I would take issue with your comment that "Economics is basically about whether or not a given action results in a monetary profit to the person or organization taking the action". It is true that a number of people view economics in this way but that represents a failure of many to understand exactly what economics as both an art and a scocial science seeks to deliver. One of the most crucial principles in economcis is understanding the concept of "utility". Utility need not be measured in terms of monetary units. Economics for example can deal with the question of why we give money to charity - there is clearly no monetary gain for the giver ( perhaps except in political arenas!) but rather the giver receives utility in the form of feeling good about themselves or perhaps feeling less guilty about themselves. Furthermore the concept of "externalities" (where economics seeks to take account of both the negative and positive side effects of one individuals actions) can allow economics to deal with the wider implications to society of particular actions. The essence of economics deals with what motivates the behaviour of people and while many people perceive economics to be all about money this does a great subject a great disservice. Books such as Freakonomics by Steven Levitt and The Undercover Economist by Tim Harford should be required reading for those who really want to know what true economics is about.
Andy,
Thanks for your input on this. You are correct in that economics can and should be much more then my simplification of it. My take on economics comes from my experiences, which are limited to economics that I see practiced in engineering, where the use of economic cost/benifit analysis are done by applying a monetary cost or benifit to various options, along with some attempts to spell out the non-monetary costs and benifits on things like impacts on enviroment, etc. The challange I have seen with this type of procedure is that in our society, it seems that more often or not, money speaks loudest. When I read the excerpt from Bill Joy, what I heard from him was that unless social programs are indeed profitable from a money aspect, business will not undertake them.
Obviously I need to educate myself on the conscept of utility, but in your example of charity, this seems to me to be an example of placing a monetary value on a act. The act of charity is valued at least as much as the amount of money contributed, in addition there would likely be an additional monetary value in the tax deduction the contribution would create. The challange I see is how do you value a non-monetary act of service, say a group of girl scouts spending a few hours playing bingo with the seniors at an assisted living center. For me it seems that the question should be do we need to place a value on that act? It seems to me that the purpose of economics is to place a value on actions, whether the value be monetary or some other utility method. It seems to me that there is a deeper purpose in acts of service that a value can not really be placed on.
I do need to do some more study on the economic concept of utility and will check out the books you suggested. Thanks again for your input.
Tom
Tom and Andy:
One aspect of the externalities mentioned by Andy is commonly referred to as distributive justice, which determines how social benefits and burdens are distributed within a particular social system. For whatever reason, our social and societal systems are inextricably bound to our capitalistic economic system so that utility is often measured in terms of economic value or worth. Just ask the next person you meet for the first time this question: "So, what to you do?" I'd bet you dollars to donuts they'd describe their personal worth in economic terms by beginning with how they earn a living. This level sets the conversation and grounds each of you, for better or for worse, in economic terms so that you can then begin to relate on the appropriate level of socio-economic hierarchy you both happen to occupy at that moment in time.
While I would strike the term "monetary" from Tom's initial quote from Schuemacher, I would not change much else. As Andy suggests, Freakonomics clues us in to the fact that not all economic exchanges involve direct transfer of money, though I believe value in modern social exchanges can always be traced back to their ultimate monetary utility. As Deep Throat reminded Woodward and Bernstein, "Follow the money."
Now, these ideas are not unique to contemporary contexts. For instance, the Chinookan Indians of the Northwest Coast of North America engaged in a regional phenomenon called the "Potlatch". This practice required high status people to stockpile valuable goods for a period of time before a ceremony was held in which that person divested himself of everything and anything of value in his possession. Thus, even greater status was imputed to that person. Now, how is this an equitable exchange in our terms? Well, some people (me included) believe the Potlatch represented an opportunity for the redistribution of wealth amongst the community. In this way, the benefit for the high status individual was a concomitant rise in status, which resulted in all kinds of future social and economic benefits that were probably assumed by all parties. This is not a contemporary application of these ideas, yet I believe it illustrates the concept of tacit economic utility in an interesting way.
So, I come back around to distributive justice and our intrinsically economic view of ourselves and our places in the world. From a purely economic standpoint in the context of the American capitalistic economic system under which we currently labor, our only ethical duty is to the shareholders (stakeholders?) of the organization with which we trade our time for dollars. That is, if they are committed to only the Friedmanian concept of corporate/workforce value described by Tom in his initial post. I believe it is acceptable to operate along different lines in which social benefits and burdens are the first consideration of the organization, yet I also believe that the stakeholders of that organization should be fully aware of the direction in which the leadership and management of the organization is leading the enterprise. It would be unethical to mislead one's organizational stakeholders, would it not?
In the end, I currently and have always considered economics to be the study of the equitable exchange of value between individuals and institutions. If this is the case, we are left with only one choice: Determine what consitutes value and what the rules are for equitable exchange. If this is in purely monetary terms and all parties agree, then it is an entirely ethical way to operate an organization dedicated to generating money for its stockholders. If this is a commitment to something more, something that affects and is affected by society at large, then it must be recognized that this is the primary motivation for all involved, most especially the stakeholders of the organization.
Where does servant leadership fit into all of this? I believe it is possible and entirely appropriate to practice servant leadership in both of the circumscribed contexts I've suggested here. Remember, it's about the kind of person I am, not what I should do or how I should do it, right?
Darin,
Thanks for you input on the topic. I always appreciate it when other folks add some value to my two cents. I think your "bottom line" sums it up well and it a great reminder for me that it is not about the shoulds, or what everyone else is doing, but who I am.
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