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The Economic Aspect

This page discusses the economic aspect of reality as we experience it: its kernel meaningfulness, what sciences investigate it, economic functioning, what good and harm it can bring, and how it relates to other aspects.

The economic is one of Dooyeweerd's fifteen aspects, between the social and the aesthetic aspects. This growing page is offered to help us: (a) understand Dooyeweerd's notion of 'economic, (b) think more widely about economic issues, (c) to critically discuss Dooyeweerd's ideas.

Contents:


Defining the Aspect x

Kernel: x

rather than:

To Dooyeweerd [1955,II:66], economic functioning is "the sparing or frugal mode of administering scarce goods, implying an alternative choice of their destination with regard to the satisfaction of different human needs". His discussion occurs on pages 66-7, 122-7, 344-5, 360-2 of [1955,II], most devoted to economy of thought, logic, language, aesthetics and law rather than 'the economy'.

Note: satisfaction, not maximisation (of profits, income, owner value, GDP); cf. Simon [1956]. Note: frugality, not consumption, competition, growth. Frugality, whether during scarcity or exhibited in self-control during plenty, is normative because it not only sustains future prosperity but also stimulates originality, responsibility and generosity (the next three aspects). Modern economics is distorted by a mechanistic view of the world [Dooyeweerd, 1955,II,p.344].

Some central themes x

Note: SInce this aspect is post-social, the full development of these themes and kernel issues involves social functioning of relating to people and of organisations. For example, exchange implies other people. There is a personal element (such as an individual's management of resources available to them), but much of this aspect can only be understood in terms of society.

Common Misconceptions x


The Aspect Itself x

We experience the economic aspect intuitively as managing limited resources frugally. 'Eco', meaning 'household' (Greek), implies sustainable viability within limits. Resources can be of any type (here, words). Limits imply value. Outwith the household, value is usually symbolised quantitatively by currency.

Also meaningful within the economic aspect are: goods, customers, orders, etc.; business, bank, etc.; budgets, deadlines, etc.; markets, commons, the economy, money; activities like administering, storing, distributing, conserving, recycling; properties like sustainable, valuable, rare, careful, sparing; and their opposites.

Non-Absoluteness x

We can perhaps see that the economic aspect cannot be absolute, but requires the proper functioning in later aspects if its own functioning is to operate correctly, if we consider the case of rebuilding the economy of a devastated country.

If, in that country, there is injustice such that the rich will cream off the money that pours in, then the whole economy will falter. If that country is denied proper prices for its exports then it its economy will be increasingly centred on producing drugs etc. Even if we argue that an economy based on drugs, or one that involves only the rich, can be a sound economy, we find that argument is thin. Because it is not sustainable, even if its financial mechanisms seem to be working for a short time. We can see that a sound economy requires at least a sound functioning in the juridical aspect.

We can see that it also requires sound functioning in other aspects. But I have chosen a later aspect here because earlier aspects might be involved merely in a dependency manner whereas non-absoluteness goes beyond this to require all aspects.

It will be noticed that we have taken the conventional view of 'economy', as to do with finance, which, we argue elsewhere, is not the kernel of the economic aspect. This is not invalid in this instance since finance is indeed part of economy and we are not talking about mere quantitative measures like 'maximizing profits' here.

Special Sciences and Disciplines x

Institutions x

Contribution to Shalom x

The blessing that functioning in the economic aspect can bring includes:

Harm x

Contributions from the Field x

Each major and minor economist seems to bring insights that fit into Dooyeweerd's view. If this is so, then Dooyeweerd's treatment of the economic aspect might be able to integrate them, and enrich each individually. It is an outworking of Dooyeweerd's claim that his transcendental critique of theoretical thought can provide a basis for genuine discourse between apparently conflicting views.

Adam Smith (1700s) argued that labour and capital as well as land are productive, and that each economic actor should act for themselves and their profit alone, and an 'invisible hand' would then bring about good for society. This goes against three of Dooyeweerd's precepts, that economics is to do with frugality rather than profits, that it is more than just production, and that the economic aspect should serve the norms of other aspects rather than solely its own. From a Dooyeweerdian point of view, Smith seems to have taken economics off in the wrong (i.e. ultimately unhelpful and harmful) direction.

J S Mill (1800s) argued that society should intervene in the market. While this recognises the embeddedness of economic functioning within other functioning, and of mutual dependency between aspects, it focuses too much on the entity that is the organ of society, such as the state. Dooyeweerd would give a juridical function to the state rather than economic.

Karl Marx, as economist, focused on the link between labour and value, and exploitation of labour by capital. In this, he emphasised human functioning in economics, as Dooyeweerd would, in contrast to the abstract ideas of profit, market, society. However exploitation, though it has economic manifestations, is primarily meaningful in the juridical aspect.

