Introductory paper for a programme on The Wealth of Nations Revisited

by Orio Giarini, Garry Jacobs and Ivo Šlaus | 18 April 2010 | In: Paper No. 15 / 2010 Special Issue on Wealth and Welfare

Orio Giarini, Director, The Risk Institute, Geneva, Switzerland
Garry Jacobs, Vice-President, The Mother’s Service Society, Pondicherry, India
Ivo Slaus, President, South East European Division, World Academy of Art and Science, Zagreb, Croatia

Introduction

Civilization is an instrument fashioned by human beings to improve the welfare and well-being of our race through a wide range of institutions – political, social, economic, educational, scientific and cultural. When Adam Smith published the Wealth of Nations at the onset of the Industrial Revolution, it appeared as if a solution had finally been found to the age-old problem of scarcity. This was also a time when physical science began to uncover the laws governing the marvels of nature. It was natural and, perhaps, inevitable that early economic thinkers looked for similar laws governing society and gave inordinate importance to the system of industrial economy, since it appeared to offer enormous promise at the time. In the process they lost sight of the greater truth that, unlike the systems governing the physical universe, social systems are created by human beings for the benefit of humanity and their validity must be judged solely on the basis of their contribution to human welfare and well-being.

Current economic theory has been constructed on a foundation laid more than 200 years ago. Since then, and especially in the past half century, monumental changes have radically altered the structure and functioning of economies, to such an extent that they call into question many of the valid premises on which earlier theory was based. Among these, the evolution from a production to a service-based economic system, the growing predominance of public policy in economy, the globalization of production and markets, dramatic changes in the nature and role of money and financial markets, and fundamental changes in social aspirations and social values are especially relevant. It is now evident that economic theory cannot be separated or divorced from other aspects of human existence – political, social, ecological, technological, cultural, etc. – and that none can be validly considered without giving central importance to their impact on human welfare and well-being.

In recognition of these facts, the idea of rethinking economics has been gaining support. Late last year, a small, multidisciplinary group of individuals with membership in the World Academy of Art & Science and the Club of Rome began a fresh examination of current economic theory to examine why the basic premises of classical theory were adopted in the first place, to understand where and why they have failed or are no longer adequate to meet the needs of the 21st century, and to consider the feasibility of evolving a more effective theoretical basis for the future.

This article sets forth the rationale and justification for a re-evaluation of the fundamental concepts and premises of modern economic theory with the goal of evolving a truly human-centered theory and practice. READ FULL PAPER

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