient allocation of resources. A major source of market failure is
information asymmetry and consequent issues like adverse selection and moral hazard
extensively found in the market like credit markets. If we dig further into these
issues, we can realize that the ultimate problem is trust-deficit wherein, say,
lender cannot trust the borrower in the absence of perfect information about
the credit worthiness, background and commitment to use borrowed money of the
borrower. Hence such market is said to be imperfect and therefore bound to
suffer from market failure as mistrust will deter the lender having enough fund
to be lent from lending even to most deserving (productive) borrower causing
inefficiency in the allocation of resources. And if we look at the business of
economics through such a perspective today, we can see that ‘trust’ is at the
centre of it. For instance, if trust or mistrust is not involved, what is the
relevance of laws such a ‘labor laws’ passed in the modern welfare societies specifying
rights of the employee from employer or land acquisition bill recently passed
by Indian government which stipulates the dos and don’ts in the context of the acquisition
of private land by the government. This kind of laws is passed under the
presumption that interests of the stakeholders will be hurt which is literally
violation of the trust or contract entered into either implicitly or explicitly
between concerned parties. However, such laws did not exist in the past during
the era of feudalism or slavery as the power relation was unidirectional and
therefore, the plight of the serfs were taken for granted and coerced to suffer
and in such an environment it does not make sense to indulge in an academic
debate over the relevance of trust or irrelevance of mistrust. Like this almost
all matters in the realm of economics can be associated with trust or social or
individual bond as economics is ultimately dealing with the behavior of social
animal - human being. Thus, what concerns economics mostly today is not simply scarcity
of resource; rather it is concerned about scarcity of trust between economic
agents. Therefore, out of two important
concepts in the very definition of modern economics that received major attention,
scarcity of resources, is under threat. Critics of this view may raise here the
question of perennial poverty and misery found in the various parts of the
world today. In my view, it is not the scarcity responsible for this as world
is rich enough to cater to the decent need of the human being. This kind of
problems exist simply because we concentrate our attention rather excessively
and strategically only on the efficiency at the production disregarding
efficiency at the distribution of so produced pie as a result of which a major
section is still deprived of even basic amentias of life.
Second
thing is impact of modern economics on the ecology of human being. Unbridled
pursuit of modern economics to find optimality conditions has taken its toll on
the very health of ecology in various forms like carbon emission, consequent climate
change and environmental degradation like pollution, global warming etc. Now at
least from some quarters we here exhortations like- reduce industrial
production like automobile- is just contrary to what we were told just decades
before as to produce as much as possible so that you will be an efficient
producer. It is worth mentioning here Chian’s
recent decision to ban purchasing of car simply to address the problem of environmental
pollution caused by the automobiles. Similarly the rhetoric heard from
developing countries in connection with the debate over the issue of carbon
emission and subsequent climate change is also similar to this
no-more-production advocacy. Developing countries have accused developed
countries of being responsible for bulk of the carbon emission and therefore,
they should reduce it rather that victimizing developing countries for their
mistake. This otherwise means that let developed countries shut their polluting
industries or find better eco-friendly technological alternative which is
undoubtedly time consuming. In short, there is unanimity of opinion today among
global community that minmum production is the efficient outcome.
Above
mentioned two developments in the field of economics amply makes it clear that
economics should be redefined as a study
of how to produce necessary goods and services within the limits of trust–deficit. This definition of economics replaces the old
concepts, ‘efficiency’ and ‘scarcity of resources’, with ‘necessity’ and
‘scarcity of trust. To realize the underlying importance of this definition of modern
economics, we have to foray into what went wrong with economics in the past
that led to a situation warranting even the re-definition of the very
subject. For this we have to introduce
here another familiar concept called ‘equity’. While the proponents of efficiency
advocated that the pie should be enlarged as much as possible, champions of equity
advocated that such a large pie should be sliced between stakeholders equally without
allowing it to get concentrated in a few hands. Thus, the proponents of equity
advocated for a fair-deal to the larger section of the society with a normative
perspective over the positive perspective of the proponents of efficiency.
However,
it is here economics went wrong. In the pursuit of ensuring that all get fair
slice of pie, including scientific innovation discovering new technologies
under the patronage of the political class (the survival of which always depends
upon the appeasement of the people irrespective of the fact that such an
appeasement is bane or boon) to expand the pie (industrial production) so that
all can be catered and thereby fair-deal can be ensured. However, what was
missing fatally in this process was ensuring a fair-deal to the ecology. In
other words, the zeal to ensure fair deal to concerned socio-economic stake
holders cast a shadow over the necessity of ensuring a fair-deal to Mother
Earth. As the limits of the tolerance on the part of ecology crossed, it began
to respond with fury pushing even the very existence of the humanity into
danger zone. Let us recollect the fact that thousands of billions of years old
ecology of human being is under threat simply because of the pursuit of the so called
development models over just two hindered years of industrial revolution. Thus, today we are forced to cut carbon emission
and other pollution to save ecology and thereby human being. Thus, the failure of
the development models otherwise remind us how inefficient has been our efficiency
in the past. At the same time, the new
definition of economics reminds us to live a contented life with necessities inculcating
the spirit of brotherhood, humanity, harmony and social bonds.
