Laszlo ZsolnaiBusiness Ethics CenterCorvinus University of BudapestandBuddhist Economics Research Platform                ...
2* The paper is a modified version of the author’s paper “Western Economics versusBuddhist Economics” published in Society...
3(3) The cessation of suffering is the cessation of desire. This has to be realized. Bybecoming aware that there is a root...
4The prospect theory developed by Daniel Kahneman and Amos Tversky uncovers thebasic empirical features of the value funct...
5headaches, and to personality disorders, narcissism, and antisocial behavior” (Kasser,T. 2002: p. 22.).Psychologists call...
6mechanism (Polanyi, K. 1946). In the age of globalization we can experience thismarketization process on a much larger sc...
7produced and the key production processes need to be run entirely without inputsfrom the world system.Community economy i...
8(v)      The trust of subcontractors can be established.Caring organizations are rewarded for the higher costs of their s...
9Buddhist economics represents a minimizing framework where suffering, desires,violence, instrumental use, and self-intere...
10Table 1   Modern Western Economics versus Buddhist Economics           Modern Western                   Buddhist Economi...
11Buddhist economics does not aim to build an economic system of its own. Rather, itrepresents a strategy, which can be ap...
12Douthwaite, R. 1996: Short Circuit. Strengthening Local Economics for Security in anUnstable World. 1996. The Lilliput P...
13Schumacher, E.F. 1973: Small is Beautiful. Economics as if People Mattered. Abacus.Tversky, A. and Kahneman, D. 1992: “A...
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Laszlo Zsolnai paper for BuBu Brussels nov 2012

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Paper of Laszlo Zsolnai submitted for 'Buddhist Values in Business' workshop on 24-25 November in Brussels. More: www.bububrussels.blogspot.com

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Laszlo Zsolnai paper for BuBu Brussels nov 2012

  1. 1. Laszlo ZsolnaiBusiness Ethics CenterCorvinus University of BudapestandBuddhist Economics Research Platform Buddhist Economics as an Alternative Strategy*Buddhist economics can be considered as a major alternative to the Western economicmindset. Buddhism is centered on want negation and purification of the humancharacter. Buddhist economics, developed by E.F. Schumacher, Venerable P. A.Payutto, Richard Welford and others, challenges the basic principles of modernWestern economics: (i) profit-maximization, (ii) cultivating desires, (iii) introducingmarkets, (iv) instrumental use of the world, and (v) self-interest-based ethics.Buddhist economics proposes alternative principles such as minimizing suffering,simplifying desires, non-violence, genuine care, and generosity. It is suggested thatBuddhist economics is not a system but a strategy, which can be applied in anyeconomic setting.1. The Problem of the SelfThomas Schelling rightly characterizes modern Western economics as an “egonomicalframework.” Modern Western economics is centered on self-interest, understood assatisfaction of the wishes of one’s body-mind ego. Buddhism challenges this viewbecause it has a different conception of the self, which is anatta, the “no-self” (Elster,J. 1985).-----------------------------
  2. 2. 2* The paper is a modified version of the author’s paper “Western Economics versusBuddhist Economics” published in Society and Economy 2007. No. 2. pp. 145-153.Anatta specifies the absence of a supposedly permanent and unchanging self in anyone of the psychophysical constituents of empirical existence. What is normallythought of as the "self" is an agglomeration of constantly changing physical andmental constituents, which give rise to unhappiness if clung to as though thistemporary assemblage represented permanence. The anatta doctrine attempts toencourage Buddhist practitioners to detach themselves from the misplaced clinging towhat is mistakenly regarded as self, and from such detachment (aided by moral livingand meditation) the way to Nirvana can be successfully traversed.Modern neuroscience supports the Buddhist view of the self. What neuroscientistshave discovered can be called the selfless (or virtual) self, “a coherent global pattern,which seems to be centrally located, but is nowhere to be found, and yet is essential asa level of interaction for the behavior.” The nonlocalizable, nonsubstantial self acts asif it were present, like a virtual interface (Varela, F.J. 1999: p. 53. & 61.).The Four Noble Truths of the Buddha address the dynamics of human life. (Welford,R. 2006)(1) Life is suffering. This has to be comprehended. With the increasing secularism anddissociation from nature and the environment, and rising expectations inside andoutside work, people are becoming less satisfied with life and lifestyles.(2) The cause of suffering is desire. This has to be abandoned. Heighteneddissatisfaction arguably has implications for consumerism. First, there is an erroneousperception that purchasing goods is going to make one happy; and second, we areincreasingly dissatisfied and thus unhappy or stressed because we are unable to dealwith what is needed to change.
