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The Economics of Optimisation

(20/5/1999)

I heard an article on BBC World Service Radio this evening about how children in Hong Kong no longer eat a traditional, healthy diet, but now snack constantly on American style high fat, high sugar snacks. Obesity in Hong Kong children is now causing significant health problems, including high blood pressure and diabetes. Apparently, Hong Kong parents like to see a fat baby.

What has changed? Have children suddenly developed a taste for these foods? I don't think so. And it's not just Honk Kong - a liking for the fatty and sugary foods is pretty much universal. What has changed is that these foods are now more available. In fact food in general is more available in most parts of the world.

In a situation where food is scarce, it makes sense to 'pig out' when you can - and having excess body fat is useful insurance against 'leaner times'. Indeed, in a situation of periodic scarcity, a fat baby is a good sign.

The economics of scarcity is the economic attitude which views poverty as an ever present threat, and views wealth as an absolute good. It arose in an era when there was a general condition of scarcity - where real poverty, or the threat of poverty formed a backdrop for peoples' lives. Our present economic models - all of them - are based on the fear of scarcity. Even in Western, wealthy countries, where ordinary citizens live in greater comfort and luxury than mediaeval monarchs, workers are motivated by fear of poverty. They worry about not being able to pay the mortgage on their palatial houses; they worry about their pension and whether they will be poor in old age; they worry about paying for their childrens' education.

I am not suggesting that every individual in this system is unhappy; rather that, as a society, our economic attitudes are predicated on the fear of poverty. It's a cultural belief - largely unquestioned - that wealth is good, and more wealth is always better. I hope you can see the analogy with food. In a condition of food scarcity, the rule "the more you eat the better" is appropriate. Similarly, if there is poverty all around you, then the rule, "the more money you have the better" is a good one to follow. It is only when we move into a condition of abundance that we discover there is actually an optimum level of food intake, and an optimum level of wealth.

In the affluent countries of the world, we have been in a condition of abundance for some time - and yet we are still using an economic model from a previous era. This is to be expected - paradigms shift slowly - but the model will change bit by bit. it's inevitable.

What would an 'optimised' economy look like? For a start, it will be more equal - as people realise that there is no advantage in having vastly more money than others. There will still be significant differences in wealth, because peoples' ideas of what is optimum will differ, but the sense of serious competition will gradually fade away.

If you are asking yourself what will motivate people to work, then just consider that there is also an optimum level of work. In a world where work is back-breaking and dangerous, or demeaning and soul-destroying, it is rational to avoid work whenever possible. In this situation, the rule "work is bad - the less work you do the better" is appropriate. But, as most of us discover, who have had periods without work - either through choice or through unemployment - a certain amount of work is good, and we feel bad without it. Why do we work? We derive all sorts of benefits and pleasures from work, but ultimately, we work because we are needed.



Copyright 1999 Paul Mackilligin