The Future of Economics. M. Umer Chapra
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to abide by these rules even when doing so hurts their self-interest. Whether or not they have succeeded in this task is a different matter. However, economics may not be able to ignore religious values and the associated motivating force if its goal is the realization of comprehensive well-being.
A society may have attained the pinnacle of glory in the material sense, but it may not be able to sustain it for long if the moral fibre of individuals and society is weakening, the family disintegrating, the new generation unable to get the kind of attention and upbringing that are necessary for an achieving civilization, and if social tensions and anomie are rising. The material and the spiritual aspects of well-being are not, therefore, independent of each other. Rather, they are closely interrelated. Greater family harmony may help raise better individuals to operate in the market, and better social harmony may create a more conducive environment for effective government and accelerated development. If this is true, then the emphasis on serving self-interest and maximizing wealth and consumption may have to be toned down so as to serve social interest and optimize human well-being. Some uses of resources which serve self-interest and fit well into the hedonist framework may have to be reduced to fulfil the needs of all individuals in society and, thereby, promote family and social harmony.
Available evidence supports the contention that material advance is not by itself sufficient to increase happiness and social harmony. “Rich countries are not typically happier than poor countries,” concludes Richard Easterlin after 30 surveys conducted in 19 developed and developing countries.5 There is something else that is also needed to create happiness and harmony and to remove tensions and anomie. Therefore, if economics concerns itself with well-being in its comprehensive sense, then it may not be able to confine its discussion to just material prosperity.6
How human well-being is defined is, therefore, an extremely crucial factor in the allocation and distribution of resources. If there is a difference in the concept of well-being, then there will also be a difference in the mechanisms and method for realizing it. There are three important mechanisms which determine the use of resources in any society or economic system. These are: filtering, motivation, and socio-economic and political restructuring.7 Just as it is possible to define well-being in a number of ways, it is also possible to have different mechanisms for filtering, motivation and socio-economic restructuring.
Firstly, all the different claims on limited resources need to be passed through a filter to create an equilibrium between all the claims on these resources and their supply, in a way that the realization of spiritual or humanitarian goals is not jeopardized. There may be different ways of filtering. Three of these are: central planning, market mechanism and moral values. Experience of socialist countries has shown that central planning is not an effective mechanism for filtering even in the material sense and almost all of them have abandoned it by now, except perhaps Cuba. However, market mechanism has performed extremely well. Prices determined through the interaction of supply and demand in perfectly competitive markets help filter out the various uses of resources in such a way that an equilibrium is established. But the problem with the use of market mechanism for filtering is that it is possible to have several market equilibria depending on which tastes and preferences of individuals and firms interact with each other in the market place. Any and every market equilibrium may not lead to the realization of humanitarian goals. It may, therefore, be desirable to complement the market system by some other mechanism that helps change individual tastes and preferences and which leads to the desired kind of equilibrium. Could moral values help bring about such a change?
Secondly, if coercion is ruled out, then the desired kind of filtering may have to be brought about by sufficiently motivating all individuals to put in their best performance and to abstain from using resources in a way that frustrates the realization of the desired kind of well-being. Motivation acquires great significance in economics as compared to say physics because economics deals with human beings who may or may not always behave in a set manner that is conducive to goal realization. The serving of self-interest has proved to be an effective motivating mechanism for increasing efficiency, while competition, public accountability, and government intervention have helped safeguard social interest. Would it be possible to safeguard social interest even more effectively if both market mechanism and government intervention are complemented by a sense of moral obligation?
Thirdly, physical, social and political environments also influence human behaviour and the use of scarce resources. It may, thus, be necessary to supplement both the filter mechanism and the motivating system by creating an enabling environment of economic, social and political values and institutions8 that influence individuals positively, and in a manner that is conducive to the realization of well-being in its comprehensive sense. This would bring into focus the need for socio-economic and political reform.
For example, if the need-fulfilment of all is accepted as a goal, and the operation of market forces does not automatically lead to this, then some arrangement may need to be made to realize this goal. If budgetary constraints prevent the state from playing an important role, then is it possible for the family and the society to share the burden? However, if the values or the structure of the families and the society have changed over time, making them unwilling or unable to share the burden, then is it possible for economics not to discuss the kind of socio-economic change that is necessary to realize its humanitarian goals? Its refusal to do so may be tantamount to giving blessings to the prevailing inequities. These might accentuate social unrest and tensions, which may ultimately lead to the decline of the society even in a material sense. Similarly, even if a society has values, but individuals are able to get away with dishonesty, bribery and other unfair means of earning because there is no effective system for detecting and punishing the culprits, then such practices may become locked-in through the long-run operation of path dependence and self-reinforcing mechanisms. Everyone may then condemn the practice but not be able to eliminate it single-handedly. Is it possible to eliminate undesired practices by just preaching sermons and not undertaking comprehensive reforms through socioeconomic and political restructuring? If such restructuring is needed, could it be brought about without the state also playing a supportive role? Is it possible for economics to abstain from discussing the kind of change that is needed and the role of the state therein?
If the mechanisms chosen by economics are not in conformity with the desired concept of well-being, or if the desired restructuring is not, or cannot be, brought about, then that kind of well-being may not be realized. Within this perspective, anything that prevents the kind of filtering, motivation and restructuring that the desired well-being requires may be termed as distortion, and any use of resources that does not directly or indirectly contribute to, or is in conflict with, goal realization may be considered ‘unproductive’, ‘inessential’ or ‘wasteful’. The role that the state plays in the economy may also be determined by the kind of filtering, motivation and restructuring that are necessary for realizing its vision.
The concept of well-being selected by economics as well as the filtering, motivation and restructuring mechanisms adopted by it are determined essentially by its worldview, which in turn tends to influence “the nature of man’s reflections on almost any subject.”9 Some of the questions that the worldview tries to answer concern how the universe came into existence, the meaning and purpose of human life, the ultimate ownership and objective of the limited resources at the disposal of human beings, and the rights and responsibilities of individuals and families towards each other and their physical and social environment.
Answers to these questions have a far-reaching influence on human thought and behaviour and lead to different theoretical frameworks and policy prescriptions. For example, if the universe is believed to have come into existence by itself and human beings are not accountable to anyone, then they are free to live as they please. Their purpose in life is to serve their self-interest through the realization of maximum wealth and consumption. The measure of their well-being would, in this case, be the extent to which they attain