World News | Six economic myths the well-being economy tries to tackle

Denver (USA), June 5 (360info) The failure of free market fundamentalism and neoliberalism is based on a set of flawed economic assumptions. There is another way.

Free market fundamentalism has failed us ecologically, economically, socially and politically.

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Free markets don’t clean up oil spills, fight climate change, or create public goods like libraries, lighthouses, and weather satellites. Instead, this is considered the purview of the government.

But countries around the world are experiencing dangerous levels of government failure in these areas due to the conflation of the economic system — capitalism — with the governance system — democracy — and that doesn’t work.

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Neoliberalism is at the root of this tragedy.

The discipline of economics used to promote neoliberalism contains a flawed worldview full of false assumptions and is based on theories that cannot be verified by real-world empirical evidence.

The guiding principle in economics should be to create a welfare economy that serves life, not to increase GDP.

The Wellbeing Economy recognizes that the economy is rooted in society and the rest of nature, and that true freedom and success depend on creating a world in which we all thrive.

Here are six examples of where mainstream economic theory goes wrong.

Increased efficiency can lead to increased resource consumption The Jevons Paradox, named after the economist William Stanley Jevons, observed in 1865 that increases in the efficiency of coal use do not correspond to coal consumption reduction.

On the contrary, the opposite is true. Today, this is also known as the rebound effect.

A more modern example is global carbon dioxide emissions. Although CO2 emissions per unit of energy use declined from 1960 to 2013, total and per capita CO2 emissions increased over the same period.

Unlimited economic growth is impossible on a finite planet

Despite overwhelming evidence to the contrary, mainstream economists ignore physical limitations and planetary boundaries to convince politicians and the public that permanent economic growth is a desirable goal.

The Club of Rome report “The Limits to Growth” found that continued growth in the global economy will lead to a transgression of the planet’s boundaries in the 21st century, which will lead to the collapse of population and economic systems.

Other scientists using different perspectives have come to almost the same conclusions about the viability of sustained economic growth.

Above a certain threshold, economic well-being has nothing to do with happiness Economist Richard Easterling is the namesake of Easterling’s paradox, which states that above a certain level of income, basic needs are met while happiness does not. did not improve at the same rate as income levels rose.

This relationship has been explored in several countries and different scenarios, and clearly shows that human well-being does not increase indefinitely with per capita GDP.

Capital flows within capital-rich countries or from low-income to high-income countries

Despite the assumption that globalization should favor poor countries, causing world income to converge over time, economist Robert Lucas observed that capital does not flow from rich to poor countries.

In contrast, there has been a net inflow of $16.3 trillion from developing to advanced economies since 1980, despite trillions of dollars in investment and aid to developing economies.

A similar phenomenon has emerged in the labor market, with skilled workers moving from skill-scarce to skill-abundant countries.

Environmental quality does not depend on income level

In the early 1990s, a new argument emerged that environmental degradation first increases and then decreases as per capita income increases, known as the Environmental Kuznets Curve. The theory holds that as incomes rise, the industrial sector becomes cleaner, society places greater emphasis on environmental quality, and environmental regulators become stronger.

While the scientific debate about the Environmental Kuznets Curve continues, especially as its generality has been refuted, the most direct criticism of its existence is that environmental damage is often irrelevant, regardless of any assumed relationship to income. reversed.

For example, if rising air pollution increases the number of deaths, it is doubtful how this effect will be reversed once high levels of economic growth are reached.

There is also evidence that, in some cases, environmental degradation begins to worsen again, beyond a certain level of income.

Rising inequality is a natural feature of growth economics

Early economic theory assumed that the distribution of income would converge naturally over time.

Empirical evidence, however, suggests that while differences between developed and developing countries are slowly converging, inequalities within countries are rising. This has major economic and social consequences.

Researchers document a strong relationship between rising income inequality and worsening well-being across a long list of social indicators, including social capital, well-being, stress and anxiety, life expectancy, mental illness and obesity, infant mortality, violence Crime rates, social mobility, and education scores.

A growing number of economists, including some Nobel laureates, are bemoaning economics’ failed worldview and its negative impact on civil society and the environment.

The implications of these long-standing economic assumptions for real-world policy and practice are showing glaring problems.

We are facing multiple crises in which economic systems collapse, ecosystems collapse, and technological systems rapidly outpace social, cultural, and biological evolution.

Conventional economic thinking based on the imperative of growth is hindering our ability to govern ourselves in a way that allows for the co-creation of just, sustainable and desirable regenerative economic systems.

Addressing this multiple crisis requires re-establishing government authority (preferably democratic governance) over a reimagined economic system or a more regulated capitalist system.

To thrive, all institutions (including businesses) and societies must evolve toward a new purpose: shared well-being on a healthy planet. But achieving a happiness economy will require major shifts in our worldview, society and economy. (360info.org)

(This is an unedited and auto-generated story from a Syndicated News feed, the content body may not have been modified or edited by LatestLY staff)