  3. 3. 3(3) The cessation of suffering is the cessation of desire. This has to be realized. Bybecoming aware that there is a root to the general societal malaise and avoidance ofenvironmental and social responsibilities, we can understand that there is a way ofstopping such complacency and beginning a path to sustainability.(4) The path to the cessation of desire requires practice. To cease doing what makes usdissatisfied, we have to realize the result of that dissatisfaction and keep trying tobehave in a more sustainable manner. Buddhism shows us that this is difficult andrequires ongoing commitment and practice.Even if one gets what one desires, greater desires always emerge. The ego mindsetcannot be fulfilled and its greed for more satisfaction and recognition becomes thesource of its own destruction. This is a source of suffering because the human spiritbecomes captured by the avaricious mind. The way through this life of constantlyunsatisfied desires is the practice of nonattachment—in other words, developing adistance from all desires (Welford, R. 2006).2. Principles of Buddhist Economics2.1 Minimizing SufferingWhile modern Western economics promotes doing business based on individual, self-interested, profit-maximizing ways, Buddhism suggests an alternative strategy. Theunderlying principle of Buddhist economics is to minimize suffering of all sentientbeings, including nonhuman beings.From a Buddhist viewpoint a project is worthy to be undertaken if it can reduce thesuffering of all those who are affected. Also, any change in economic-activity systemsthat reduces suffering should be welcomed.The suffering-minimizing principle can be formulated to reveal that the goal ofeconomic activities is not to produce gains but to decrease losses.
  4. 4. 4The prospect theory developed by Daniel Kahneman and Amos Tversky uncovers thebasic empirical features of the value function of decision makers. The central findingof prospect theory is that the value function is concave for gains and convex for losses(Kahneman, D. & Tversky, A. 1979).A salient characteristic of people’s attitudes to changes is that losses loom larger thangains. The main statement of prospect theory is that the value function is steeper forlosses than for gains. This means that decision makers are more sensitive to lossesthan to gains. Experiments show that the ratio of the slopes in the domains of lossesand gains, the “loss aversion coefficient,” might be estimated as about 2 : 1 (Tversky,A. & Kahneman, D. 1991, 1992).Since humans (and other sentient beings) display loss sensitivity, it does make sensetrying to reduce losses for oneself and for others rather than trying to increase gainsfor them. Losses should not be interpreted only in monetary terms or applied only tohumans. The capability of experiencing losses, i.e., suffering, seems to be universal inthe realm of both natural and human kingdoms.2.2 Simplifying DesiresModern Western economics aims to cultivate desires. People are encouraged todevelop new desires for things to acquire and for activities to do. The profit motive ofcompanies requires creating more and more demand. But psychological researchshows that materialistic value orientation undermines well-being. “People who arehighly focused on materialistic values have lower personal well-being andpsychological health than those who believe that materialistic pursuits are relativelyunimportant. These relationships have been documented in samples of people rangingfrom the wealthy to the poor, from teenagers to the elderly, and from Australians toSouth Koreans.” These studies document that “strong materialistic values areassociated with a pervasive undermining of people’s well-being, from low lifesatisfaction and happiness, to depression and anxiety, to physical problems such as
  5. 5. 5headaches, and to personality disorders, narcissism, and antisocial behavior” (Kasser,T. 2002: p. 22.).Psychologists call the mechanism through which people seek to satisfy their desires“auto-projection.” It is a loser strategy, whether or not people achieve their desiredgoals. When they are not able to reach the goals they envision, they attribute theircontinuing dissatisfaction to their failure to reach the alleged corrective measures.When they succeed in attaining their goals, this usually does not bring what theyhoped for and their feelings of discomfort are not relieved. So striving for satisfyingdesires never brings people the fulfillment they expect from it (Grof, S. 1998. p.207.).The Buddhist strategy suggests not to multiply but to simplify human desires. Abovethe minimum material comfort, which includes enough food, clothing, shelter, andmedicine, it is wise to reduce one’s desires. Wanting less brings substantial benefitsfor the person, for the community, and for nature.Buddhism recommends moderate consumption and is directly aimed at changingone’s preferences through meditation, reflection, analyses, autosuggestion and thelike. (Kolm, S-C. 1985).Desiring less is even fruitful in the case of money. Western economics presupposesthat more money is always better than less money. But, getting more money may havenegative effects. Overpaid employees and managers do not always give high-levelperformance. Being underfinanced might be beneficial for a project. If people havesmaller budgets, they may use the money more creatively and effectively.2.3 Practicing NonviolenceModern Western economics aims to introduce markets wherever social problems needsolving. Karl Polanyi refers to the whole process of marketization as “The GreatTransformation,” by which spheres of society became subordinated to the market
