Presentation used during the #2012waic conference - Ghent, Belgium

1. How
Can
Our
Economy
Be
Both
Efficient
And
Connected?
Sarah
Lewis
&
Jem
Smith

2. What
does
‘an
economy
of
interconnec@ng
strengths’
mean?
Ø What
does
it
look
like?
How
similar
or
different?
Ø What
economic
language
can
we
use?
How
does
it
relate
to
Economics is in crisis. But
language
of
economics
why aren’t political
now?
scientists and sociologists
offering an alternative
Ø A
level
of
scep@cism...
view?
Aditya
ChakraborJy:
The
Guardian
17.04.12

3. Our
@me
here
together
Ø Key
current
economic
terms
and
assump@ons
Ø The
pull
of
the
future
Ø What
apprecia@ve
ques@ons
can
we
be
asking
to
help
us
develop
a
beJer
sense
of
of
the
phrase
‘economy
of
interconnec@ng
strengths’?
Ø Developing
a
new,
yet
connected
language
to
‘do’
economic
talk
Ø How
do
we
take
it
beyond
this
room?

4. What
is
an
economy?
An
economy
is
a
system
to
turn
raw
resources
into
consumer
goods/
services
using
workers
and
machines

5. What
is
an
economy
for?
To
make
people
happy.
What
makes
people
happy?
Consumer
goods
and
services
(includes
healthcare,
educa@on
etc.).
Two
problems:
1 Working
oXen
makes
people
unhappy.
2
Resources
(coal,
oil,
land
etc.)
and
inputs
(workers
and
machines)
are
limited,
people’s
wants
are
unlimited.

6. Choices
must
be
made
• How
much
should
people
work?
Leisure
@me
makes
people
happy
but
money
allows
them
to
buy
good/services
they
need
or
want.
Vs.
•
What
goods/services
should
be
produced
with
limited
resources,
and
how?
Vs.
•
Who
should
get
these
goods/services?
Vs.

7. How
do
we
decide?
The
Price
Mechanism
Prices
tell
you
something’s
Opportunity
Cost
–
what
you
have
to
give
up
to
enjoy
it.
This
allows
society
to
make
these
choices.
Price
is
determined
by
scarcity
and
desire
–
supply
and
demand.
Prices
don’t
lie
–
usually!
Examples
If
workers
are
scarce
and
companies
want
to
use
them
rather
than
machines
then
wages
–
the
price
of
labour
–
goes
up
as
supply
is
low
and
demand
high.
Wages
are
the
price
of
leisure
@me.
If
cars
are
plen@ful
and
people
prefer
bicycles,
the
price
of
cars
goes
down.

8. Who
decides?
All
systems
use
prices
to
make
these
choices
one
way
or
the
other,
the
ques@on
is
who
uses
them
and
for
what
purpose?
Extremes
Socialist
Free
Market
What
is
produced:
What
the
What
is
produced:
What
people
government
thinks
is
best
for
you
want
Who
gets
it:
Everyone
gets
equal
Who
gets
it:
The
most
valuable
shares
people
get
the
most
How
much
should
you
work:
As
much
How
much
should
you
work:
As
as
society
needs
you
to
much
as
you
need/want
to

9. Which
economic
system
is
best?
Err….
Two
ques@ons
really:
What
is
the
best
system
for
producing
goods/services?
What
is
the
best
system
for
distribu@ng
them?
Answer:
Which
is
the
most
efficient?
Which
system
produces
the
most
of
the
things
which
make
people
happy,
and
in
the
way
they
are
happiest
with
(which
is
the
most
produc?vely
efficient)?
Which
system
shares
out
these
things
in
the
way
which
results
in
the
greatest
amount
of
happiness
overall
(alloca?ve
efficiency)?

10. Produc@ve
efficiency
Theory
and
experience
tells
us
that
in
this
case,
the
free
market
is
best:
Consumers
decide
what
is
produced
so
they
are
what
make
people
happiest
and
what
they
need.
People
decide
for
themselves
how
much
to
work
and
so
can
balance
work
and
leisure.
This
system
has
compe@@on,
making
companies
deploy
labour
and
capital
efficiently,
boos@ng
produc@vity.
This
system
encourages
technological
advances,
boos@ng
produc@vity.

11. Excep@ons
–
market
failure
The
free
market
relies
on
people
making
ra@onal
decisions
about
what’s
best
for
them
–
experience
and
psychology
suggests
that
some@mes
they
don’t!
Health
–
people
underes@mate
the
value
of
early
interven@on
and
insurance.
Educa@on
–
you
being
educated
has
benefits
for
others
but
they
don’t
pay
for
it.
Street
ligh@ng
–
physically
impossible
to
charge
people
for
the
street
ligh@ng
they
use,
even
though
they
would
willingly
pay
for
it.

12. Alloca@ve
efficiency
There
is
no
consensus
on
how
to
allocate
goods
in
the
best
way
for
society
Depends
on
how
you
think
people
enjoy
material
possessions…
Does
a
poor
man
buying
his
first
car
get
more
happiness
from
it
than
a
rich
man
buying
his
third?
Yes:
A
more
equal
society
=
a
happier
society
No:
A
more
equal
society
=
no
benefit
Do
people
care
more
about
the
reality
of
their
current
situa@on
than
the
possibili'es
for
the
future?
Yes:
A
more
equal
society
=
a
happier
society
(many
people
beJer
off,
some
worse
off
today)
No:
A
more
equal
society
=
an
unhappier
society
(nobody
can
dream
of
being
s@nking
rich
in
the
future)

13. Different
Models
As
long
as
produc@ve
efficiency
is
maintained,
economies
can
have
different
alloca@ve
models
and
be
equally
successful.
USA
Sweden
High
growth
High
growth
Highly
unequal
wealth
Very
equal
society
Huge
possibili@es
‘The
American
Less
poten@al
for
riches
Dream’

14. Exis@ng
points
of
connec@on
Ø What
connec@ons
did
you
hear
to
‘strengths’
language?
Ø How
could
the
language
of
economics
move
towards
the
language
of
‘an
economy
of
interconnec@ng
strengths’?
Ø What
is
pulling
us
towards
a
different
understanding
of
economy
and
economics
now
and
in
the
future?

15. Developing
the
ques@ons
Ø What
apprecia@ve
ques@ons
can
we
be
asking
to
help
us
develop
a
beJer
understanding
of
a
world
that
reflects
‘an
economy
of
inter-­‐
connected
strengths’
?
Ø How
can
we
take
these
ques@ons
into
the
world?
Ø
What
resources
and
strengths
do
we
have
to
ac@vely
par@cipate
in
changing
the
understanding
of
world
economy?