Introduction
I have spent a lot of time on this blog talking about the politics of care, and less time on the economics of hope, but the two are, of course, intimately related.
I have already begun a series of articles on the economics of hope, the third of which was published this morning. However, one of the luxuries of the last week, created by the fact that I was ill, was that, because I could not spend any time on video production, I could spend time thinking and reading about ways of presenting arguments, whilst also trying them out. That might be everyone's idea of how to manage extreme pain, but it was mine.
This matters to me at present because I think that both the politics of care and the economics of hope are fundamentally new approaches to political economy.
Simultaneously, one of the recurring themes in the comments on this blog over the last few weeks has been the need for narratives to support these ideas.
To help build this narrative, I decided to use the logic of an “if/then” analysis. This is a form of argument that builds cumulatively on the suggestion that if one thing holds true, then another follows, resulting in another that must hold true, and so on.
I have now tried this logic on a number of familiar themes, all of which are big issues in my thinking, and none more so than the nature of economics itself. This piece flows from that experimental thinking.
What is economics?
- If every human being has needs that cannot be met alone, then every human being depends upon relationships with others.
- If people depend upon one another to survive and flourish, then every society must organise those relationships.
- If economics studies how societies organise themselves, then economics is the study of how societies manage the relationships on which life depends.
- If every person possesses unique but finite potential, then society should seek to create relationships that help each person realise that potential.
- If people flourish when they can realise their potential, then the purpose of an economy is to create the conditions in which this is possible.
- If all human life depends upon the natural world, then every economy depends upon its relationship with nature.
- If the natural world provides the energy, materials and ecological systems on which life depends, then no economy can exist independently of nature.
- If the people, relationships, knowledge, institutions, infrastructure and natural systems within a society embody the capacity to meet need and create future wellbeing, then that capacity is its societal capital.
- If societal capital is the total productive, caring, creative and regenerative capacity embodied within a society, then the purpose of economic activity is to create, maintain, renew and wisely use that capital.
- If production transforms societal capital into goods and services that meet needs, then production is a means of realising societal capital, not an end in itself.
- If unmet need persists despite society possessing sufficient societal capital to meet it, then society has failed to manage the relationship between societal capital and wellbeing.
- If care develops, maintains and restores the people and relationships on which every society depends, then care is one of the principal means by which societal capital is created and renewed.
- If education, healthcare, environmental stewardship, scientific discovery, culture and democratic institutions increase society's future capacity to meet needs, then they are investments in societal capital.
- If people specialise in different activities, then they become increasingly dependent upon one another.
- If people depend upon one another, then exchange becomes one way of managing those relationships.
- If exchange takes place across many people and over time, then society benefits from a common system for recording obligations, claims and settlement.
- If money performs that function, then money is an accounting system for managing economic relationships.
- If money records claims upon societal capital but is not itself societal capital, then money is not the economy.
- If finance exists to allocate and manage claims upon societal capital, then finance exists to support the development and use of the real economy, not to become an end in itself.
- If relationships within society are varied and complex, then they require many different institutions to manage them.
- If families, communities, businesses, companies, co-operatives, markets, charities and governments each manage different relationships, then each has an essential economic role in creating, protecting or mobilising societal capital.
- If markets organise only some relationships well, and neglect others such as care, public goods and long-term stewardship, then markets alone cannot sustain societal capital.
- If governments can help society create, protect and mobilise societal capital where markets cannot, then government is an essential economic institution.
- If every institution shapes power as well as resources, then economics must ask who controls societal capital, who benefits from it and who is excluded from it.
- If today's decisions determine tomorrow's societal capital, then economics must manage relationships across time as well as between people.
- If the real limits on an economy are the quantity, quality and resilience of its societal capital, then these are the real constraints on economic activity.
- If money is an accounting system for managing claims upon societal capital, then money can never be the ultimate constraint on an economy.
- If money can never be the ultimate constraint on an economy, then the first question in economics should never be, “Where will the money come from?”, but instead, “Do we have, or can we create and mobilise, the societal capital needed to achieve our goal?”
- If inflation occurs when financial claims exceed society's capacity to mobilise its societal capital, then the task of economic policy is to develop and manage societal capital whilst ensuring that financial claims remain consistent with the economy's real capacity.
- If inequality concentrates control over societal capital and limits access to its benefits, then reducing inequality is an economic necessity.
- If measures such as GDP record flows of economic activity but ignore changes in societal capital, then they cannot by themselves define economic success.
- If the purpose of an economy is to create, maintain, renew and wisely use societal capital so that everyone can realise as much of their finite potential as possible within planetary limits, then economics is the study of how societies manage the relationships that make this possible.
A resulting accounting framework for economics
This understanding of economics also suggests a different accounting framework.
Conventional economics is primarily concerned with measuring flows of money, income and production. It pays much less attention to the underlying capacity that those flows create, maintain, restore or destroy.
This framework begins with a different question. It asks how society's capacity to meet needs and enable people to realise their potential changes through time.
That capacity is what I have called societal capital. It is the productive, caring, creative and regenerative capacity embodied in the people, relationships, institutions and natural systems of a society.
