Economics is the study of how resources are distributed, and to that basic foundation most economists add two assumptions. Firstly, that resources are scarce. That’s why there is competition for them. Secondly, that wants are unlimited, which is why we never reach a point of ‘enough’. As one economics textbook puts it right in the opening definition, economics is “the study of how people allocate their limited resources in an attempt to satisfy their unlimited wants.” If that sounds like a depressingly futile science, you wouldn’t be the first to make that observation.
However, Wolfgang Hoeschele has a bone to pick with the traditional definition of economics. Wants are not unlimited, he maintains, and resources are not necessarily scarce. We know wants aren’t unlimited because many people seem happy to stop consuming at a given point. In fact, recessions are often prolonged because consumers stop maximising their incomes. They voluntarily slow their spending, suggesting that “wants are variable, not that they are infinite.” What is actually happening is that our economic system generates an endless stream of new wants. As these wants become needs, scarcity is created.
This, says Hoeschele, is not a good thing. Economics is supposed to be about managing resources so that people’s needs are met. Instead it has become about creating scarcity so that consumption will continue. This is fundamentally at odds with human satisfaction, happiness, and freedom. If lacking the resources to live well is the fundamental problem that economics is supposed to solve, then surely the economics of consumerism has become part of the problem. As one want is satisfied, another one is created. The result is poverty rather than wealth – an economics of scarcity rather than abundance.
The Economics of Abundance – A Political Economy of Freedom, Equity and Sustainability is a “systematic critique of the economic concept of scarcity”. From the idea that scarcity is created rather than naturally occuring in response to unlimited wants, Hoeschele unravels the whole political economy of capitalism, and then attempts to re-create something more fair, more healthy, and more sustainable. It’s really quite a radical premise, questioning the whole definition and role of economics.
There are several ways that scarcity is generated: 1) creating new wants, 2) limiting access to a resource, or 3) reducing the amount of the resource available. Society is full of scarcity-generating institutions using one of these three methods. Fashion creates new wants all the time. Patent systems put fences around innovation and knowledge, granting monopolies. Interest makes money more scarce than it should be. Industry pollutes the air, making fresh air more scarce. These scarcities are what drives the economy. “Our social and physical environment is constantly restructured so as to make increased consumption necessary” he writes.
In a world defined more by what we lack than what we own, “even the affluent are not truly rich”, writes Hoeschele. “Innumerable needs have been produced by creating desires in people’s minds, or by altering their environment in such a way that commodities that were once luxuries are now necessities and that amenities that were once freely available cost money.” In this kind of economy, the affluent need to be ‘liberated’ just as much as the poor do – reducing their needs and setting them free from the never-ending treadmill of unsatisfied wants.
Having explored the systems and consequences of the production of scarcity, Hoeschele turns towards solutions and the production of abundance instead. How can we use less and redistribute the resources we free up? How should we manage resources, especially the non-renewable ones?
Here is where the book takes a slightly unexpected turn. Hoeschele begins his solutions by arguing that the capitalist system has a merchant view of people, assuming that we’re all out to maximise their profits in all circumstances. Instead, he argues, we should consider everyone to be like artists, out to live their lives as a creative, self-actualising project. Hoeschele then uses this idea of ‘life as art’ to guide the solutions that follow. There are some great ones, around civil rights, equality, and resource management, but however good the individual ideas may be, I was disappointed with the underlying philosophy. ‘Life as art’ is just as inadequate as ‘life as trade’. It errs towards the individual and lacks a vision for community or society. The idea is that everyone has their own view of enough, their own definition of what a flourishing life will entail. But can you run an institution on that basis? Can you structure a government whose primary purpose is empowering people to live life as art?
I found the ‘life as art’ principle an interesting idea, but not a compelling one, and the referrences to it became a recurring frustration in the later chapters. But while this is distracting, it doesn’t invalidate the rest of the book. In fact, it is interesting to discover that Hoeschele’s unique perspective eventually homes in on some rather familiar solutions. Steady state economics, the wellbeing agenda, equality advocates, all these movements seem to converge on the same sorts of policies – reducing the work week, co-ops, local currencies, restrictions to advertising, microfinance. It’s confirmation, in my opinion, that the future lies this way.
Hoeschele’s book doesn’t convince on every level, but it doesn’t need to – this is economics that provokes and questions. It’s a bold thought experiment that opens up new possibilities at a time when we desperately need them. The Economics of Abundance is the first in the new Green Economics and Sustainable Growth Series. If the rest of the series lives up to the this one, it’ll be an intriguing new discussion.