The large number of examples I have given so far have been intended to demonstrate the intimate and significant effect that ethics and values have on economics. However ethics, i.e. questions of good and bad are only one aspect of Dhamma.1 The relationship of Dhamma to economics is not confined to the sphere of ethics. Another way that Dhamma is connected with economics is with regards to the true nature of things, the natural condition of phenomena. In fact this aspect is even more important than ethics, because it concerns the very heart or essence of economics. The word ‘Dhamma’ is here used to mean the truth, or in other words the complex and dynamic process of cause-and-effects that constitutes our world. If economics does not fully know, understand and address itself to the whole causal process, economic theory will be unable to produce solutions to problems that arise, or produce the salutary effects that it desires. It will be an economics that is not in harmony with ‘the way things are’ (Saccadhamma).
‘The way things are’ refers to the nature of nature, i.e. the true mode of existence of phenomena, and it encompasses all aspects of theory and practice. It is not the subject of any particular branch of knowledge, but is the very essence of science or the essence that science seeks to discover. The contemporary trend towards division and separation of the different aspects of a complex subject, one that has even reached treatments of the Dhamma, is a dangerous one and may lead us to stray from the truth. It is another important point that must be understood.
Economics has been said to be the most scientific of the social sciences. Indeed, economists are proud of how scientific their subject is: that they take only those things which can be measured and quantified into their considerations. It has even been asserted that economics is purely a science of numbers, a matter of mathematical equations. In its efforts to be a science, economics tries to eradicate all questions of abstract values as unquantifiable, and seeks to be value-free. But in opposition to this trend, some critics of economics, even a number of economists themselves, say that actually, of all the social sciences, economics is the most value-dependent. It may be asked how it is possible for economics to be a value-free science when its starting point is the perceived needs of human beings, which are a function of the value-systems of the human mind. Furthermore, the end-point or goal of economics is to answer those perceived needs to peoples’ satisfaction and satisfaction too is an abstract value. So economics begins and ends with abstract values. Economic decisions concerning production, consumption, etc. are largely value-dependent, as for example in debates over the granting of mining concessions in national parks. Consequently, it is impossible for economics to be value-free, and it is this dependence on values that disqualifies economics from being a complete science.
Two further points may be made in this connection, the first being that economic principles and theories are full of unverified assumptions, and that a science cannot be so based. It is an important objection. Secondly, it is not such a good thing for economics to be a science anyway. Science has too many limitations to be able to solve all the problems of humanity. It shows only one side of the truth, that which concerns the material world. If economics actually became a science then it would be pulled along the same pathway as science, and then would be restricted in its ability to remedy human suffering.
The best attitude for economics is to see and accept the truth of things. The attempt of economics to be scientific (i.e. exact and precise) is one of its good points and should be maintained. However, at the same time, for any real or effective answer to human suffering, particularly at the present time which is a ‘turning point’ for human society, economics should surely open itself up to co-operation with other disciplines. It should cast a wider, more comprehensive eye on the question of values. As soon as values have been accepted as legitimate objects for consideration, then they become factors to be studied in accordance to their proper status, enabling the whole causal process to be seen. But if values are not studied then economics can never be scientific because it cannot develop any understanding of the whole causal process of which values form an integral part.
At present economics only accepts certain sorts or aspects of values as being relevant to it. It does not study the whole range of value systems. Errors are made, for instance, in economic forecasting, when the factor of values comes into play at a much more significant level than economics is willing to allow for. To give an example: one principle of economics is that people will only agree to part with something when they can replace it with something that will afford them equal satisfaction. Here an objection might be made that this is not invariably true. Sometimes we can experience a sense of satisfaction by parting with something without getting anything tangible in return, as when parents out of love for their children may give them something as a gift without expecting anything back. They feel satisfied, more so perhaps than if they had received something in return, the cause being of course, the love they feel for their children. If human beings could expand their love of others, not confining it to their own families, but feeling love for all other people then they might be able to part with things without receiving anything in return, and experience more satisfaction than before. They would not only not be deprived of satisfaction, or just receive a compensatory amount, but they would actually experience much more satisfaction. This too is an example of how values can affect economic matters.