The purpose of economic accounting is therefore to explain changes in societal capital.
Every accounting period begins with an opening stock of societal capital.
Economic activity then changes that stock.
Some activities create new societal capital. Others maintain existing societal capital. Others consume or deplete it. The task of accounting is to record those changes faithfully.
The simplest accounting identity is therefore:
Opening societal capital
+ creation of societal capital
− consumption of societal capital
= Closing societal capital.
As understanding improves, that identity can be refined by distinguishing between creation, maintenance, depletion and changes in the assessed quality or resilience of societal capital. The purpose is not to make accounting more complicated. It is to describe economic reality more faithfully.
Money forms part of this accounting framework, but only a part.
Money records financial claims upon societal capital and helps coordinate the relationships through which societal capital is created, maintained and used. It is therefore a subset of the accounting framework for economics. It is neither the accounting framework itself nor the economy that the framework seeks to describe.
The central question for economics, therefore, becomes:
Has society strengthened or weakened its societal capital?
If societal capital has increased, society has enhanced its future capacity to meet needs and enable people to realise their potential.
If societal capital has merely been maintained, that capacity has at least been preserved.
If societal capital has been depleted, society has become poorer, whatever its GDP, profits, wealth or financial assets may suggest.
Seen in this way, economics is not primarily about money. It is about accounting for the capacity of society to flourish.
Why this matters
Thinking about economics in this way changes almost everything.
It changes what we measure. Instead of concentrating on money, deficits, debt, or GDP alone, we begin by asking whether society is creating, maintaining, and renewing the capacity on which future well-being depends.
It changes what we value. Care, education, public health, environmental stewardship, trust, democratic institutions and social cohesion are no longer treated as secondary concerns. They become central because they are among the principal means by which societal capital is created and sustained.
It changes the questions we ask of government. Instead of asking whether there is enough money to achieve a goal, we ask whether society possesses, or can develop, the societal capital required to achieve it. Money becomes a tool for organising economic activity, not the measure of whether that activity is possible.
Most importantly, it changes what economics is for. Economics ceases to be the study of markets, prices or financial optimisation. It becomes the study of how societies create, maintain, govern and renew the societal capital upon which all future well-being depends.
That, I suggest, is a better economics because it begins with reality rather than abstraction, with people rather than money, with relationships rather than markets, and with the future capacity of society rather than the financial transactions of the present.
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Good stuff! Exciting. I will read again, but I get the gist.
So many posts today – you know you could keep a couple up your sleeve for days when writing is inadvisable. I am aware comments are work for you too.
I did keep two up my sleeve…..I knew there was a lot.
Economics.
The nations population does not understand it.
The government is the economic driving force of the economy.
No government, no trade, no business, no economy.
The government is the power house, not corporations.
Bealdor.
The nations needs, in order of importance:
Military.
Government.
Education.
Security & Safety.
Health Care.
Regional Governance.
Transport.
Social Security.
A nation with out the above is not a place to live in safely and freely with liberty.
The government drives all the above via making money, no one else.
Taxation is to regulate the amount of money in circulation.
Every year inflation decreases the value of the pound(£) so the BoE creates more money, this year about 3.8%, to compensate. every one in the nation, citizens and business receive an extra 3.8% to cover inflation, via pay rises and price rises.
No government, no money.
Every nation of the world has one thing in common, national security provided by a military force.
Just so happens this nations is probably the best in the world, not the largest, or most funded, but a force able to operate and ensure other nations do not attack this nation.
Now to support that first building block, the military requires modern equipment and trained personnel to undertake a task. Spending money on the military does two things for the nations economy, it creates direct and indirect jobs also creates an economy in the nation by personnel spending money.
This is lost if the government buy military equipment from foreign nations, it creates a reliance on overseas, do we trust Europe to defend us, or do we really trust Trump?
The economy now has security and the first base of building.
Something governments have failed to do in the past.
Invest in the nation to prosper.
What was this post for?
Love this Richard.
A few thoughts in response:
“If every human being has needs that cannot be met alone, then every human being depends upon relationships with others.”
Sarah Blaffer Hardy argues -convincingly- in “Mothers and Others” that we evolved to be co-dependent. It’s literally what made us able to become human.
“If every institution shapes power as well as resources, then economics must ask who controls societal capital, who benefits from it and who is excluded from it.”
I read Cory Doctorow’s latest yesterday. “Neoclassical economics is obsessed with reducing all political questions to economic questions and transforming all economic questions to equations which can ‘prove’ which policy would be objectively best (“numbers don’t lie”)…In order to convert all policy questions to equations, we have to discard (or at least assign a numerical value to) all qualitative aspects of a policy, like “Is this person afraid of what another person might do if they demand a pay rise?”, or even “How can we make this group of people less afraid of what their boss might do to them if they demand a higher wage?”. You’ve addressed this.
“If the real limits on an economy are the quantity, quality and resilience of its societal capital, then these are the real constraints on economic activity.”
It would be interesting to apply Taleb’s concept of ‘antifragility’ here: “How could we ensure that our response to any exogenous shock actually extends, improves and strengthens societal capital?”