  6. 6. 6mechanism (Polanyi, K. 1946). In the age of globalization we can experience thismarketization process on a much larger scale than ever.The market is a powerful institution. It provides goods and services in a flexible andproductive way; however, it has its own limitations. Limitations of the market iscaused by nonrepresented stakeholders, underrepresented stakeholders, and myopicstakeholders.Primordial stakeholders such as nature and future generations are simply notrepresented in the market because they do not have a “vote” in terms of purchasingpower. They cannot represent their interests in the language of supply and demand.Other stakeholders such as the poor and marginalized people are underrepresentedbecause they do not have enough purchasing power to signal their preferences in themarket. Finally, stakeholders who are well represented in the market, because theyhave enough purchasing power, often behave in a myopic way; that is, they heavilydiscount values in space and time. Market prices usually reflect the values of thestrongest stakeholders and favor preferences here and now. Because of these inherentlimitations the market cannot give a complete, unbiased direction for guidingeconomic activities (Zsolnai, L. and Gasparski, W. [eds.] 2001).Nonviolence (ahimsa) is the main guiding principle of Buddhism for solving socialproblems. It requires that an act should not cause harm to the doer or the receivers.Nonviolence prevents doing actions that directly cause suffering for oneself or othersand urges participative solutions.The community-economy models are good examples. Communities of producers andconsumers are formed to meet both their needs at the lowest cost and reduced risk bya long-term arrangement. Studying dozens of working models, Richard Douthwaitecharacterizes community economy as follows (Douthwaite, R. 1996):Community economy uses local resources to meet the needs of local people ratherthan the wants of markets far away. World prices do not determine what will be
  7. 7. 7produced and the key production processes need to be run entirely without inputsfrom the world system.Community economy is based on self-reliance that is closely linked to ecologicalsustainability. Practically speaking, living within limits and sustainability are one andthe same thing. Every community should achieve ecological sustainability byexploiting the ecological niche available for itself. Achieving ecological sustainabilityand nonviolence requires altering the underlying structure of dominatingconfigurations of modern business. This means de-emphasizing profit maximizationand market systems and introducing small-scale, locally adaptable, culturally diverseways of engaging in substantive economic activity.2.4 Genuine CareIn modern Western economics the value of an entity (human being, other sentientbeing, object or anything else) is determined by its marginal contribution to theproduction output. A project is considered worthy of undertaking if and only if itsdiscounted cash flow is positive.The basic problem with the instrumental approach is that it generates the worstresponse from the beings involved. To get the best from the partners requires takinggenuine care in their existence.Robert Frank developed five distinct types of cases when socially responsibleorganizations are rewarded for the higher cost of caring (Frank, R. 2004).(i) Opportunistic behavior can be avoided between owners and managers.(ii) Getting moral satisfaction, employees are ready to work more for lower salaries.(iii) High quality new employees can be recruited.(iv) Customers’ loyalty can be gained.
  8. 8. 8(v) The trust of subcontractors can be established.Caring organizations are rewarded for the higher costs of their socially responsiblebehavior by their ability to form commitments among owners, managers andemployees and to establish trust relationships with customers and subcontractors.2.5 GenerosityThe Western economic man is allowed to consider the interest of others only if itserves his or her own interest. This self-interest based, opportunistic approach oftenfails.Generosity might work in business and social life because people are “Homoreciprocans.” They tend to reciprocate what they get and often they give back more invalue to the doer than he or she gave to them.Ernst Fehr and Simon Gaechter designed a gift exchange game in which the employermakes a wage offer with a stipulated desired level of effort from the worker. Theworker may then choose an effort level, with costs to his or her rising in effort. Theemployer may fine the worker if his or her effort level is thought to be inadequate.The surplus from the interaction is the employer’s profits and the worker’s wageminus the cost of effort (and the fine, where applicable).The self-regarding worker would choose the minimum feasible level of effort, and,anticipating this, the self-regarding employer would offer the minimum wage. Butexperimental subjects did not conform to this expectation. Employers made generousoffers and workers’ effort levels were strongly conditioned on these offers. Highwages were reciprocated by high levels of efforts (Bowles, S. 2004: pp. 495-496.).3. Minimizing or Maximizing?
  9. 9. 9Buddhist economics represents a minimizing framework where suffering, desires,violence, instrumental use, and self-interest have to be minimized. This is why “smallis beautiful” and “less is more” nicely express the essence of the Buddhist approach toeconomic questions.Modern Western economics represents a maximizing framework. It wants to maximizeprofit, desires, market, instrumental use, and self-interest and tends to build a worldwhere “bigger is better” and “more is more” (Table 1).
