Putting Homosexuality in Perspective

In a world defined by god, as interpreted by man, we would all be heterosexual. So is homosexuality a freak of nature, so to speak? If so, how omnipotent is god? For those not believing in god and of a more existentialist persuasion, what is the limit of mutation?

Homosexuality is always and always will be a touchy subject because we have been raised to believe that a happy family consists of a mom, a dad, and their children. In other words, a normal family consists of a wife, a husband, and their children.

Homosexuality was rampant in the ancient world, especially in the Greco-Roman period. The fact that Alexander the Great was homosexual (bisexual, but I’m trying to make a point) was of no major significance to his followers, the Phalanx in his army – the most masculine men there could be at the time. However, homosexuality these days is like a punching bag for the “tough” guys to punch away their insecurities.

In the end, what’s really the controversy? Is it that something has appeared out of thin air or is it that nature does not have a defined structure?

To imagine that humans even exist is far beyond imagining that homosexuality exists in today’s society. The fact that a creature similar to a unisexual bacteria grew into a human outweighs the fact that an originally heterosexual human has a small fraction of homosexual humans.

In fact, studies have shown that over 5% of bird species and other species are homosexual. And, no, Social Darwinists, those species have not been eradicated by evolution. And this may, in some way, work to allay the fears of those who think that homosexuality will eventually spread to all like the spread of iPhones.

But, in the end, what is it that makes us uncomfortable with being associated with homosexuality? In supporting homosexual men and women? It is that deep seated animal fear of being labelled by association in a society obsessed with being normal — becoming an outcast by befriending an outcast; but we are human, and it is exactly that capacity to use our intellects, forego animal instincts and rise above thoughtless action to reach a higher moral ground that makes us human.

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Consumers Prefer Goods from Not-for-Profits over Goods from Businesses – Research Paper

Good Business: Empirically Examining the Goods Sector as a Revenue Source for Not-for-Profits

 Abstract

The recent proliferation of not-for-profit organisations (NFPs) has intensified the competition for limited government grants and private donations causing NFPs to increasingly turn to the market for funds. While many NFPs generate commercial income from the service sector, the involvement of NFPs in the goods sector has been minimal, with the exception of NFPs that exclusively target the poor. However, an increasing number of NFPs are entering the retail sector to sell goods to the general public in order to raise funds for their social missions. In spite of this recent trend, there has been little research about NFPs in regards to the goods sector. This exploratory study examines consumer preference for NFP goods over goods from for-profit companies using an online survey so as to assess the feasibility of this commercial revenue strategy. The study relies on the contract failure theory and socially responsible consumer behaviour to explain consumer preference for NFP goods. The findings indicate that consumers generally prefer NFP goods over goods from for-profit companies and that preference is even greater for goods that cannot be readily evaluated in terms of quality.

 Introduction

The accelerated growth of the NFP sector since the 1990s has significantly escalated competition among NFPs for private donations and government grants causing them to increasingly turn to the market for funds (Claude, 2010; Ebrahim, 2003; Froelich, 1999; Horne, 2000; Weisbrod 1998). As a result, globally, NFPs now generate most of their income from commercial activities (Austin, Gutiérrez and Ogliastri, 2007). On further investigation, most of this commercial income is derived from fees for services such as healthcare, education, and childcare – industries where NFPs successfully compete against for-profit companies. Income from the goods sector has been relatively minimal (Hammack, 2001). However, there is an emerging trend of NFPs entering the retail sector to sell goods such as clothes, carpets, bicycles, restaurant meals, coffee, and so forth to the general public in order to raise funds for their missions (Claude, 2010; Formosa, 2009; Horne, 2000; Moin, 2010; Saeed, 2010; Skewes, 2009). If NFPs can replicate the general success in the service sector in the goods sector, the new stream of income from the goods sector could provide the answer to waning donations and grants. This would be especially encouraging for smaller NFPs that receive little attention from private donors and governmental bodies (Froelich, 1999). As for-profit companies currently dominate the goods sector, the viability of the revenue strategy for NFPs in this sector would depend heavily on how well they can compete against for-profits. This paper investigates consumer preference for NFP goods over goods from for-profit companies as it is a key indicator of how well NFPs can compete against for-profits in the goods market.

Literature Review

The dominant theory for explaining the existence of NFPs in the commercial sector – especially in service industries such as healthcare, education, and childcare – has been the “contract failure” theory proposed by Henry Hansmann in 1980 (Ali, Spillan and DeShields, 2004; Glaeser and Shleifer, 2001; Hirth, 1999; Handy, Seto and Wakaruk, 2010; Malani and David, 2008; Schlesinger, Mitchell, and Gray, 2004). Consumers cannot accurately evaluate the quality of some goods and services (e.g. a course at a university) when they make an agreement (contract) to purchase them; subsequently, as they normally cannot renege on the contract after an agreement to purchase a good or service, consumers are stuck with the good or service even if its quality falls below their expectations (contract failure). For these types of products, consumers prefer to purchase from NFPs rather than for-profits because they tend to trust NFPs more as for-profits may have the motive to compromise product quality by cutting costs to increase profit (Hansmann, 1980). Past studies have found that consumers generally do trust NFPs more than for-profits (Handy, Seto and Wakaruk, 2010; Schlesinger, Mitchell, and Gray, 2004; Webb and Mohr, 1998).

Contract failure explains consumer preference for NFP services over services from for-profit companies and the concomitant widespread presence of NFPs in the service sector (Glaeser and Shleifer, 2001; Hansmann, 1980; Hirth, 1999). Also, more complex services such as healthcare have higher levels of contract failure and corresponding consumer preference than less complex services such as fitness centres (Handy, Seto and Wakaruk, 2010). However, little is known about the role of contract failure in the goods sector in regards to NFPs. Hansmann did originally claim that there would not be enough contract failure for standardised industrial goods such as basic food so as to necessitate the existence of NFPs in the sector (Hansmann, 1980). Nevertheless, he refers to the “nature of a product” as being a critical factor in the degree of contract failure, implying that goods, too, can lead to contract failure (Hansmann, 1980, p. 843). Thus, it can be inferred that although NFPs are not ‘needed’ in the goods sector, they might still benefit from contract failure for certain goods if they were to enter the sector. The recent entry of NFPs in the goods sector points towards this possibility (Austin, Gutiérrez and Ogliastri, 2007; Horne, 2000; Parsons, 2004).

As much as contract failure might account for consumer preference for NFP goods over goods from for-profit companies, the potential contribution of socially responsible consumer behaviour (SRCB) cannot be ignored (Singh, de los Salmones, and del Bosque, 2007; Webb and Mohr, 1998). SRCB, in this context, is a consumer basing buying decisions on how socially responsible companies are (Mohr, Webb and Harris, 2001, p. 47). There have been many studies in the for-profit sector that have shown a positive relationship between how socially responsible a company is and consumers’ preferences for the company’s products (Brown and Dacin, 1997; Friedman, 1996; Mohr, Webb and Harris, 2001; de los Salmones, Crespo and del Bosque, 2005). Furthermore, consumers tend to perceive NFPs to be more socially responsible than for-profits (Handy, Seto and Wakaruk, 2010; Schlesinger, Mitchell and Gray, 2004; Smith and David, 1991). Therefore, in addition to contract failure, SRCB would have to be considered as a factor in consumer preference for NFP goods over goods from for-profits. Thus, two research questions emerge out of the preceding discussions:

Q1: Do consumers prefer goods from not-for-profits more than goods from for-profits?

