Wellbeing economics: guiding inclusive development beyond obsolete thinking
Pathways to inclusive development need to be informed by more than economic growth models alone. Social and political institutions and power inequities shape economic processes, as well as outcomes. The concept of ‘Wellbeing economics’ provides a broader lens through which to view the complex relationship between human wellbeing and more inclusive economic development.
From economists like Joseph Stiglitz to Tony Lawson there is growing concern that standard economics is wrong. It no longer provides an adequate framework for analysing the problems of today’s globalizing and rapidly changing economies. A fundamental reframing of economics is needed in order to move it closer to reality on the ground. Instead of seeing the economy as a closed and neutral system, we need to think of it as an instituted process subject to emergent change. From this viewpoint, the study of economics is about resource allocation decisions and processes and the forces that guide these: from a human perspective it is about understanding who gets what, under what conditions, and why?
For political, analytical and technical reasons we argue in favour of a pluralist approach to economics. This involves rethinking economic agency and behavioural drivers and focusing on human wellbeing instead of welfare. People everywhere “strive to sustain, protect or improve their wellbeing” by making constant trade-offs between: the different dimensions of wellbeing (e.g. between income and social wellbeing); individual and collective wellbeing; and past, present and future wellbeing. Structural inequalities and repressive powers prevent many people from realizing their full potential. This results in high levels of exclusion (e.g. in the form of discrimination, forced migration, ill-health and exposure to violence) and unearned income. Especially, the most vulnerable and marginalized groups in society are excluded from creating viable options or making free choices in the first place. If we continue to think that households, communities and societies function on the basis of market mechanisms alone, we will systematically overlook reciprocal, redistributive, extortive, exploitative and other mechanism through which the allocation of resources takes place. These mechanisms are partially grounded in society, culture and politics.
The starting point of Wellbeing economics is to see the economy as an instituted process of resource allocation. The economy is not a closed and controllable system; it is open to influences from ‘outside’. The economy can best be seen as a temporarily organized system of relationships between people and resources at different levels of aggregation. Resource exchange is driven by market and non-mechanisms. Social norms, power relations, and political preferences steer these forces in different directions, not always benefiting the majority or most vulnerable in society.
In places where people experience ill-being (e.g. famine, insecurity or lack of future prospects), only “bad alternatives” present themselves. The concept of rational choice is not helpful in analysing such situations, because it only takes relative prices into account. People may be purposeful in making economic decisions, but they are not always ‘rational’ in the narrow sense of the word. What people have in common is that their economic decisions are aimed at protecting, sustaining or improving wellbeing in one dimension or the other. Moreover, people factor other people’s wellbeing into their daily economic decisions to a greater or lesser extent. Economic agents are not like Robinson Crusoë; even he created ‘Friday’ to accompany him. It is the human being in relationship to others and the environment that should feature centrally in economic analysis.
From such a comprehensive perspective on the economy, it is easier to understand sub-optimal individual and collective decisions, feedback loops, and self-reinforcing dynamics. There is, thus, a ‘visible hand’ steering economic processes and outcomes. Within the framework of Wellbeing economics, investments in social protection, voice and empowerment, and environmental sustainability are not seen as costs to growth per se, but as preconditions for sustainable human wellbeing and inclusive development.