AM27 Human Development

Inverted Class: Students required to watch the lecture on Quest for Prosperity, and study its 1000 word summary and PPT, before comming to class. Brief summary provided in class, followed by discussion of key points of lecture.

"Quest for Prosperity: Culture & Economy" Quaid-e-Azam Lecture at Pakistan Society of Development Economics PSDE 33rd AGM and Conference on 14th Dec 2017, at Marriot, Islamabad

33rd Annual Conference, Redefining Prosperity Paths in Changing Global Economy; Opportunities and Challenges for Pakistan

Dr. Asad Zaman, VC PIDE

Sample Question for Final:

1. Prove, using textual evidence from econ texts, that economists believe that the purpose of life is to maximize consumption, and that rational behavior means maximization of lifetime consumption.

2. Prove, using empirical evidence about actual observed behavior of human beings, that this assumption is not true. Humans can often forego consumption, and sacrifice personal consumption goals for higher purposes.

3. Prove that maximization of lifetime consumption is not a good normative principle -- this is NOT how rational people SHOULD behave. It would be highly irrational -- stupid -- to try to maximize consumption.

3. Provide some Islamic principles regarding consumption which CONFLICT with economic theories.

Short Summary: 850 Words.

Modern, Secular, Societies assume that life evolved by accident, and will perish by accident, and lacks meaning. Pure hedonism is the sole purpose of life. Modern economic theory is based on the amazingly childish assumption that all human beings share this belief, and act to maximize lifetime consumption. This is empirically false; human beings have diverse goals. It is also normatively false as a prescription for happiness; long-run happiness has no correlation with consumption, and is far better correlated with character traits like generosity and gratitude. How did such ridiculous beliefs about human behavior, and sources of human welfare, become widely accepted as foundations of modern economic theory? This is due to the Great Transformation, which replaced traditional values based on family and social relationships by market values based on impersonal and commercial transactions. Philosophies and theories developed to justify and legitimize individual pursuit of wealth and pleasure have caused great damage to society and the planet. See “Markets and Society” for some evidence regarding the ecological catastrophe created by the Market Society.

It is natural to ask whether this damage can be reversed? Can we improve human lives and welfare, and also stave off the impending environmental crisis? Doing so would require reversing the Great Transformation, which involved subordinating social relations to the market. In particular, it is necessary to reverse the idea that human lives are commodities for sale in the labor market. Instead, human lives must be regarded as infinitely precious, with infinite potentials and capabilities for growth in dimensions unknown. Taking this principle seriously would require re-writing all economics textbooks, and radically re-organizing our economic, political and social institutions. Taking collective responsibility to ensure that all members of a society get the chance to develop their capabilities would be a new definition of prosperity, very different from GNP per capita, which is the current focus of policy makers across the globe.

Modern economic theory makes accumulation of wealth the goal of economic activity, and values human lives only to the extent that they contribute to production. How can we reverse these priorities, putting the enrichment and empowerment of human lives at the center, and valuing wealth only to the extent that it is helpful in achieving this goal? The first requirement is to win the battle of ideas, creating consensus on the prioritization of human beings over material wealth. To do this, we need to recognize modern economic theory for what it is, instead of what it claims to be. Even though economic theory claims to be an objective and factual description of how a capitalist economy works, it is actually a normative theory which justifies these operations by arguing that markets operate efficiently and maximize social welfare, as well as providing fair and equitable outcomes to all members. We label modern economic theory as Economic Theory of the Top 1% -- or ET1% -- and explain how all aspects of this theory are designed to portray increasing wealth of the top 1% as the goal of society, and also to show that this serves to benefit the entire society. For example, use of GNP per capita as a yardstick of social welfare exactly fits this description, since gains to the top 1% are first divided over the entire population and then measured, thus appearing to be generally beneficial, when in fact they are not. Overcoming this deception will involve replacing ET1% by ET90% -- a new economic theory for the bottom 90%.

Recognizing the deceptive nature of economic theory, which persuades laborers to believe in the necessity of their own exploitation, Marx urged them to unite, and throw off their chains. Providing for each “according to his needs” is a perfect example of ET90% being urged as a replacement for “each according to his (ability)” which exemplifies ET1%. Experience shows that we can successfully unite laborers to revolt against the capitalists, but after the revolution, control necessarily remains in the hand of a small minority. The nature of power is such that this small minority will be corrupted by it, and will use it for personal gains, and to oppress the majority. Just like democracy has failed to give ‘power to the people’, so alternative systems of government also fail.

The Islamic solution works along different dimensions. It seeks to co-opt the rich and powerful, instead of killing them off, and replacing by another set of rich and powerful. This is done by creating social norms of generosity and social responsibility. Fourteen centuries ago, the revolutionary teachings of Islam led backwards and ignorant Arabs to world leadership. These teachings include the ideas that the best leader is the servant of the people, that power is given to us in order to protect the weak, and wealth is meant to be given to the needy. Widespread acceptance of these ideas created a society which provided basic needs, health care, and education to all members using the institutions of Waqf, and the norms of collective social responsibility and brotherhood. Because these ideas have been forgotten, they continue to have the same revolutionary potential today, as they did 1400 years ago.

YouTube Video: bit.do/azqal (Asad Zaman Quaide Azam Lecture)