Q2: Is there an association between consumer preference for NFP products and SRCB?

 Method

An online survey instrument was developed and a convenience sample of consumers was used to collect data for the research questions. Participants accessed the survey voluntarily through links provided on personal Facebook pages of several individuals – Facebook being a widely used social networking website (“Facebook,” 2012).  The title for the link and the questionnaire, “The Mentality of the Modern Day Consumer,” was purposely vague so as to reduce response bias. 100 responses were collected, with 70 complete responses and nine partially complete responses; the nine were used only for the first research question.

In the online questionnaire, participants were asked to choose between two products, labelled A and B, of the same product class presented in images in the first section, similar to Soman (2004). After completing the first section, participants were asked to choose between the same products again in the second section but this time with additional information about companies that produced them – one was produced by a not-for-profit and the other by a for-profit (see Appendix A). A 7-point anchored bipolar scale was used to measure the strength of preference for either A or B, with the middle point being “no preference.” If the respondent chose a certain response in the first section but changed the response for that product after viewing information about the providers in the second section, this was taken as indicating preference for the provider the response changed towards. This two-section approach was used in order to measure preference purely as a function of what type of firm produced it, separated from other factors such as visual cues. Participants were also asked how much more they were willing pay (price premium) for the chosen product over the other.

Five product classes were used: prepared coffee, small carpet, bottled water, packaged orange juice, and prepared meal. Product classes were chosen as opposed to brands and providers were fictitious so as to eliminate any prior biases that might stem from association (Brown and Dacin, 1997; Laroche, Bergeron and Goutaland, 2003). Products were chosen according to attributes relating to contractibility of quality based on the contract failure theory of Hansmann (1980). Coffee, juice, and meal represented goods that were more non-contractible in quality – quality could not be ascertained during purchase – and carpet and water represented more contractible goods – “what you see is what you get.” As appropriate measures for contract failure in goods could not be found due to limited research in the area, a new construct was developed based on the qualitative feedback of five participants who participated in a pilot survey as well as the perceived risk classifications of products by Murray and Schlacter (1990) as perceived risk essentially denotes contract failure.

Additional information for coffee, carpet, and water in the second section was limited to the status of the provider (NFP or for-profit). The additional information for juice and meal presented social responsibility information about the providers (see Appendix B). Social responsibility information about the for-profit company was positive for juice and negative for meal, while it was only positive for NFPs. The differences in preference for three similar types of goods (i.e. non-contractible) with varying social responsibility information is a way to determine the contribution of SRCB to consumer preference as social responsibility information invokes strong product reactions (Brown and Dacin, 1997). The third section gathered the SRCB profiles – past SRCB buying behaviour. Participants had to choose from five statements that corresponded with the SRCB typology developed by Mohr, Webb and Harris (2001) that captured SRCB in increasing levels. Those choosing the first three statements were “non-SRCB consumers” and the last two were “SRCB consumers”.

A majority of the respondents were between the age of 21 and 30 with 20% over the age of 30 and 20% under the age of 21. Most of the respondents were pursuing or had completed a bachelor degree. Three-fourths of the sample was generally knowledgeable about NFPs and for-profits. Pertinently, 83% agreed to the statement (over 45% strongly agreed), “The intention to make profit can lead to unethical actions,” while 7% disagreed. A majority also agreed that NFPs tend to be more socially responsible than for-profit companies.

 Results

In regards to the first research question, consumer preference was measured by the change in preference between the first and second sections of the questionnaire. The 7-point interval scale for product preference was used as a -3 to +3 interval scale for data manipulation in SPSS, with 0 being “no preference.” In the survey, the NFP products were placed as A (towards -3) for water and juice and as B (towards +3) for coffee, carpet, and meal. For example, in Table 1, the mean in the first section for ‘Juice’ is 0.38, revealing that respondents slightly preferred Juice B on average; however, mean in the second section for Juice changes to -1.41, indicating that respondents relatively strongly preferred Juice A on average after reading that Juice A was produced by an NFP. This shows a clear preference for the NFP over the for-profit company as this preference change is purely a function of the reaction to the new information. A paired sample t-test between preference in the first section and preference in the second section revealed that the change in preference was significant and that the change was towards the NFP provider for all five product classes (Table 1).

Table 1                                                                  ** is (p < 0.01), *** is (p < 0.001)

Product class

Mean in first section (n=79)

Mean in second section (n=79)

Significance level

Avg. Price premium for NFP products (n)

Coffee

1.15

1.84

.001**

14.82% (16)

Carpet

.58

1.16

.001**

32.33% (6)

Water

-.22

-1.48

.000***

17.41% (27)

Juice

.38

-1.41

.000***

17.59% (32)

Meal

-.82

.54

.000***

18.75% (25)

The approach used to answer the second research question was to test for differences between the two groups, SRCB consumers (n=27) and non-SRCB consumers (n=46), in terms of preference change and also to test for differences in preference change between the products with varying social responsibility information about the providers. Preference change was calculated by subtracting the response in the first section from the response in the second section, the resulting number indicating the strength of preference for the provider. For the first approach, an independent t-test was performed. Here, SRCB consumers (M=1.185, SD=1.798) had significantly greater preference change towards NFP carpet (t=3.98, p=0.000) than non-SRCB consumers (M=0.022, SD=0.649). Further, SRCB consumers (M=-1.889, SD=2.025) had greater preference change towards NFP water (t=-2.12, p=0.037) than non-SRCB consumers (M=-0.891, SD=1.889). No significant differences between the two groups were observed for non-contractible products. Thus, SRCB played the major role in consumer preference for the contractible goods, especially for carpet as mean is only 0.022 for non-SRCB consumers. However, since consumer preference for NFP products was also high for non-contractible goods, it can be inferred that contract failure played the major role as even non-SRCB consumers showed significant preference for non-contractible NFP products.

For the second approach, paired sample t-tests were conducted between non-contractible goods that had varied levels of social responsibility information. It revealed that participants preferred NFP juice (M=1.785, SD=2.319) significantly more (t=-3.327, p=0.001) than they preferred NFP coffee (M=0.683, SD=1.829). The difference was close to significant (t=-1.905, p=0.060) at the p < .05 level between coffee and meal (M=1.367, SD=2.552). The difference was insignificant between juice and meal. Therefore, more social responsibility information about NFPs invokes greater SRCB and increases preference for NFP goods.

 Conclusion and Limitations

In summary, consumers prefer NFP goods over for-profit goods because of SRCB. Moreover, contract failure strengthens this preference for non-contractible NFP goods. Since consumers are generally willing to pay an average of over 15% price premium for NFP goods, generating revenue surplus for social missions is also a good possibility. To ensure the greatest advantage, NFPs should sell non-contractible goods and display not only their NFP status but also information about their missions (social responsibility) for greater consumer preference – also found in previous studies (Handy, Seto and Wakaruk, 2010; Schlesinger, Mitchell, and Gray, 2004). As this study assumed parity in price, offering products at the general market rate would make the findings more applicable. Additionally, for greater applicability the consumer would have to be choosing between products for which there is little product experience (for example, products targeted at tourists or new immigrants).

Limitations of this study are the sample size, sample representativeness, and the use of a convenience sample. Also, social desirability bias – participants wanting to appear benevolent – may have influenced the responses (Mohr, Webb and Harris, 2001). The attitude-behaviour gap found in past studies may also limit the applicability of the findings (Boulstridge and Carrigan, 1993). Future research expanding on this study should also develop a more systematic and scientific approach to measure contract failure in goods.