Neoclassical economics concerned itself with supply and demand, prices and income, and distribution. A key concept is maximization of utility. It has a tendency to overuse transduction to quantitative measures. From a Dooyeweerdian point of view, we see neoclassical economics as very limited and even distorting of genuine economic activity, because of its focus on certain aspects, the quantitative for prices and maximization, and the formative for utility. If utility were to be seen instead as multi-aspectual normativity, then neoclassical economics might be enriched.

J M Keynes, interested in macroeconomics, emphasised aggregate demand (total spending in the economy). Keynes is used to support public sector finance not just private. From a Dooyeweerdian point of view, Keynes recognised that money is not just a personal possession but operates across society. However, the public-private distinction would be meaningful, to Dooyeweerd, not primarily in the economic aspect but in the juridical, as would the notion of possession. The conflation of juridical with economic issues is likely to bring problems in both theory and practice, including that one cannot argue from one to the other. Also, Dooyeweerd would criticise him, with most of the above, for focusing too narrowly on quantitative value and finance.

Ronald Coase, in The Nature of the Firm (1937), tried to explain why economic activity was organized within firms (as opposed, for example, to being all in a single huge market), and why is a particular activity organized within a particular firm. His views are now again attracting interest (e.g. Madhok A, 2002, Strategic Management Journal, 23) and are centred on the notion of limited resources (usually expressed by money). Dooyeweerd's view that the kernel is frugality of limited resources, and Coase was, as Dooyeweerd hoped, trying to delineate the kernel of economics from within. To Coase, firms are coordinated through authority relations while markets are coordinated through price mechanisms. This speaks of the dependence of the economic on the social aspect.

Milton Friedman, and 'moneytarism', argued that the sole purpose of business is to increase owner (shareholder) value, and that social responsibility should be deliberately ignored when making economic decisions in a firm. This goes against Dooyeweerd's recognition of the interwovenness of aspects, and absolutizes what is non-absolute. We can now see the immense harm that moneytarism has done since it became fashionable in the 1980s.

By contrast, Muhammad Yunus introduced the notion of micro credit and social business. Business, he says and has demonstrated, need not be run for profit or owner dividends, but can be run solely for the purpose of solving a social problem. He brings things like friendships, environmental responsibility and even "joy" alongside economic responsibility. He also argues the importance of trust and being willing to lose. This strongly echoes, and is supported by, a Dooyeweerdian multi-aspectual view (these are respectively, social, juridical, aesthetic, economic, pistic, ethical aspects).

Dooyeweerdian Economic Theory

There are so far two attempts to work out a Dooyeweerdian economic theory.

De la Sienra [2001] discusses the modal laws of the economic aspect in detail. In [1998], he discusses how Dooyeweerd fulfils the requirements of a neoclassical economic theory, but of a widened version, and makes some useful suggestions about how the financial system should be structured. However, his theory is more a theory of monetary systems than of economics. It seems fixated on price mechanisms and finance, and not on the wider concerns of the economic aspect, namely careful management of scarce resources. It rests on an assumption that there is no gap between the 'real sphere' of the economy and the 'financial sphere' - but there is a huge gap: only 5% of international transactions are of the 'real' economy of purchasing goods and services. Moreover, his theory assumes the centrality of economic decision-makers and the economic entity, and seems to say little about the societal dimension of economics.

Goudzwaard [1979, 1995, 2001, 2002] tackles the latter issues as economic issues, while recognising their link with juridical and pistic aspects. He criticises global economics that elevates GDP as not only a measure but as a motivation. In place of idolizing economic growth, and while recognising the validity of developing nations to aspire to more economic growth, he suggests a blossoming economy model, in which economies grow like a tree: growing in numeric height when small, but stopping this when mature and instead putting their efforts into blossoming and fruit-bearing. Many other kinds of economy agree: 'new economics', 'circular economy', and even Yunus' social business. Goudzwaard differentiates between real and casino economy, on the basis that the latter is meaningless. De la Sienra, though, contests Goudzwaard's rejection of neoclassical economic theory.

In my view, Goudzwaard's view is more faithful to the Dooyeweerdian notion of the economic sphere, with De la Sienra providing some useful technical outworking of a narrow area thereof.


The Aspect Among Others

You are in business. If you set your prices lower, you not only compete, but you do something else too: you set a precedent that affects people's expectations. They begin to believe, even if only slightly, that lower prices is something that 'should' occur. This is pistic mode of functioning. Even if you don't set that precedent, there is a social aspect here, in that you hope that not just a few people individually will buy your product, but that customers will move as a group towards your product. There is a juridical aspect, in that if the price reduction should never be at the cost of someone else's basic needs. This is just one wee example of how all our economic functioning involves every other aspects, and in different ways. Read on ...

