Nov 15, 2011

A Buddhist economic approach

This is from the paper "A Buddhist economic approach to the development of community enterprises," by Wanna Prayukvong, published in The Cambridge Journal of Economics (2005). 
Economic analysis combining the Buddhist approach with economic concepts increases understanding of morals and values which are missing elements in neoclassic economics, and may help address such questions . . . 
Self-interest in the Buddhist context is therefore not limited to the individual, and since it also applies to nature and society, it equates to quality of life . . . 
Buddhist economics therefore seeks a balanced equilibrium which aims to achieve the satisfac- tion of achieving quality of life instead of the satisfaction of maximising consumption . . . 
In the Buddhist context, human beings can develop themselves through training towards gaining ‘right understanding’, as a result of which they will be satisfied in choosing economic options which give them a high quality of life that complements nature and society . . . 
Instead of being governed by the law of diminishing returns, the opposite applies: the more you experience, the more you develop right understanding.
The author concludes:
When leaders of the three groups studied were asked what they got personally as a result of their sacrifices, they all said that they were proud of themselves, their families and their communities, but acknowledged that if they had spent time working on their own businesses instead of for the community, they might have become richer and been more successful on a personal level. The neoclassic economic approach would consider this to be an irrational or interdependent utility function, and Marxist economics would interpret the success of the community groups as coming from exploitation of the leaders by others in the group. Neither discipline can help us to understand this behaviour in economic terms. However, when we apply Buddhist concepts to economics, we can see that the thought processes of the group leaders have developed to a right understanding based on a clear vision of their lives. They have not put personal interests as their first priority but have considered the needs of society and nature as well, choosing a path whereby they as individuals can coexist with society and nature to achieve a certain quality of life. With limited desires, they were able to obtain contentment and happiness as a result of their actions in each of the case studies. 
A neo-classical economist might be very critical of this approach. He might thing that all of these factors can be integrated into an individual's utility function. 
Religion and culture provide institutions which can be modeled in a Neo-classical fashion using different constraints, obviously imperfectly. Neo-classical economists however need be aware (and probably most of them usually are) that culture affects development, either at the micro level, like the case studies the article describes (where institutions seem to be key to solve collective action problems), as well as at the macro-country level. 

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