——————————————————————————

Appendix A

Survey to measure consumer preference for not-for-profit products

 

Appendix B

Product

Information about NFP

Information about for-profit company

Coffee

Café Dolce is a business (for-profit company). Kinfolk Café is a not-for-profit company.

Carpet

Woolsmiths is a business. Its profits are distributed to the owners of the business. Gaia is a not-for-profit company. Its revenue surplus goes back into the company for development purposes.

Water

Encompass is a not-for-profit company. It sources its water from streams high up in the Himalayas. H two O is a profitable business. It sources its water from deep in the Alps.

Juice

EcoJuice is a not-for-profit company. It sources its oranges from organic farms in South America and pays fair trade prices to the farmers (similar prices to farmers in developed countries). EcoJuice also donates a large portion of its revenue surplus to charities in South America that give scholarships to farmers’ children for attending schools and universities. Original is a well-known business (for-profit). It sources its oranges from Asia. Original has consistently maintained and surpassed the standards required by the government regulatory bodies. Original sponsors various sports tournaments for children, which might not have been possible without its support.

Meal*

Mogul is a restaurant chain (for-profit). The company has 4 restaurants in town. Mogul advertises that it sources its ingredients from small farms where animals are treated right. It also has its own well-known charity to support children with disabilities.

[NFP] Spiral is a not-for-profit company. The primary goal of for-profit businesses like Mogul is to make as much money as possible for its owners. Mogul’s charity is completely supported by customer donations and the small farms that are its suppliers are not that small and are not organic farms. But Spiral is quite different. Since it does not have to make any profits for any person, its primary goal is to serve the healthiest and best food possible – quality is the highest priority. Also, because there is no pressure to make as much profit as possible, it can afford to be environmentally friendly, keep its employees happy, and contribute to charities and social causes that it believes in from its own revenue surplus.

 

* Negative social responsibility information about the for-profit presented on the NFP side.

References

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Austin, J.E., Gutiérrez, R., Ogliastri, E., Reficco, E. (2007). Capitalizing on convergence. Stanford Social Innovation Review; Winter 2007; 5, 1, 24

Australian Bureau of Statistics. (2007). Not-for-profit Organisations, Australia, 2006-07 (Re-Issue). Retrieved from http://www.abs.gov.au/ausstats/abs@.nsf/mf/8106.0

Brown, T.J. and Dacin, P.A. (1997). The Company and the Product: Corporate Associations and Consumer Product Responses. The Journal of Marketing, 61, 1, 68-84

Dolnicar, S, and Lazarevski, K. (2009). Marketing in non-profit organizations : an international perspective. International marketing review, 26(3), 275-291

Ebrahim, A. (2003). Making sense of accountability: Conceptual perspectives for northern and southern non-profits. Non-profit Management and Leadership, Vol. 14 No. 2, 191 –212

Facebook Statistics by Country. (2012). Retrieved June 4, 2012, from http://www.socialbakers.com/facebook-statistics/

Fontana, C. (2007, July 7). Habitat for Humanity gets into retail: Nonprofit aims to profit from donated materials at ‘ReStore’ in Clovis. McClatchy – Tribune Business News, Washington, 1

Formosa, N. (2009, Dec 1). Shop Supports Nonprofit with Used Bike Sales. Bicycle Retailer and Industry News; 18, 18; ProQuest Central pg. DT4

Friedman, M. (1996). A Positive Approach to Organized Consumer Action: The ‘Buycott’ as an Alternative to the Boycott.  Journal of Consumer Policy, 19, 4, 439-451.

Glaeser, E.L. and Shleifer, A. (2001). Not-for-profit entrepreneurs. Journal of Public Economics 81, 99–115

Hammack, D. C. (2001). Introduction: Growth, Transformation, and Quiet Revolution in the Nonprofit Sector Over Two Centuries. Nonprofit and Voluntary Sector Quarterly 30, 157

Handy, F., Seto, S., Wakaruk, A., Mersey, B., Mejia, A. and Copeland, L. (2010). The Discerning Consumer: Is Nonprofit Status a Factor? Nonprofit and Voluntary Sector Quarterly 39, 866

Hansmann, H.B. (1980). The Role of Nonprofit Enterprise. The Yale Law Journal, Vol. 89, No. 5, 835-901

Hansmann, H.B. (1981) Consumer Perceptions of Nonprofit Enterprise: Reply. The Yale Law Journal, 90, 7, 1633-1638

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Horne, S. (2000). The charity shop: Purpose and change. International Journal of Nonprofit and Voluntary Sector Marketing Volume 5 Number 2, 113-124

Laroche, M., Bergeron, J., and Goutaland, C. (2003). How intangibility affects perceived risk: The moderating role of knowledge and involvement. The Journal of Services Marketing, 17(2), 122-122.

Malani A. and David G. (2008). Does Nonprofit Status Signal Quality? The Journal of Legal Studies, Vol. 37, No. 2, 551-576

Mohr, L.A., Webb, D.J. and Harris, K.E. (2001). Do consumers Expect Companies to be Socially Responsible? The Impact of Corporate Social Responsibility on Buying Behaviour. The Journal of Consumer Affairs; Summer 2001; 35, 1, 45

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Parsons, E. and Broadbridge, A. (2004). Managing Change in Nonprofit Organizations: Insights from the UK Charity Retail Sector. Voluntas: International Journal of Voluntary and Nonprofit Organizations, 15, 3, 227-242

Saeed, S. (2010, Aug 10). Melbourne cafe donates profits to charity. Melbourne Leader. Retrieved from http://melbourne-leader.whereilive.com.au/news/story/melbourne-cafe-donates-profits-to-charity/

de los Salmones, M.M.G., Crespo, A.H. and del Bosque, I.R. (2005). Influence of Corporate Social Responsibility on Loyalty and Valuation of Services. Journal of Business Ethics, 61, 369–385

Schlesinger M., Mitchell, S. and Gray, B.H. (2004). Public Expectations Of Nonprofit And For-Profit Ownership In American Medicine: Clarifications And Implications. Health Affairs, 23, no.6, 181-191

Singh, J., de los Salmones, M.M.G., and del Bosque, I.R. (2008). Understanding Corporate Social Responsibility and Product Perceptions in Consumer Markets: A Cross-cultural Evaluation. Journal of Business Ethics, 80, 597–611

Skewes, Z. (2009, Apr 22). Lentil as Anything happy for diners to dodge bill. Herald Sun. Retrieved from http://www.heraldsun.com.au/news/more-news/dine-out-and-name-the-price/story-e6frf7kx-1225701488028

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Young, D.R. (1998). Commercialism in Nonprofit Social Service Associations: Its Character, Significance, and Rationale. Journal of Policy Analysis and Management, Vol. 17, No. 2, Special Issue: The Commercialism Dilemma of the Nonprofit Sector (Spring, 1998), 278-297

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Consumerism: Insanity Made Normal

A definition of insanity by Einstein has been so popularized by cinema and television that dictionaries simply cannot keep up. He said, with trademark elegance, that insanity is “doing the same thing over and over again and expecting different results.” But he might have forgotten to add a qualifier: insanity may not be conspicuous if a majority is insane.

Think about the modern consumer who buys and buys and buys, often the same thing but referred to as a newer version that provides the same basic functionality. If a person was looking to fulfill a certain need through a product, the person would not abandon it so readily for a newer version by paying even more if the product fulfilled the need to begin with. The replacement of one product by its newer version or its substitute could only mean that the product was not fulfilling the needs it was supposed to.  However, in the modern world of consumerism, that newer version or substitute, is replaced again as quickly or even quicker. Today, it is all about buying the latest version, without a single reflective thought about how it would fulfill the need differently than an older version would.