Another economic principle states that when prices go down, people buy more; when prices go up, people buy less. That is generally the way that things happen. If prices are lowered, peoples’ purchasing power increases. They buy more, and the number of consumers increases. But that is not always the case. If one knows that the members of a society are given to ostentation and flaunting of possessions as statussymbols, then one can make use of that tendency to induce people to think of expensive goods as trendy. People are led to believe that whoever is able to buy such and such an expensive object will stand out from the crowd and be a member of high society. Then it occurs that the more that one raises the price, the more people buy that commodity, because of their desire to be fashionable or to be identified with a certain social group.
In fact, there are numerous examples which economics itself uses to demonstrate how the values of a society determine prices, one of which concerns two men shipwrecked on a desert island. One man has a sack of dried rice and the other a hundred gold necklaces. Ordinarily a single gold necklace would be enough, more than enough, to buy a whole sack of dried rice. But now the two men find themselves stranded on an island with no means of escape and no guarantee of any ship coming along to rescue them. The value of the goods changes. Now the person with the rice might purchase all one hundred gold necklaces for a mere portion of the rice, or he might refuse to make the exchange at all. So the value of goods is a function of demand.
However, what I wish to point out here is that economics must distinguish between the various kinds of demand and deal with the question of the quality of demand. Economics replies that it is not our business, we are only interested in demand, its quality does not concern us. But in fact the quality of demand or want does affect economics. In the example given above there are other possibilities besides trade. The man with the gold necklaces might take advantage of a time when the owner of the rice is not present to steal some or he might just kill the owner in order to get the whole sack. On the other hand, the two men might become friends and help each other out, so that there is no need for any buying or selling or bartering at all; they might just share the rice until it’s all gone. It could happen in any of these ways. So factors such as personal morality or emotions such as greed and fear can affect the economic outcome. A demand that does not balk at violence or theft will have different results from one that recognizes moral restraints.
In order to show that economics is a science, that it is objective and doesn’t get mixed up with subjective feelings and values, economists will sometimes give various examples to back up their arguments. They say, for instance, that a bottle of alcohol and a pot of Chinese noodles may have the same economic value, or that going to a night club may contribute more to the economy than going to listen to a Dhamma discourse. These are truths according to economics. They take no values whatsoever into account. Economics will not look at the benefits or harm that come from a particular commodity, activity, production, consumption, or trade. Neither the vices associated with the frequenting of night clubs nor the knowledge and wisdom arising from listening to a Dhamma talk, are its concern. Others may look at things from those standpoints but economics will have nothing of it.
Thoroughly reflecting on the leading cases above one sees that the scientific nature and objectivity of economics is rather narrow and superficial. Economists look at just one short phase of the natural causal process, as if just cutting out the part that they are interested in, without paying attention to the whole stream of causes and conditions in its entirety. This is a characteristic of economics in the industrial era which prevents it from being a true science and from being adequately objective. However certain contemporary trends seem to indicate that economics is starting to expand its vision to encompass more of the causal process, and is consequently moving in accordance with reality.
The first thing to consider is what economic costs may arise from harm to the consumer’s well-being. Let us return to the example of the bottle of alcohol and the pot of Chinese noodles. We can see that, though their market prices may be the same, their economic costs are not equal. The bottle of alcohol may damage the person’s health, forcing him to spend money on medical treatment. The distillery which produced the alcohol will probably have released foul-smelling fumes into the air, which can be dangerous to health, causing cold sores, for instance. The pollution of the environment causes a natural degradation that has economic effects. It may force the government to devote resources to remedying environmental problems. The one who drinks the alcohol might crash his car as a result, incurring more economic costs. And of course there are the detrimental social effects: drinking can cause crime, and crime’s costs are very high. Also, intoxication will mean that the one who drinks will have poor mindfulness, making him less efficient at work.
Every one of the above points is concerned with economics. They imply the necessity of looking at economic costs on a much wider scale than at present, not just in terms of market prices. There is now a trend towards including environmental costs in calculations of economic cost. Some economists even include them in the price of the finished product. But it is not really enough. In the case of the bottle of alcohol, apart from the environmental costs there are also the social, moral, and health costs (i.e. crime, efficiency of production, etc.) of which all have economic implications.