Law-dependencies x

Economic depends on social in that (a) needs-satisfaction in not primarily for individuals but for "us and them", including future needs; (b) economic functioning requires working together. Economic depends on formative (planning) and lingual (tokens of value). But it cannot be reduced to these because notions of value and resource have no meaning within them. Here is a collection of specific notes on dependency:

Successful economic functioning presupposes that (a) we balance different needs, (b) exchange is just, (c) generosity stimulates, (d) brokers operate in 'good faith' - anticipating the next four aspects.

Analogies x

Antinomies x

Common Reductions x

(See above).


Notes x

Economics as Supply and Demand

Some see economics as supply and demand, production and consumption, stimulation of markets, etc. - as process economics. Does harm come of this, and why?

In process economics, the prime goal is flow, so that stimulation of demand is seen as a Good Thing. Whether or not the demand can be met, and whether or not the demand should be met. Thus, in the early days we found economics gurus saying that the prime task was to change wants into needs, and this idea has so completely penetrated the world view of establishment economics that few question it. But it has had several harmful effects:

An example is fish (U.K. BBC Radio 4, 19.20 pm). Fish stocks are severely depleted, yet fish consumption worldwide is growing around 5% p.a. Why growing? Because we (in the West) are encouraged to buy and eat ever more fish-related products - fish fingers, fish and chips, cat food, and whatever. Marketing and advertising is a major player in this. And marketing is based on the process view of economics, rather than the frugality view.

Another, ironic, aspect of this mis-perception of economics as process of supply and demand is that small firms can go bankrupt even though they are profitable, simply because of cash-flow problems.

Many now believe that harm has come of all this. One result of this is the growing awareness of green (environmental) issues. As mentioned earlier, frugality is central to the green view. (That is, the true green view, not the libertarian version, nor the anti-human version.)

But today's business managers do not see the problem, or at least not so clearly as to do things differently. Fineman (1997) (in "Constructing the green manager", British Journal of Management, v.8, pp.31-38) says:

"Its soul can remain, however, relatively untouched: environmentalism comes and goes according to 'business priorities'. Until there is a substantive change in the meaning of business, such that commercial and social value is inextricably tied to 'common-wealth' .. it is unlikely that managerial greening will progress beyond the formulaic [the mere lip-service to rules of the organisation]."

Note the phrase, "meaning of business". To Dooyeweerd, meaning was the essential element in all things. In other parts of his framework, he says that the human heart is the functioning centre, and that it is this that must be changed, reflecting, in different terminology, what Fineman has said.

References

De la Sienra, AG. (1998) The modal laws of economics. Phil. Ref. 63(2), 182-205.

De la Sienra, AG. (2001) Reformational economic theory. Phil. Ref. 66(1), 70-83.

Goudzwaard, B. (1979), Capitalism and Progress, A diagnosis of western society. tr. Josina Van Nuis-Zijlstra (ed.). Toronto, Canada: Wedge Publishing Foundation; Grand Rapids, MI, USA: William B Eerdmans.

Goudzwaard B., de Lange, H (1995) Beyond Poverty and Affluence, toward an economy of Care. Eerdmans Grand Rapids/ WCC Geneva, ISBN 0-8028-0827-1.

Goudzwaard B. (2001) 'Economic growth: is more always better'. pp.153-166 in Donald Hay and Alan Kreider (eds.) Christianity and the culture of economics. University of Wales Press, Cardiff, UK. ISBN 07-7083-1704-9.

Goudzwaard B, de Santa Ana, Julio (2002) 'Globalisation and Modernity' p.1-33 in Koshi, N (ed.) Globalization, the imperial thrust of modernity, Mumbai, India: Vikas Adhyayan Kendra.


Back to Index of Aspects.

This is part of The Dooyeweerd Pages, which explain, explore and discuss Dooyeweerd's interesting philosophy. Questions or comments would be welcome.

Copyright (c) 2004 Andrew Basden. But you may use this material subject to conditions.

Number of visitors to these pages: Counter. Written on the Amiga with Protext.

Created: by 19 March 1997. Last updated: 30 August 1998 rearranged and tidied. 21 February 1999 slight change to a link. 7 February 2001 copyright, email. 21 January 2002 non-abs added. 14 March 2002 better kernel. 1 April 2002 occam's rzr. 8 June 2002 Coase. 11 September 2002 constraints as echoing juridical. 14 September 2002 Note after themes about being post-social. 20 December 2002 added about the shalom of the economic aspect i.t.of protection from extinction. 7 November 2003 Stravinsky quote. 12 March 2004 competition as a harm. 24 August 2005 .nav,.end. 4 September 2007 externalising costs anti-ethical. 5 January 2008 poverty. 23 June 2010 eg of masp in bz. 22 September 2010 Dooyeweerd's and Basden's kernel. 8 December 2010 added .html. 4 February 2011 ref, De la Sienra.

18 May 2013 Complete Revamp. Added introduction, contents. Rewrote many parts that were weak. Contributions from field now includes some main economists, and Dooyeweerdian economic theory moved after it. Brought in some text from the IJMAP aspects paper.