This repeated buying of products, while expecting them to fulfill a need that similar products before could not, matches very closely with the definition of insanity provided by Einstein. Of course, it is often the case that the products are marketed in such a way as to appear to be fulfilling basic human emotional needs (just think about all the smiling faces and beautiful people in advertisements of products that have no direct link with happiness or sexuality, such as a car) but people seem to fall for the advertisements so consistently and repeatedly that it makes you wonder if the mind is really any competition for the heart, so to speak.

Looking from afar, people in modern times are insane according to Einstein’s definition. It may not seem like it when it is so commonplace and seemingly permanent, but it is definitely a thought worth considering. However, if insane is normal, then who would not want to be insane, for not being insane would make one an outcast?

Take a look at a short film I made about consumerism.

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Are You Open to the Open Source Revolution?

Sigmund Freud, founder of psychoanalysis, smok...

Started consumerism indirectly, perhaps a Freudian slip

It is a commonplace catchphrase in our times: nothing in life is free. Yet, some would argue that THE BEST things in life are free. Which philosophy you adhere to is purely based on perspective. However, that does not rule out the veracity of either, unless you are a pedantic lover of logic, willing to deduct statements to the bitter end.

Yes, bread isn’t free, clothes aren’t free, a house isn’t free, and, in many cases, good health isn’t free. Whether relationships are free or not is beyond the scope of this article (suggested reading: Sigmund Freud, Dr. Phil). So in essence, the essential things in life, which would be ‘ everything’ one needs, are not free. On the flipside, a sunset is free, water CAN be free, and i guess if you don’t get caught, THE BEST things in life can be free.

However, despite addressing the veracity of the aforementioned statements, we still have not addressed the central question: who decides what is free or not? The obvious answer would be: the ones that are offering. In the case of sunsets and rock-filtered water, and white sands, God (or ‘Nature’ if you are a savage pagan) would be the seller. And in the case of bread, clothes, house, and health, man is the seller. So, what we can deduct from this exercise is that man charges for everything while God (or ‘Nature’ for the savages) gives things away for free. I guess it only makes sense that since man has taken over most of what God (or ‘Nature’, sick of doing parentheses for the savages) has made, most things in life are not free.

However, things are ‘a’ changing. Open Source Software is changing the landscape of the world. However, this landscape does not boast of anthills and mole holes or daffodils or sunflowers. It is a virtual landscape. If you are using Mozilla Firefox right now, then you are in that space; if you are using Open Office Writer instead of Microsoft Word, then you are in that space; if you are using Wikipedia, then you are in that kind of space.

The world is getting things for free that it never thought it would. These days, instead of buying Microsoft Windows for 200+ dollars, one can get Linux for free; instead of getting Internet Explorer, one can get Firefox for free; Instead of using Microsoft Office for 300+ dollars, one can get Open Office for free, for the same quality, and sometimes more.

How in the hell did groups of creatively-minded people with remote alliance end up challenging the multi-billion-dollar powerhouses that were Microsoft and Apple? They did not have the start-up investment, the business drive, or the stranglehold over politicians that most big corporations do. However, almost for the first time in the information age, products that rival that of unimaginably powerful corporate juggernauts come for free.

The revolution is underway, below the radar.

Now, there are a lot of open source projects underway, not just in the virtual world, but also in the real world: http://osliving.com/sourced/real-world-open-source/remarkable-real-world-open-source-projects/ . This can become a phenomenon not just in the virtual world but also in the real world if people choose to combine their strengths to defeat Goliaths of the modern era. Their names might not be David, but they represent the essence of the underdog, the modern underdog that shows the middle finger to the powers that be by just doing what they love – create.

Soon, we’ll have more people saying that the best things in life are free with the origin in a  certain movement called the ‘open source’ that started noticeably with Linux and such. It will be a testament to those that dedicated their time for the Open Source movement from the beginning. It is not in the nature of man to deny his fellow man the best possible existence. It is only a matter of time when man learns to be as generous as God or Nature, providing for free, what is needed.

(This article is dedicated to Wikipedia)

– Openness is the only way to go forward

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The Major Challenge of the Occupy Movement: Out-Group Bias

Mixed Reaction to the Occupy Movement

As the contagious Occupy movement spreads around the world and grows in stature, there seems to me a markedly mixed reaction to its existence. The movement is protesting, among other things, the enormous and ever-growing gap between the super rich and the rest – labelled the 1% and the 99% respectively. But despite its conspicuous intent to be the representative of the overwhelmingly large majority, the movement is inadvertently and ironically creating a burgeoning gap between the proponents and opponents within the 99% that is threatening to seriously undermine its credibility, which is vital to its success.

The negative reactions from many belonging to the “99%” elucidate psychological factors that have deterred them from embracing this movement, even though its success would be favourable to them, at least in theory.

An example of out-group bias

Division Caused by Out-Group Bias

One of the psychological factors is a pervasive and almost unavoidable by-product of the information age: out-group bias. In the comment sections of several internet articles or videos about the movement, there seems to be a trend of labelling the protestors as either one or a combination of these: hippies, hooligans, university kids, unemployed, dirty, lazy, brats, whingers, cry babies, marijuana-smokers, and so on.

This pigeonholing is borne out of unconsciously selecting a few eccentric members of the movement and generalizing the viewer’s perceptions of these types of people to all the participants of the movement. The generalization is, of course, an inherent human trait that serves to put a whole information piece into a distinct compartment of either good or bad. And it is another human trait to label that which is similar to oneself as good and that which is different as bad.

Consequently, the now well-established profile of the average protestor as being a young university student or recent graduate, liberal-minded, and ardent, which often is the antithesis of the more conservative and security-minded profile of an older individual, has the majority of the older demographic categorizing the movement as bad. Similarly, even a lot of younger people who have unconsciously attached a hippie face to the average protestor and who subscribe to the social ostracizing of hippies have adopted a stance against the protests. In addition, there is also wide-spread belief that most protestors are unemployed and the stigma attached to being unemployed automatically disqualifies the movement for some.

The Reality of the Movement

The aforementioned out-group bias is a very powerful psychological barrier to overcome. Evidently, even an out-group protesting fervently in your interest is to be treated with utmost suspicion. However, the truth is in fact quite different from the specific labelling of protesters as unemployed or as hippies, or even as only students.

Often, because detached visual information on television and internet stimulates sensitive emotional nerves and readily engenders various out-group biases, information presented in statistical numbers can give much better judgment of the movement and can be digested in an unbiased and rational manner.

There was a survey collected at the Occupy Wall Street site in New York in regards to the demographic of the protestors that visited the site and participated in the protests. The numbers, in stark contrast to the rumours and selective reporting and commenting, illuminate the reality of the movement and reveal that participants cannot, in fact, be simply categorized into one distinct group but rather resemble more closely the diversity of the 99% it claims to represent:*

  • While the sample is relatively young, one in three respondents is older than 35 and one in five respondents is 45 and older.
  • 26.7% of respondents was enrolled in school and 73.3% was not enrolled in school.
  • 50.4% was employed full-time and an additional 20.4% was employed part-time.
  • 13.1% of the sample was unemployed.
  • 2.6% of respondents was retired, 1.3% disabled, 2.6% homemakers and 9.7% were full-time students.
  • 47.5% of the sample earn less than $24,999 dollars a year and another quarter (24%) earn between $25,000 and $49,999 per year.
  • 71.5% of the sample earns less than $50,000 per year.
  • 15.4% of the sample earned between $50,000 and $74,999.
  • The remainder 13% of the sample earn over $75,000 with close to 2% earning over $150,000 per year.
  • 27.3% of respondents considered themselves Democrats, another 2.4% said they were Republican.
  • Interestingly, a very large proportion of the sample, close to 70.3%, considered themselves Independents.

