Economics is a social science, and thus, centered around the study of human behavior and decision making. At some point, we decided that we could model human behavior through mathematical models. This decision is not necessarily wrong, as economists need the means to simplify reality to try to understand it. Our problem may be in how much we may be relying on outdated models and if those models were indeed reliable in the first place.
We’re not doing enough when we typecast our citizens simplistically. When we demonize those who have reached a certain level of wealth, criticize others’ consumption behaviors, or fail to empathize with those who are struggling.
We are more capable now than at any time before to rapidly assess the outcomes of our choices and strategies, even to the point of following indicators of human beings’ wellbeing improvement. This trend has forced businesses (and customers) to quickly adapt to new environments, in which scrutiny is at the forefront.
The 2020 pandemic may have brought some perspective, as the unprecedented impact on global livelihood may end up driving priorities to shift. Yet, once this has passed, it is still uncertain whether the new equilibrium will set on sustainability or if we will fall back to our consumerist ways, especially since those ways may be justified in the short-term to get the ball rolling once again.
Before the current crisis, consumers have evolved to claim goods and services that not only meet their needs, but that do so in ethical and sustainable ways. This behavior is not necessarily a trend at all levels, and there are probably still pockets of consumers who may remain quite complacent.
There may be a dark side in consumer sophistication, in my opinion, as it may generate externalities through increased cost pressures that affect more vulnerable consumers. Vulnerable consumers’ access to markets would be affected, leaving them to resort to lower quality and quantity in the products and services they access.
Today, primary resources are readily available, technology helps us enable lower-cost solutions (communications, materials for affordable housing, etc.), and we may now assess broader indicators of human wellbeing. Therefore, market decisions can consider more efficient ways of utilizing resources to ensure everyone is capable of living with dignity and providing they meet their basic needs.
Solutions are not merely to give the people more money and circus. Why are then some of our societies so obtuse as not to consider broader solutions?
Income Inequality has been at the forefront of activism, and in the current context is being used to try to solve the problem through “Robin Hood” taxing proposals rather than attack the underlying problem. Income inequality should not be a problem per-se as long as it doesn’t generate resentment. Therefore it is imperative to ensure even access to profit opportunities and avoid pressure over communities living-hood because of behaviors such as “in your face consumption,” which ultimately divert resources to small segments of the population.
Outdated income-level-based policies are not enough when access to specific essential resources, including decent education, may be at risk. Yes, we must be conscious of how consumption decisions may be impacting those most vulnerable. But there is also a need for an even playfield. Preferably we will achieve that through empowerment and education, not through trying to vilify economic advancement.
Fortunately, different trends are emerging from private and NGO initiatives such as more skilled and better aimed philanthropic activities, impact investment funding, and a more generalized adoption and requirement of ESG frameworks.
Multilateral and private cooperation initiatives that are generating useful guidelines such as the UN’s SDGs for 2030 and the GIIN and World Bank frameworks for impact investment are also contributing to improving the ecosystem. Finally, Government initiatives such as some countries’ adoption of supportive measures towards sustainability and social welfare, transparency, among others, will also play a key role in securing a sustainable advance.
Of course, this doesn’t mean that we can’t do more, but at least there are sparks of greater awareness of the problems we’re facing. I chose to take an optimist point of view on the system and not argue against what is not working. I believe, though, that rather than focusing on more initiatives, we have more to gain from a more thorough understanding of the underlying problems we’re trying to solve, this will help us adapt our solutions. Understanding that there is no “one size fits all” solution, and that we need to incorporate varying points of view to tailoring those solutions to a common goal centered around improving living conditions. Even more, understanding what living conditions’ improvement entails to all people.
 In their book “Poor Economics”, Abhijit Banerjee and Esther Duffo make the point that, at least in terms of food, annual production is currently enough to feed the whole world. They argue that reaching the hungry more a matter of logistics. I would question whether there are no other sorts of waste embedded in the system?
Originally published at https://inmintality.com on May 22, 2020.