Social And Economic Aspects

One can question whether the values implicit in such theories are sharply distinguishable from the values that govern policies. For example, it may be difficult to hold a maximizing view of individual rationality, while at the same time insisting that social policy should resist maximizing growth, wealth, or welfare in the name of freedom, rights, or equality. Fourth, people’s views of what is right and wrong are, as a matter of fact, influenced by their beliefs about how people in fact behave. There is evidence that studying theories that depict individuals as self-interested leads people to regard self-interested behavior more favorably and to become more self-interested (Marwell and Ames 1981, Frank et al. 1993). Since economic theories bear so centrally on people’s interests, there are bound to be ideological biases at work in the discipline.

It has become popular to privatise public services and leave the task of their delivery to companies rather than the state. As a consequence, the role of the civil servant is now similar to that of a business manager overseeing the spread of markets into new areas such as education, health and security. Yet, in line with the Polanyi-type adjustment process, government agencies and state organisations cannot entirely shed their responsibility for some of the negative effects of radical policies associated with market liberalisation, especially in trade and finance. Economic globalisation creates ‘winners’ and ‘losers’, which leads to the issue of inequality in societies.

To win the support of the ‘losers’, governments typically have to offer compensatory measures through income redistribution, retraining programmes or further educational opportunities. The budgetary resources necessary for the funding of such activities brings into perspective taxation as a main attribute of modern forms of government as well as an indicator of state power relative to other actors in the international system.

The writings of liberal political economists have become so broad a church that they can include advocates of uncontrolled markets as well as supporters of strong state intervention in the market. This is a representation of some of the practical contradictions that Karl Polanyi first discovered in different historical manifestations of liberal ideas in the aftermath of the industrial revolution in the nineteenth century. Consider, in this respect, whether government policy takes freedom of choice away from individuals, or if the state should establish a legal order that enables individuals to make choices and function as participants in a market system. Polanyi’s reasoning offers an insight into the globalising economy of the twenty-first century. In this account, markets are not just abstract constructs that settle demand and supply for goods through a specific price, as economists would make us believe. They are social phenomena embedded in broader communities and directly connected with deliberate forms of state action.

Second, goods and services are produced in the most efficient way possible. The most productive companies will earn more than less productive ones. The owners can make legally binding contracts to buy, sell, or lease their property. It is characterized by private ownership, freedom of choice, self-interest, optimized buying and selling platforms, competition, and limited government intervention.

Economy Examples

As a consequence, economic, social and political life is always interconnected. In particular, the widely held belief in the advantage of a self-regulating market process carries with it a basic contradiction in so far as it leads inevitably to a severe disruption of the social fabric in different countries. This disruption can occur because of rising levels of income inequality, foreign takeovers of companies, or fundamental disagreement on what needs to be done during economic recessions to prevent social decay. Despite similar pressures to reduce government expenditure, states have also continued to diverge in the way they provide welfare for different social groups within their societies.

Second, economic “science” is a human activity, and like all human activities, it is governed by values. Those values need not be the same as the values that influence economic policy, but it is debatable whether the values that govern the activity of economists can be sharply distinguished from the values that govern policy makers. Third, much of economics is built around a normative theory of rationality.

As the international controversy around the tax bills of large multinational corporations like Amazon has shown, there is a general public expectation that multinational corporations should make a fair contribution to the states in which they generate their profit. After all, for their business models to succeed they have to be able to draw on a well-developed infrastructure, an educated workforce and general health care. First, economists have to interpret and articulate the incomplete specifications of goals and constraints provided by policy makers.

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