The numbers clearly discredit the seemingly widely-held belief among the detractors of the movement that most of the protestors were unemployed and lazy trouble-makers looking for an easy way out. The percentage of unemployed roughly resembles the actual rate of unemployment in theUnited Statesat the moment.

While most protestors are young, there is significant participation from those in their middle age and beyond as well. The income level of the protestors is also representative of the diversity of the middle class.

I am Better than Them

What the glaring discrepancy between the reality and the constructed beliefs about the Occupy movement demonstrates is that, in these times, the mistrust in humanity and the constant urge to assume superiority over others is far more prevalent and compelling than the desire for unity and the betterment of society achieved through it. Many would much rather consider themselves better than others and deride the efforts of others than come together and join forces for real progress. Interestingly enough, these traits of individualism and competition are not only the pillars of capitalism but also traits that have been created by capitalistic philosophies of fending for oneself and beating others for rewards.

Conclusion

There are very strong challenges for the Occupy movement to overcome if it is to achieve its goals of unity and equality. The most important challenge is to bring those that readily assign out-groups into the in-group called humanity.

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*http://www.scribd.com/doc/69603228/The-99-Movement-Comes-From-and-Looks-Like-the-99

Posted in News and Analysis, Psychology | Tagged , , , , | Leave a comment

The Club: A New Way to Organize Society

The Need for a New Way to Organize Society

A human is so far separated from the process of production of a good he/she consumes in modern times that he/she has no direct control over it. In contrast, a human during ancient times would have virtually complete control over the production process. Furthermore, in a system that values efficiency over all else, the modern method of production has to be one of the most inefficient ways to produce goods at the individual level. If a person wants a pair of shoes and has a design in mind, he/she has to visit various shoe stores, look at numerous shoes, and possibly decide upon a pair that still might not fit his/her exact need. Since a large percentage of shoes produced do not find suitors, the waste of resources is enormous, which mocks the very definition of economics – the allocation of scarce resources.

‘Efficiency’ attained by the producers of goods during the production process is effectively negated by the inefficiency of post-production. In fact, letting the aforementioned person create their own pair of shoes would not only prevent enormous waste of scarce resources but it would also enable him/her to produce one that would fit his/her exact need. In addition, there would be the additional satisfaction of making one’s own shoes from beginning to end.

However, in today’s world, putting a shoe together would be like working outside of work. Humans get so little time off from work that they would rather go buy a pair of shoes from the store even if it might not fit their exact need or even if they would have no knowledge of who produced the pair or how it was produced. For all they know, it could have been a child working under terrible conditions in China that made them. Time off from work is so precious that even thinking about that or researching it would eat away any leisure time available.

Leisure time, time off from work, has become the only thing that makes life worth living for a majority of people in the world. Work has come to be seen as an evil necessity. A compelling explanation for why people abhor work is that work has become repetitive, specialized, and meaningless. The work we perform has little connection to our true interests and talents and the final product or service we partially contribute to has no use for us.

The way labor is organized bears major consequences for human happiness, in addition to the allocation of scare resources. In the current system of capitalism (which includes China and Russia), labor is organized in such a way that workers receive as income much less than what they actually produce for their employers (the discrepancy is called labor surplus) and the work performed is so specialized and repetitive (in order to increase labor surplus) that workers are alienated from what they do. They derive little satisfaction out of the process of production they are engaged in because they do not choose what they produce or how they produce it. The system is designed in such a way that the wants of the employers overshadow and subordinate the wants of the workers, which results in employers dictating how the workers work and enforcing routines and methods that make the workers as productive as possible, as opposed to as satisfied as possible.

The Club Labor System

There are many other ways of organizing labor that could possibly bring more happiness to people and more meaning to the work that they perform. The only reason that labor is organized in a capitalistic manner in the present time is because of the power that capitalists possess to preserve the institutions that perpetuate capitalism. Of course, they want to preserve this system because it gives them the ability to extract the most output from workers but pay them a lot less than what they generate, and keep most of the labor surplus, or the profit, for themselves. The money they derive through the labor surplus from their workers is usually so disproportionate to what the workers are paid that the total surplus is enough for them to pay to affect policies of the government, control the media, maintain a security force that protects their interests, hire top lawyers to defend their legitimacy, and on top of that, keep enormous profits to grow even more powerful.

I am now going to discuss another type of system to organize labor that would not only give people greater choice and control over their work but also return to them the labor surplus that they generate. This system is loosely based on the organization style of a club.

A club is simply defined as an association of two or more people united by a common interest or goal. The structure of the club is such that the goals and strategies of the club are chosen through a democratic process in which all the members of the club engage in direct or indirect voting. The funds obtained by the club, usually through the members’ contributions or through fundraising, are then used to attain the goals of the club by following strategies and methodologies decided upon by the committee (which consists of all members). Since every member plays a part in every decision made by the club if he/she wishes to, the organization of labor in achieving the goals of the club is based on the interest of all members and not just one or a few.

In terms of the labor surplus, if there is labor surplus (the member putting in more effort than he/she gets rewarded for, financially and psychologically), once again, the club committee would vote on how to distribute the surplus and to whom. If the members decide to take back the surplus that they generated, say if it was money the club received from its operations, they can simply vote on this policy and divide the surplus amongst themselves. However, as this might prove problematic as far as the specifics are concerned, the club could operate in a way where no disputable surplus is generated, which I will elaborate on a little later.

Therefore, the relevant features of the club in terms of the organization of labor is that the decisions made by the club would be democratic through its members, the members would be self-motivated and satisfied to perform work on behalf of the club, and the labor surplus, if generated, would not be used to benefit a single member or a small group of members of the club.

To quickly contrast the features of the corporation, all the corporation’s decisions are made by a very small group of stakeholders (the board of directors), the worker’s personal goals and wants are misaligned with that of the corporation (which is to make more profit for the owners), the payment to the worker is a lot less than what he/she generates for the corporation, and this labor surplus is distributed through a highly undemocratic process.

There is a good likelihood that the corporation would be more efficient than the club in terms of production but the simple reason for that would be that the members of the club would choose not to endure working conditions and methods that would be the most efficient but rather would choose conditions and methods that would be the fairest and most inclusive. There would be a shift in priority from efficiency to fairness, from specialization to greater involvement in production, from repetitiveness to variety; in other words, from owner to worker.

Features of the Club Labor System

I will now discuss some prominent features of the club labor system that distinguishes it from the capitalist labor system.

First off, self-sustainability and greater communal responsibility will be promoted in the club labor system and these will be rewarded by giving people greater freedom and greater variety when it comes to work and giving people opportunities to work on what truly interests them or where they feel their true talents lie.

The club system will not force any individual to perform any particular type of work or to give up something for the community but rather it will provide incentives for people to contribute to the community. Moreover, individuals will be able to request their own compensations based on their contributions in production, provided that it is a fair assessment. In addition, they will have a say in how much is paid to other members of a club for their contributions. All members will evaluate the fairness of a compensation request and a majority vote will grant this request.

