Question

In: Economics

What role does human nature play in determining which economic systems may succeed ?

What role does human nature play in determining which economic systems may succeed ?

Solutions

Expert Solution

Rather than focusing on the human nature itself, which has mostly psychological aspects, we will focus more on the connection between the human nature and economic systems.

The emphasis on evolution in natural science, rather than the beliefs based on creationism, was, of course, a significant achievement. The theories based on evolution, in a way, laid the founding bricks of not only analytical frameworks in the natural science such as biology and environmental sciences but also of social sciences. We can link the existence of any social system to its previous form and measure the change in terms of evolution. Just like any social system, economic systems also see different phases of evolution. But what exactly evolves then, as one may ask since economic system are abstractions of economics relation between different social individuals. It is, obviously, the human nature itself. Thus, philosophy of economics, evolution and human nature can be connected.

The economic system can be framed as a classification of the type of economic relationship between different agents of the economy. The most important framework was placed by Marxian theorists, according to whom there are about 6 phases of the economic system. They are primitive communism-slavery-feudalism-capitalism-socialism-communism. One can see it as the evolution of the economic systems, but we have to look more closely to see what exactly is evolving and what exactly changes between different phases. Human nature is what have the potential to describe these question more efficiently; assuming our studies on human nature is still limited that it is just a neuron network or even more so. Human nature, which is never alike between any two individuals, has something in common between everyone in terms of either incentives or values that is feasible enough to be classified as a type of economic system. It should be observed that the evolution of a theory itself might explain the changes in the economic system over time. It might be argued that the evolution of the economic system is guided as well as causes the evolution of human nature. Also that the term survival of the fittest is not just for biological processes, but can also be attributed to surviving in terms of socioeconomic aspects.

Yet human nature has aspects mostly of a psychological nature, but even those aspects are classified under ethics, morality, philosophy, incentives, etc.; the same which are directly related to the economic system in many ways. The human nature which governs the present economic system was not, and arguably even could not be present in previous systems; the same argument can be made to compare current and upcoming systems. They shape as well as evolve along with the system itself. For example, the current macro and micro-economics analyses the agents in capitalistic economy (the present classification of economic system), attributes their properties and assumptions on human nature of incentives of profitability, rationality, knowledge seeking motives, etc, such that the relation between different agents are - as they seem at present: we see people as working class people, CEO, investors, shareholders, etc. They might seem the crude people with incentives like 'working for themselves and no one else', but they surely attribute to a scenario of a win-win scenario. In fact, it was Adam Smith who first laid the framework by theorising that nations can win in trade even after importing and exporting; before him, according to the Mercantilists, a nation can win in trade only with exports and acquire 'all the gold in the world' and that importing was losing in trade; and not to forget, Mercantilism was a doctrine of Feudal days. The workers now are different from the slaves under slavery; the farmers now do have different mindset and incentives than farmers in Feudal days, and kings and king's men in monarchy had so different economic thinking than president and policymakers present these days. Also, evolution can be traced back to the hierarchy of different comparable agents then and now and CEO's expectation is surely different than the Feudal lords.Numerous examples like these can be stated to attribute the relation between differences between human nature and economic system, and hence the relation between human nature and economic sense.

Of course, there need to be several psychological, sociocultural, and even neuropsychological, and different other interdisciplinary studies to confirm the belief that human nature is directly connected to the economic system, which shapes and get shaped by each other. But it can be seen there is a direct connection in both of their changes, and thus, can be safely believed that the connection exists.


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