Brilliant work. Thank you. For the method as well as the results.
I hope you start to feel better soon.
Thanks. Noted, and progress is being made.
IF questions 26-29 accurately describe reality (& IMHO they do),
THEN
the Treasury should not be the senior government department (and should become the Dept. of Finance).
the Chancellor of the Exchequer should not be housed in 11 Downing St. and should be renamed the Finance Minister.
and
PPE Degrees should no longer regarded as qualifications for senior government roles.
and
We need a Dept. For Social (or Societal) Capital producing an annual (legislative) autumn Budget and an annual (reporting) Spring Statement.
(just for starters)
Thank you
This framing really resonates. It’s refreshing to see economics described in terms of societal capacity rather than financial abstraction. When you start from people, relationships, care, education, health, trust and environmental stewardship, the whole picture changes. You’re measuring whether society is actually strengthening its ability to flourish, not just whether money moved around.
It’s a far more faithful description of reality, and it makes visible the kinds of contributions that are usually ignored in traditional economic metrics. Thinking in terms of societal capital feels like a much more honest way to understand what’s being created, maintained or depleted.
And by those rules I would be wealthy in societal capital – although that would not make me suddenly financially well off either lol.
Thanks
“…both the politics of care and the economics of hope are fundamentally new approaches to political economy.”
My first thought on reading this was that it sounds like a module in a degree course, but whether Economics, Sociology or Politics, I couldn’t decide and don’t know enough about any to make further comment. However, you mentioned a while ago that a number of students are arriving at Uni asking about MMT. And at that time, I thought that it would be good to develop such a module and ‘sell’ it to your colleagues in academia (activate them hahaha).
But now, I see that MMT is quite a limited subject and has perhaps been studied and commented upon by a lot folk with various beliefs, and to little effect.
Sheffield Uni BSc Economics has a module Classical and Contemporary Thinkers in Economics: “Understanding the roots …will help you become a more rounded economist, better equipped to identify and evaluate the assumptions underpinning contemporary theory, empirical analysis and economic policy.”
These students would do well to read this blog and apply some critical thinking of their own. (Though perhaps at post-grad level).
What I really appreciate about your approach is that it is entirely new and entirely graspable by people like me (who has limited knowledge and understanding of the economy as is), because it is based in reality and lived experience. I can run with this…
Personally I think this is one of the best things you have written (on the verge of greatness as a new economic thinker – without exaggeration). I have struggled to explain your ideas to friends in ‘economics’ terms, but can surely begin to talk sense now in ‘human’ terms.
Thank you.
Thanks. Appreciated. These ones take a lot of time. The one in money (to come) is on draft 30 maybe.
I posted a serious and impressive call to action from UCL Professor Marianna Mazzucatto- in the past few days in which she advocated that politicians should make people dream of the common good.In her new book, The Common Good Economy: A New Compass, she wants nothing less than a remaking of economic theory and government practice, around a new set of purposes that would tackle the global scourge of inequality and the existential threat of the climate and nature crises. Current economic models have failed us. She argues that the world needs to rediscover the idea of the common good, our shared fate that depends on equitably nurturing the bounty of our only planet.In todays opinion piece in the Guardian she goes further and sets out some key frameworks for achieving this dream. I for one fully endorse these timely exhortations. This quote exemplifies my thoughts exactly:
“Finally – and perhaps most critically – mission delivery must be co-created and governed with citizens, workers and communities. Missions gain their legitimacy and resilience from the degree to which the people affected have genuine ownership of the goals being pursued. That means deliberative forums, citizens’ assemblies and participatory budgeting. It means trade unions with a meaningful seat at the table, not a symbolic consultation. And it means investing in arts and culture as core social infrastructure for the green transition, building the public imagination and democratic engagement that durable economic transformation demands.”
Noted. Thanks.
You said this earlier:
First, economics is about provisioning. Every society must decide how food is grown, homes are built, health care is provided, knowledge is shared, and infrastructure is maintained.
I am despondent. Economics should be about this, but as long as economists are wedded to their models they will only pay lip service to this. Would it not be better to leave economics (the science of money flows) to the economists and invent a new discipline – like provisionomics – that deals with real flows (going in the opposite direction of monetary flows) of real materials meeting real needs – and let the economists play with the money side – flows of money being steered by price signals between privately owned corporations, individuals and authorities?
I understand your frustration, but I would resist giving up the word economics to those who have narrowed its meaning.
Economics existed long before the neoclassical obsession with markets, prices and money. At its heart, economics is about how society provides for itself. Money is simply one accounting mechanism that helps organise that process. It is not the process itself.
The mistake modern economics has made is to confuse the accounting system with the underlying reality. It studies the tokens rather than what the tokens are meant to organise.
So I would rather reclaim economics than invent a new discipline. We need economics to return to its original purpose: understanding how societies mobilise resources, labour, knowledge and technology to meet human need within environmental limits.
Money matters, of course. But it is the servant of provisioning, not its master.
The problem is not economics. The problem is that too much of what now calls itself economics has forgotten what the subject is actually for.