This democratic system of determining compensation for effort will not only ensure that everyone is compensated fairly but it will also maintain natural checks on overcompensation and greed. The most humane aspect of this compensation system is that it will be based on human empathy and not on mathematical calculations. This system will take advantage of natural human abilities of giving credit where it is due that have been developed over thousands of years of communal existence that have given way, quite unreasonably, to impersonal and soulless computer calculations in the capitalist system.

Clubs in the community will provide all the goods and services in demand besides those that would be considered human rights: health care, education, and public transportation. Those services considered human rights would be provided by the government, which is already the case in countries like Sweden, Denmark, and Germany.

The education system will be based on all-round education, the pattern that the work system will follow as well. The introduction of students to all kinds of topics will enable them to find their true interest as well as practice a more holistic way of thinking. In addition, all students will be exposed to farming, weaving, toolmaking, carpentry and so on to a degree that they would be able to live a self-sustaining life if they desired. These skills and knowledge gained from education will be utilized and honed in the self-rotating club labor system.

Supplying Necessary Goods and Services AND Bringing Enjoyment to Work

The most revolutionary aspect of the club system would be its self-sustaining and self-rotating labor system. Club membership would be based on two distinct criteria: the interests of an individual and the wants of an individual. First off, the labor system will not be rigid but rather free-flowing in the sense that an individual does not only have to be a member of a single club at one time but can be a member of several clubs. For example, in one week, a person can work as a part of the pizza-making club, the public works construction club, the neurology research club, the farm club, the classical music club, and the shoe-making club. However, the person would have to pay attention to how much income he/she is earning as the revenues for these different clubs would be different, and so would the respective income one could derive from them. If the person desires more income, he/she would work more in clubs that produce goods and services that would be in higher demand. Therefore, if the said person had higher wants and thus needed higher income to fulfill them, he/she would spend more time working in the pizza-making club, the construction club, the farm club, and perhaps the shoe-making club more than the neurology research club and the classical music club, assuming that the demand for neurology research and classical music is lower than the former ones. On the other hand, a person with lower wants would have the freedom to engage more in clubs that truly interests him/her while also putting in effort in the basic clubs to maintain a basic wage. In this way, the goods and services that have the highest demand level would be taken care of first and foremost.

Furthermore, a very important feature of the club system would be that there would be incentives such as discounts for purchasing products and services from a club one works for, which, in turn, would motivate a person to work in a club that produces what he/she wants. In this way, a person would produce goods and services that he/she wants and that would consequently greatly diminish the problem of supply-demand discrepancy. Additional motivation to help make products one wants would be that the work would be more meaningful since the member would have a direct interest in the product and the person would have greater control over the production process of a product, which would ensure a higher quality product as well.

The rotation system would not mean that a club member would leave a club in the middle of a production cycle because that kind of irresponsible behavior would be discouraged by the income vote by the club committee if there is consensus that the behavior was irresponsible and unfair. The club committee meetings in regards to income for its members would be held at the end of each production cycle. Since the production cycle of different clubs would be different, members would stay longer in some clubs than others throughout the production cycle. For example, the production cycle for the Italian cuisine club could be the preparation of meals for lunch while that for a public works construction club could be the construction of a public landmark.

This system would naturally and quickly evolve into a system where the compensation for work that would be less desirable, require greater effort or demand longer stay would be substantially more than work that would be more interesting, easier, or shorter. In fact, if labor supply were to be chronically less than the labor demand for certain work, then the government would be able to provide further tax incentives or other incentives to attract people to those positions. Either way, this would not mean that a person would only have to perform less desirable work. He/she would be free to engage in more interesting and meaningful work during the work week in the rotational system that ensures variety in work.

Concomitantly, people with greater material wants and desires would have to work proportionately harder and do less interesting work than people with fewer wants and desires as those types of work would be where the most income would be available. This fair system would reward those willing to work harder. People who will have developed special skills and talents would also be rewarded accordingly through the simple labor supply and labor demand mechanism that would be much more fluid in the club labor system.

This kind of system could also discourage excessive material consumption as people could begin to realize that they would rather do interesting work than basic work in exchange for owning lesser things than more things. This would do wonders to alleviate environmental degradation as well as reveal to the person alternative ways of attaining contentment to the belief that material consumption brings happiness.

Funding the Club

The way that clubs would fund themselves to acquire the means of production as well as raw materials would be through interest-free loans from the government. The loans would be expected to be paid back not in lump sum but in installments at the end of every production cycle or a reasonable period of time. The repayment would be carefully planned such that it would not encroach upon the labor surplus of a club member or necessitate unreasonably high prices for the goods and services provided by a club.

Because the only recurring costs not covered by the loan would be labor costs, the prices charged by clubs for a product or service would incorporate only the labor that has gone into it and a small amount extra for the repayment of the government loan. Since there would be no profits or capital accumulation, there would not exist any large monopolies or oligopolies to charge prices higher than those dictated by the mechanism of supply and demand. Thus, fair prices will be universal as well. Immense corporations that just sweep aside small businesses in the current world would become a thing of the past. Also, the average club would usually be small in size, depending on the products or services they provide. An example of a larger club would be one that produces airplanes. There would be no desire for club to grow as there would be no incentive to increase profit for the club. A club would be large only if it absolutely needed to be, in light of what it produces.

Government and Tax under the Club Economy

Individual income tax would fund most government projects and programs. Individuals would be taxed monthly based on the types of clubs he/she worked for that month. Tax rates would be about the same as current rates in most developed countries but the individual income would be much higher than in capitalism because instead of being given back only a small portion of what a worker actually makes for the company, the worker will receive income equivalent to what they make for the club. It may be hard to believe, given how workers have come to accept the current incomes they receive as normal, but getting back an equivalent compensation for what one produces would raise the income by an enormous amount.

The tax system would be progressive, in that greater income would incur a higher marginal tax rate. However, the progression gradient of the tax rate would not be as steep as in capitalism because income would be mostly derived from doing actual work, as opposed to investing in shares or extracting exorbitant salary and bonuses. This would also mean that the society under the club system would be much more egalitarian, yet people willing to work harder for greater income would be able to do so without unreasonably high marginal tax rates.

Tax incentives would also be extensively used in the club system. Firstly, low tax rates would be applied to the portion of work performed to produce basic goods and services in order to promote work in areas that have the most demand but that could be less interesting than others. Secondly, portion of work performed for public services such as health care, education, and public transportation would carry the lowest tax possible. This would ensure that public services are of high quality because the demand for low-taxed jobs in the public sector would create healthy competition among applicants who are motivated to attain higher income. Moreover, as the club system would create a society that fosters higher standards of morality and altruism than capitalism, there would also be a lot of people applying for public jobs in order to help their fellow humans.

The taxes raised by the government would be used to provide social welfare such as free education, universal health care, and subsidized public transportation. In addition, the government would also use its funds to provide interest-free loans to clubs in order for them to purchase the means of production. Because the club itself would have no selfish motive, it would be reliable in repaying the loan.

The government would also fund a public but independent department of ethics, which would consist of people who would be responsible to ensure that the functioning of the club system is as ethical as possible. This department would perform auditing at all levels of the club system. Once again, the workers for the ethics department would incur the lowest possible tax rate and receive other incentives for performing work that many might consider uninteresting. Any unethical activities perpetrated by club members regarding government funding or price-setting would be investigated by this department. The repercussions of unethical activity could range from incurring a higher tax rate for a certain period to jail time, depending on the offense.

