I would argue that our economy is the metabolism of our society. Thus it is the labour, material, and energy flows into, through, and out of our communities. Economics would be the study of this. Money would be a indicator, but not a major part of the understanding of this metabolism – it is the grease in the cogs, not the machine itself. Too little grease is hard on the machine, but adding more than ‘enough’ does no good at all.
A 200 kg couch potato may have the same metabolism as a 50kg Olympic gymnast, but does either have the output we as a society are wanting to have? Maybe we want the output from a 100kg lumberjack instead. The Invisible Hand assumes that all metabolism is good, and eating more is better than eating less. But if the invisible hand can not distinguish between the outcomes of the alternatives, conventional economics will fail to deliver what we need when we need it.
Can economists say ‘if you want this outcome, this is the best policy’, and be right most of the time? I don’t know. I think we’re going to see a peak in the world ecological footprint per capita in the next few years – can economists predict what that would mean? What do we need to do to maximize the benefits that come from such a change, and minimize the suffering? Hard to answer any of that.
I’m an engineer, and I haven’t taken much economics in school. I feel, as I read much of what is written about economics, that there must be something in First Year Economics that is explained to all of the students, and it is taken for granted by everyone else, but I’ve missed. And in a conversation on Research Gate (link below), I think I found it – it’s the concept of the Rational Agent. https://en.wikipedia.org/wiki/Rational_agent
The Rational Agent is assumed to drive our economy, by making decisions that will lead to the best possible outcome, based on the information available at the time, at all times.
Reality isn’t so simple – we respond physically, rationally, emotionally, and spiritually, at all times, in all situations. We do not act in our long term best interest as a rule (else everyone would live to 100 years of age), and the actions of a mob of individually rational people does not have to be rational.
There is a Zen story about a farmer who gains a horse, loses a horse, gains 2 more horses, his son is injured, etc. And each time, the neighbours say ‘Oh, that’s good luck’, or ‘Oh, that’s bad luck’ as appropriate. Each time, the farmer says ‘Oh, is it?’, and each time the bad luck would turn out to be lucky, and vice versa. A version is found here: http://www.katinkahesselink.net/tibet/zen.html. The rational decision can only be observed after the fact – there is no way to know ahead of time what the best decision will be. We can only base our decisions on experience, and Hope. Hope isn’t rational and our experience is limited. Which is why we are suckers to marketing, and fashion, and we make irrational decisions during stressful situations. And also why there is Fundamentalism (be it economic, religious, Western, or whatever) to ensure that our experience from yesterday still is valid tomorrow.
Believing that we’re all Rational Actors leads us to believe in an Invisible Hand, because if we’re all doing what we should do, then whatever we have done must defacto be what was ‘intended’ to happen. It would be the best of all possible outcomes. Which is plainly balderdash. That logic assumes that the impact of all actions of all people are effectively the same, that there is a higher morality associated with having wealth and power, things that are blatantly untrue. “I won, therefore I was the best player, regardless of if I cheated” is a philosophy that discourages others from playing. In effect, that form of self-reinforcing selfishness breaks down community cohesion, decreasing social resilience.
Maybe we need to think about the ‘whole person’ instead, and their role and responsibilities in a ‘sustainable community”.
Is there need for redefining ‘Economics’ under the present context? – ResearchGate. Available from: https://www.researchgate.net/post/Is_there_need_for_redefining_Economics_under_the_present_context/1 [accessed Feb 19, 2016].