  10. 10. 10Table 1 Modern Western Economics versus Buddhist Economics Modern Western Buddhist Economics Economics maximize profit minimize suffering maximize desires minimize desires maximize market minimize violence maximize instrumental use minimize instrumental use maximize self-interest minimize self-interest “bigger is better” “small is beautiful” “more is more” “less is more”
  11. 11. 11Buddhist economics does not aim to build an economic system of its own. Rather, itrepresents a strategy, which can be applied in any economic setting at any time. Ithelps to create livelihood solutions that reduce the suffering of all sentient beingsthrough the practices of want negation, nonviolence, caring and generosity.Today’s dominating business models are based on and cultivates narrow self-centeredness. Buddhist economics points out that emphasizing individuality andpromoting the greatest fulfillment of the desires of the individual conjointly lead todestruction. (Zsolnai, L. and Ims, K.J. (eds) 2006)Happiness research convincingly shows that not material wealth but the richness ofpersonal relationships determines happiness. Not things but people make peoplehappy (Lane, R. E. 1998). Western economics tries to provide people with happinessby supplying enormous quantities of things. But what people need are caringrelationships and generous love. Buddhist economics makes these values accessibleby direct provision.Peace can be achieved in nonviolent ways. Wanting less can substantially contributeto this endeavor and make it happen easier.Permanence, or ecological sustainability, requires a drastic cutback in the presentlevel of consumption and production globally. This reduction should not be aninconvenient exercise of self-sacrifice. In the noble ethos of reducing suffering it canbe a positive development path for humanity.ReferencesBowles, S. 2004: Microeconomics. Behavior, Institutions, and Evolution. Russell SageFoundation, New York and Princeton University Press, Princeton and Oxford.
  12. 12. 12Douthwaite, R. 1996: Short Circuit. Strengthening Local Economics for Security in anUnstable World. 1996. The Lilliput Press.Elster, J. 1985: “Introduction” in Jon Elster (ed): The Multiple Self. 1985. CambridgeUniversity Press. Cambridge. pp. 1-34.Frank, R. 2004: “Can Socially Responsible Firms Survive in CompetitiveEnvironments?” in Robert Frank: What Price the Moral High Ground? EthicalDilemmas in Competitive Environments. 2004. Princeton University Press. Princetonand Oxford.Grof, S. 1998: The Cosmic Game. Explorations of the Frontiers of HumanConsciousness. State University of New York Press, Albany.Kahneman, D. & Tversky, A. 1979: “Prospect Theory: An Analysis of Decision UnderRisk” Econometrica 1979 March pp. 263-291.Kasser, T. 2002: The High Price of Materialism. MIT Press. Cambridge,Massachusetts and London, England.Kolm, S-C. 1985: “The Buddhist theory of ‘no-self’” in Jon Elster (ed): The MultipleSelf. 1985. Cambridge University Press. Cambridge. pp. 233-265.Lane, Robert, E. 1998: “The Joyless Market Economy” in Avner Ben-Ner and LouisPutterman (eds.): Economics, Values, and Organizations. 1998. Cambridge UniversityPress, Cambridge. pp. 461-488.Payutto, P.A. 1994: Buddhist Economics. A Middle Way for the Market Place.http://www.geocities.com/Athens/Academy/9280/payutto.htmPolanyi, K. 1946: The Great Transformation. Origins of our Time. Victor GollanczLtd., London.
  13. 13. 13Schumacher, E.F. 1973: Small is Beautiful. Economics as if People Mattered. Abacus.Tversky, A. and Kahneman, D. 1992: “Advances in Prospect Theory: CumulativeRepresentation of Uncertainty” Journal of Risk and Uncertainty 1992. pp. 297-323.Varela, F. J. 1999: Ethical Know-How. Action, Wisdom, and Cognition. StanfordUniversity Press, Stanford.Welford, R. 2006: “Tackling Greed and Achieving Sustainable Development” inLaszlo Zsolnai and Knut J. Ims (eds.): Business within Limits: Deep Ecology andBuddhist Economics. 2006. Peter Lang Publisher. Oxford. pp. 25-52.Zadek, S. 1997: “Towards a Progressive Buddhist Economics” in J. Watts, A.Senauke, and S. Bhikku (eds): Entering the Realm of Reality: Towards DharmmicSocieties. 1997. INEB, Bangkok. pp. 241-273Zsolnai, L. and Gasparski, W. (eds.) 2002: Ethics and the Future of Capitalism.Transaction Publishers, New Brunswick & London.Zsolnai, L. and Ims, K.J. (eds) 2006: Business within Limits: Deep Ecology andBuddhist Economics. Peter Lang, Oxford.

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