Starting the Club System

Clubs already exist and have existed for some time in human society but that organizational form has rarely gone beyond simple interests and hobbies. The idea of starting a business instead of starting a club to produce goods or services must have been one of those ideas that no one really bothered to question. The promotion of self-interest by modern economics must have also played a vital role in turning people towards business. However, if there is a group of altruistic, innovative, and freedom-loving people that is willing to make a true change by providing any kind of good or service to the community without any profit incentive while still earning a decent income, then this would be the perfect time to start a club.

Very soon the club would beat its capitalist competitor on the price for the good or service as that company would need the labor surplus it extracts from its workers to pay for several things including profit that the club would not have to worry about. Even after the members retaining compensation for a large part of the labor they invest the club can beat the price of the corporation and start becoming more well known in the community, not only for their community work, but also for providing higher quality and locally produced products and services for cheaper prices.

The club would be seen as a pioneer in the community and inspire various other clubs that will entice corporate workers that are sick of working repetitive and meaningless jobs and being paid much less than what they produce for the company. They would be further attracted by the democratic governance of the club and being offered to truly feel a part of something good. Moreover, the service provided to the community will invite further praises and good vibes that will make the club concept spread fast.

As the number of clubs grow, members of a club can join other clubs and bring variety into their work lives. The learning experience will be enjoyable too. In addition, the community spirit would provide many more opportunities for social interaction and camaraderie within the clubs as well as among the stakeholders of the clubs including customers.

The success of the clubs and the newfound enjoyment and meaning of community-oriented work will have a viral effect and clubs will begin to mushroom in large numbers, which will even pressure large corporations. Because the clubs will have the support of the community and lower prices for similar quality products, this tension between the clubs and the corporations will attract political interest. In order to appease the people of the community, the government will begin legislating policies that eventually give decisive advantage to the clubs. Then it will only be a matter of time before the club culture becomes pandemic and soon enough the country welcomes a new freer, fairer, and friendlier labor system than has ever existed before. It is not a far stretch from that to its spread around the highly connected world.

Conclusion

Development in the areas of science and technology should not be confused as the byproduct of capitalism. The club system would ensure even better progress in science and technology because it would be aimed at the benefit of the community instead of the benefit of a few privileged people. A community that wants great developments in science and technology will get great developments in science and technology in the club system because of two factors. First, a high demand for science and technology will create clubs dedicated to them. Secondly, high interest in scientific and technological development would ensure the creation of such clubs as well. Moreover, there will be voracious research at public universities as people base their education on their interests instead of shaping themselves for a specialized workforce and not only will science and technology flourish but so will art, music, culture, philosophy, and film.

Most importantly, the club system would pave way for a society that is freer, more equal, and has greater communal togetherness. Capitalism, despite feeding us with illusions that it is the best system for human progress and for being rewarded for hard work, has made us dislike work, become slaves to employment, become distrustful in other humans, engender false hopes of happiness, disconnect from nature, and become unable to take care of ourselves. The simple recapture of labor surplus by those who created it through clubs would truly bring unprecedented change and go a long way in eliminating class struggle that has existed in all hitherto human societies. The club system will herald the long-awaited emancipation of the worker and commence a rise to a truly egalitarian and humanist society. However, it will not be the final step; but it will be a giant leap in human progress.

The idea of the club labor system is simple. Because of that exact reason, it will be easier to start, easier to maintain, and easier to change if the need arises. But above all, simple ideas are the ones that work the best because there are fewer variables to account for. With all due respect to capitalism, corporations do not belong to the human club no matter what rights they have been given and it is high time that real humans decide their own fate as a people.

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Why Economics is Ineffective

Economists love this statement: if we do A, then B will happen, which leads to C, and that means more jobs and a better economy. I am sure you have heard it in one form or another from presidents and prime ministers in their efforts to sound smart. Economics is a widely revered prediction tool indeed. The government relies on it heavily to predict the effects of tax cuts, new taxes, government spending, and even $700 Billion bailouts. With such prophetic powers you would think economics is the second coming of Nostradamus, or better yet, in the same vein as natural science. However, equipped with the latest and most sophisticated economic models and even more impressive technology, economists failed miserably in sensing the imminent arrival of the Global Financial Crisis in 2008, and they still appear to have no grip on it whatsoever. They have tried. Obama reassuring the public that the US government has taken action to create more jobs is a mainstay on the news and it is bordering on becoming embarrassing because of the lack of results. Despite its conspicuous ineffectiveness, Obama and virtually all world leaders still rely heavily on economics to solve problems of unemployment, poverty, and inequality

Alan Greenspan - Taking full credit for ups, blaming the 'business cycle' for downs

How many tries does economics need? Laissez Faire economics produced the Great Depression, then Keynsian economics was given a chance but ended up in the bewildering Stagflation of the seventies, then supply-side economics claimed to be the savior and set up the devastating stock market crash of the late nineties, then, recently, economic models based on consumption on credit sprang to life engendering a protracted and debilitating GFC that has yet to subside and may signal the beginning of the end of capitalism as we know it. And these are just the grand highlights of many failures of economics to provide a stable economy, one that does not swing capriciously into devastating recessions.

A common explanation for the failure of economic theory is that ‘corporate greed’ and its concomitant power over politics sabotage any attempts by policy makers to put restraining policies in place. It is easy to place the blame on corporate greed but it is as easy to forget that such greed was a result of the economic policies based on neoclassical economics, which claims that individual self-interest leads to global prosperity. If greed does undermine economic policy then it can be inferred that economics is self-destructive and that it acknowledges this fact or it could be that ‘corporate greed’ is just a scapegoat for the complete ineffectiveness of economics. Since economics assumes an intransigent stance of self-importance, it cannot be the former.

‘The business cycle’ has been another convenient way of explaining away the failings of economic theories. It is claimed that all economies go through ups and downs and that it is just natural. That could be true as a law of nature but economics certainly cannot explain it. Furthermore, if economics is and has been so certain about business cycles and so accommodating about it, then why have virtually all movements in economics promised prosperity once and for all and not prosperity for a while and misery for a while? The effects of the business cycle are not incorporated into a single economic theory that has been dominant so far. This underlines the fact that even economists are clueless about the outcomes of their own theories.

The history of application of economic theories to the society of easily forgiving and gullible humans is analogous to that of endless experiments conducted on lab rats until the desired result is eventually achieved. Yet, in this global-scale experiment with very high stakes, the desired result of happiness for all has been elusive after hundreds of years of experimentation and seems out of reach, at least with neoclassical economic theory as a vehicle. While in the mean time, the experiment subjects have been afflicted with fatal poverty, meaningless wars, a destruction of their environments, child labor, monotonous and meaningless work, and broken dreams.

The primary reason that neoclassical economics (what ‘economics’ refers to these days) fails to fulfill its promises of prosperity and happiness for all is that its assumptions about the real world are grossly incomplete and fatally simplistic, which leads to wayward predictions that have very little to do with the real world. One fundamental assumption is that humans are only self-interested. The second fundamental assumption is that humans make rational decisions at all times. These two assumptions form the backbone of neoclassical economic theory. These assumptions are then incorporated into Homo Economicus, or the economic man, and absolutely every economic transaction is deemed to have been conducted by economic man, the completely self-interested and rational individual.

The flaws in the neoclassical assumptions may not be apparent at first glance but when you imagine actual people to be completely self-interested and perfectly rational, the holes in these simple assumptions about human nature appear thick and fast. Humans are not only self-interested but they are also altruistic (a point that was greatly emphasized by Hutcheson, an eighteenth century Scottish philosopher who was ironically the teacher of Adam Smith, who, in turn, is considered the father of modern economics). Furthermore, humans are not perfectly rational when it comes to making decisions. They also base their decisions on emotion and intuition. In fact, it could even be said that almost every decision is a mixture of rational thought, emotions, and intuition, all with different influences depending on the circumstance.

