Day 130: Market or Government Failure? No - Human Failure

One of the most prominent discussions in Economics and Politics is about who does better: the Free Market or the Government?

The neo-classical economic textbooks will say that the free market is generally the most efficient in allocating resources - but that there are instances where the market fails (See 'Day 81: The Role of Government in the Economy'), and then the government has to step in to correct these mistakes.

Public Choice Theory argues that it is incorrect to just assume that because the market fails to be effective under certain conditions, that the government will therefore, automatically be able to correct the imperfections of the market. The objection relates specifically to the assumption that in the market, everyone acts according to their own self-interest and that public officials, on the other hand, take everyone's interests into account.

To them that is a big inconsistency - because you cannot argue that human beings always act in self-interest, yet, on the other hand say that public officials always act in the interest of the whole. According to public choice theory, politicians and bureaucrats as much as any participant in the free market always acts in their own self-interest (See 'Day 82: Government Failure').

So - the whole discussion on who fails the most: The Government or the Market - is really mis-directed. The simplicity of the situation is that: It's not the market or the government that fails - it's the human.

When considering economic problems, we cannot simply distance ourselves from the simple truth that all economic interactions - whether instigated from within the market or from government - is always determined by human beings. And human beings are seriously flawed beings in that they believe that they MUST be self-interested and that this is the only rational way to exist and behave.

If we ever hope to get some real solutions in terms of an an economic system that always provides the best results - we cannot ignore 'The Human Factor' - as this is the starting point that will determine the outcome the economic system will bring about.

So - the question is not: How does the balance/emphasis need to change between the Market and the Government's role - the question is: How does the human have to change?

This is a question that in the current economic and political discours is conveniently ignored. It is simply accepted and assumed that the human is a fucked up creature and we just 'have to find ways to control the thing' so that its behaviour and actions don't cause 'too much' damage.

If we really care about 'market imperfections' and 'government failures' - we won't just sit around talking about what's the least of two evils. Instead - we'll make a commitment to redesign ourselves as human beings so that we can look at the economic system with fresh eyes and not create an economic system that merely re-inforces unwanted selfish and spiteful behaviour - but instead encourages support and cooperation within the understanding of what we are responsible for as this world and our reality.

This is the primary focus of Desteni - and all who claim to want to create a better world or claim to be committed towards solving the economic and political conundrum should sign up for the free DIP Lite course to take the first steps at finding out the possibilities we have as a species of re-inventing ourselves into an optimum version and a manifestation of Life instead of Evil. See - EVIL is simply the word LIVE spelled backwards - that should tell us something... We've never lived as a species, we've merely tried to outlive and outsmart others in evil ways - which is really not what life is about, come on.

And economists and political scientists have competent enough brains to see that this problem is not going to be solved unless we address the problem of human failure. You simply have no excuse to not want to take responsibility - you have the skills and the ability to be an example in this world - and so you have a responsibility to. Swallow your academic pride and start over - start where you haven't been before - start with yourself. 

http://lite.desteniiprocess.com

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• Dag 126: Turning a Blind Eye to Corruption
• Day 89: There ain't no Such thing as a Free Lunch
• Day 101: True Care Knows no Compromise
• Day 88: Capitalism vs Socialism?
• Day 97: An Economic Life Support System

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Day 43: Homo Economicus & The Invisible Hand

It is strongly suggested to view the Documentary "The Trap" by Ian Curtis as complementary material to this blog.

Next we will be looking at the 'role' which has been assigned to the human within the economic system.
This is because all models within economics are based upon certain assumptions about human beings and how they operate -- and thus how humans will react to particular situations, based upon this assumption. It is thus important to understand this point as this is one of the re-occurring patterns within economics on which all graphs and models are based on in terms of the various interactions and dynamics at play within the field of economics.
This will become clearer within the blogs to follow.

Within current economics, the Human is viewed from the starting point of being a rational being. This rationality is defined in terms of survival and self-interest -- where it is deemed 'rational' for a human being to act and behave in a way which will always be directed towards achieving maximum benefit for self, within the context of continued survival and self-gratification (as we've already seen that 'wants' are prioritized over 'needs' -- and thus satisfaction/personal gratification plays a role all throughout economics -- see Day 40: What is Economics for context) . Rationality is thus not defined within the context of logic or common sense -- but the ability/tendency to behave and think in an egotistical, self-centered and selfish manner. In terms of economics, this gets translated into human beings always acting and behaving in a way which they believe will maximize profit/wealth accumulation or at least minimize costs / loss. Within this context, the human is often referred to as a 'Homo Economicus'.

[Now imagine, I had been reading many texts and readings on the subject where authors kept on referring to human beings making 'rational decisions' -- where to me the decisions described by the author weren't rational at all -- and where I only later found out that with 'rational' they meant 'self-interested'. So you see, economists don't just do magic tricks with numbers -- they also do magic with words!]

The best way to introduce this point within the context of economics may be to look at the famous quote by Adam Smith (18th Century Scottish economists -- often dubbed the "father of capitalism"), from his book The Wealth of Nations:

It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages

This quote clearly shows how humans are viewed as essentially self-interested beings -- but where this selfishiness indirectly leads to the 'greater good' of society. This 'movement' from a person being driven by self-interest only and then indirectly through only being considered with their own well-being, supporting society as a whole to be better off -- is often mentioned within the concept of the "Invisible Hand" where it is as though an 'invisible hand' moves everyone in a way that's "best for all".

By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was not part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it. - The Wealth of Nations

What's not being considered here, is that people following their own self-interest does not in fact lead to the 'betterment' of society as a whole -- as the current status within the world clearly demonstrates, where there are more people worse off than there are people well off. This is because no-one has ever been equal or been supported to be within an equal position -- and where those with particular advantages such as skill, access to resources, location, connections etc. -- are able to move more effectively within the system and will 'trample' everyone else within their pursuit of happiness, as a game of survival of the fittest.

What is also interesting to take note of, is that the particular observation of the human  as being essentially self-interested and not caring about anything or anyone else in this world (which is quite accurate, this is what we've accepted and allowed ourselves to become and live out through the current economic system as a reflection/extension of our own nature) -- has never been questioned. Instead of questioning this nature and asking ourselves whether this is something we really want to live by, we took this point for granted and went ahead and built our entire society/economic system upon this point. Where we don't go: "Hmm, us Humans, we are really self-centered egotistical beings who only care about ourselves -- maybe we should do something about this" -- but instead go "Hmm, us Humans, we are really self-centered egotistical beings who only care about ourselves, let's create a society/economic system which uses / harnesses this point to get people to move and create the system in such a way that they are rewarded for self-interested behaviour!"

And so we've created an economic system which is fueled by, and appeals to self-interest to get things done -- instead of human beings re-evaluating their very nature as self-interested beings and committing themselves to changing/transforming themselves as this nature so we may act and behave in a way which is considerate as what is Best for All and be responsible living beings on this planet!

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