Let us entertain an example just to clarify how the assumptions of economics can lead to an incorrect prediction of a common real-life economic transaction. Suppose John wanted to buy some apples and he went to the local market. Further suppose that there are only two vendors that sell the same kind of apples, the kind that John wants. The first vendor, Kim, sells her apples for $4 per kilo and the second vendor, Ali, sells his apples for $5 per kilo. Now, John, according to economics, would pick the apples for $4 per kilo as a rational economic man. But what if Kim and John hate each other? Most likely, John would not want go to Kim and would instead go to Ali and pick the $5 apples instead of the $4 ones. His willingness to sacrifice $1 for an emotion that he felt cannot be incorporated into economic theory at all.

Going back to the example, supposing that he doesn’t know Kim or Ali, what if Ali was displaying a large picture of his very sick daughter in a hospital bed and printed on the picture was a plea for help? There is a chance that John chooses the $5 apples even though economic theory would clearly predict that he would pick the cheaper apples. Here, the decision made by John would be at least partially altruistic, if not mostly. It would not have been a completely self-interested rational decision. Here again, economic theory goes haywire when humans show altruistic behavior, which is something we see quite often.

These are just simple examples that most people could probably easily relate to. Economics is capable of predicting some transactions, but it is not a reliable tool. It can only be correct when humans are being perfectly rational and completely self-interested but as we know, humans are seldom perfectly rational and they can also be altruistic. When it comes to more complex scenarios with the outcome dependent on millions of transactions or non-transactions, then the failure of economics can be really accentuated. What makes economics even less reliable in complex scenarios is the addition of more assumptions about human behavior.

Let us take an actual incidence as an example. I recently watched a video of US president Obama claiming this (based on advice from his economic advisors, of course): “Congress has just passed a measure where payroll taxes will be reduced, meaning there will be more money in the hands of consumers, who will go out an spend the money, and this will lead to more employment and a better economy.” Very much like the statement at the beginning of this article. Besides the usual assumptions that people are rational and self-interested, there is also an added assumption that people will spend the extra money on consumer goods and services. Based on these assumptions, what follows is that when people spend money this way there will be greater demand and, subsequently, a need for greater supply, which is what creates the new jobs in the economy. Once again, the assumptions are too simplistic to work as intended in the real world.

Let’s say an American receives an extra $100 per month from the tax cuts. Now for Obama’s prediction to work, the individual would instantly go to the shop and do things like buy clothes, dine in restaurants, go to the dry cleaner, buy a few drinks, take a small vacation, and so on. If all Americans did that, there would be more jobs created. The flaw is clearly not in the logic. The logic is very sound indeed. The flaws, once again, are in the assumptions. This can be demonstrated by a very plausible scenario: the individual, instead of spending the money in the way just mentioned, spends it on an electricity bill or a phone bill that was overdue, and in the next month gives the money to his sister to pay her phone bill, and from the next month onwards decides to save it in order to emigrate to a different country because he does not expect to find a job in America soon enough. In this case, there is absolutely no new consumption, and therefore the individual does not directly contribute to the creation of a single job.

Let’s imagine another very common situation in the case of Obama’s tax cuts. Jodie, an American citizen, not being very rational, completely maxed out her $10,000 limit credit card before the recession hit and she is still very deep in debt. All she wants to do is pay off the credit card to relieve her constant stress and she has promised herself that she would never get another credit card again. Moreover, her full-time job has turned into a part-time position and she only earns half the money she used to. Her interest payments are completely out of hand and the amount she is left over after paying for basic things such as rent and food doesn’t even cover half her monthly interest payments. Now, it is easy to imagine that Jodie will put each dollar of the $100 she gets per month from the tax cuts as well as any other money she can save towards the monthly credit card payments. At the rate she is paying, it will take her a few years to pay off her credit card. From this scenario, it is obvious that a person like Jodie will not have any additional consumption for years in regards to the extra money she receives and will not contribute to the creation of any jobs.

As the two scenarios outlined above are commonplace in the real world, especially in America where people are debt-ridden, the economic policy to create jobs, would once again fail because of overly simplistic and flawed assumptions. And this, of course has happened uncountable times before when the government adopts a new economic policy.

In can be established from above that economics is a very unreliable tool to create policies for the world we live in. Even if economics did not exist, the world would not be any worse off. In fact, it would be better off because not only is economics responsible for numerous failed policies and waste of taxpayer money but it has also created greed, corruption, and moral degradation by giving vindication for complete self-interest. If policies are based on assumptions that people will be completely self-interested then that gives them the license to actually be that way. Economics, by claiming that competition is beneficial to mankind has created a world in which competition, and not cooperation, has become the norm. It is well known that competition only breeds envy, cynicism, prejudice, and hatred. Cooperation, on the other hand, would make people a lot more helpful, tolerant, caring, and friendly towards each other.

Neoclassical economics is directly responsible for the horrendous poverty in the world, the pervasive inequality, child labor, destruction of ecosystems and the environment, eradication of thousands of species, meaningless specialized jobs that give people no satisfaction or fulfillment, and millions of broken promises of happiness for people who chased after money.

It is claimed that economics is responsible for great developments such as medicine and technology but what is ignored in that claim is that great scientific breakthroughs came before the advent of neoclassical economics and its offspring, capitalism, and they were already beginning to change lives. Most scientists and pioneers who were responsible for world-changing inventions and discoveries were not motivated by money but rather by a drive to achieve something great or to change the world for the better. It is time to snap out of the illusion that economics is useful and even beneficial to the development of the world, it simply is not.

Ancient Greece ran a great and prosperous civilization without economics and we still look up to and admire what it has left behind. Great thinkers and administrators who lived at the time, such as Xenophon, Plato, and Aristotle, were critical of commercial activity because they believed that the creation of wealth from commercial activity was unnatural. Aristotle thought that only land created natural wealth, in the form of food and other material. Furthermore, he thought that in order to live a good life one must live a life of limited wants and be virtuous.

The administrative policies that were adopted by the city-states of Greece were based on the advice of sophists and philosophers such as those mentioned above, as they were advisors and teachers to the king and these policies were grounded on ethics instead of economics. In fact, the first traces of policymaking based on economic theory only emerged during the mercantilist era in the seventeenth century. In 1668, a bill was introduced into the Parliament of England to lower the maximum rate of interest to 4 percent on the advice of a merchant, Sir Josiah Child, because he believed that countries are ‘richer or poorer in exact proportion to what they pay, and have usually paid, for the interest of money’ (Backhouse, p.80). This marks one of the first instances of economics being used to set national policy. This theory, of course, would later be discredited on the basis that its assumptions were too simplistic and did not take into account the intricacies of the real world. This set into motion a continuous cycle of new policies based on new economic ideas being adopted and then abandoned because they did not work. And that incessant cycle still rolls in the twenty-first century with the same result. How many more centuries before we realize that economics is not reliable and has never been reliable and that it only leads to unwanted circumstances?

The field of ethics, I believe, should replace economics as the main source of policymaking. This change would help alleviate the poverty, inequality, violence, delusion, and frustration that engulfs the current world, which was created by the completely self-interested economic man. Only then, after illusions and barriers have been removed, will there be conditions for the attainment of true happiness for all.

(In the next article I will elaborate on why and how ethics should replace economics as a source of policy-making.)

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