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neoclassical economics

The neoclassical economics is a set of theories that are roughly dated back to 1871. They emerged as a reaction to, and a rejection of, Marxist economics? whose analysis had relied on dialectic in the form of class struggle? to explain long-standing disparities in the value of life.

The neoclassical view differed from this and from classical economics? in a number of important ways:
  • The emphasis on macro-economics? and banking, which has no equivalent in micro-economics?, as a means to set currency values and determine their impact on well-being which remains the goal of all legitimate neoclassical economics.
  • Commodification of labour as human capital on the macro level - which in neoclassical economics means literally the conversion of the worker's body into financial capital over time as their individual capital is depleted or put at risk to gain wages or fees
  • Acceptance of the price of life? as the value of life - that is, equating the price one pays with the moral value of something. Colloquially "money talks?".

Of these issues the last is the most overtly contentious and has tended to lead to resistance to the application of many neoclassical techniques to larger questions of public policy.

valuing human life


Neoclassically, "the disability-adjusted life year? is "the standard yardstick" of the price of life.

In other form of economics, there are other ways of assigning value than to set a price in commodity markets - the rules and adjudications of which are themselves reflective of non-price value judgements. Neutrally, "the value of life is an economic or moral value assigned to life in general, or to specific living organisms. In social and political sciences, it is the marginal cost of death prevention in a certain class of circumstances. As such, it is a statistical term, the cost of reducing the (average) number of deaths by one. It is an important issue in a wide range of disciplines including economics, health care, political economy, insurance, worker safety, environmental impact assessment, and globalization." - Wikipedia

While neoclassical techniques seem to gain stability of the store of value? by relying overmuch on the monetary system?, according to The Economist?, even the DALY-based price tends "to vary from study to study.. even if...basic parameters such as the value of life and the discount rate were clear-cut, the cost-benefit approach... requires forecasts...often far into the future...always prone to error... condom distribution combined with treatment for sex workers... would entail a cost of just $4/year for each disability-adjusted life year saved, the implied ratio of benefits to costs is nearly 500 - and this is assuming a value of life based on GDP per head, that is significantly lower than the figure of $100,000 US which the Copenhagen Consensus? panel said it preferred to apply." - The Economist special report, Copenhagen Consensus, June 5th 2004, page 64-65."

That said, the existing 15x price ratio between developed and developing world (as cited by Kennan, and by IPCC analysis, and hinted at in this proposition) is "unsustainable" and must end at some point. A generation-by-generation plan to cut the ratio in half while uniformly raising the ratio of price of the life of our genus (Homo, I am not biased as to other species emerging or being allowed in that genus) to that of the biosphere may be the default because:

There are also moral hazard?s in equating what might be actually a sort of social credit rating? - see Social Credit? for a detailed theory of this - with life-value. One way to resolve that is with a simple definition:

pricing vs. valuing


When "pricing" not "valuing", it is not the "personality" nor "human" inherent value being valued but the prospects of that personality or person thriving in the anticipated future which yields some expected value? in raw monetary terms.

human capital


However the neoclassical "human capital" is not defined fundamentally with reference to social capital, instructional capital and individual capital that is required and involved to sustain it, nor even the socially-maintained infrastructural capital. It is measured just in terms of the private employment value, or "salary", that is presumed to be "neutrally" valued by price mechanism?s.

However, the choice of "valuation" mechanism is more complex than simply putting one's body and skills up on some market: for one thing, not every body has access to the same markets or powers of dispute resolution? when things go wrong in a transaction. So below a certain threshold of certainty of a market system? working properly, neoclassical economics simply cannot function. See Core and Gap? arguments re: the impact of this on human security? and environmental security.

credit chasm


Validating a credit rating as a measure of self-worth? may be a further problem. While its valid to want credit to expand in developing nations and for the price of life in those nations to increase, most attempts to seriously address the problems with the "developing world" meeting the "developed world" on equal ground tend to bog down. For instance a credit chasm may cause a great discrepancy in the quality or depth of legal advance that two parties can access in a transaction, putting the richer one at great advantage.

Attempts to naively create equal ground between rich and poor nations fail very often and regularly, and the end result tends to be life commodified down to the DNA by "markets" that don't recognize any uniform value on any kind of life. This is a question John McMurty? expores in his life-value analysis.

valuing Earth


When considering arguments about the way the biosphere is seen through the lens of the economic system, neoclassical methods tend to fare better. See value of Earth.

Given very large scale single-buyer models such as that required to model heating of the atmosphere? with respect to climate change, neoclassical markets should work fine to enable a medium of exchange? of carbon risks and needs to alleviate risks. See carbon market? for more on this and the more general and problematic emissions trading?.

life value ratios


Some analysts believe that the ratio between the economist-measured or algorithmically-assigned price of a human life and the assigned price of the entire biosphere is what is important: a monotonically rising absolute price of the biosphere, with some cycle of adjustment so that the absolute price of a human life is also rising, creates a spiral growth of well-being for all.

well-being


The ratio is one way to potentially compare models of well-being including the "Genuine Progress Indicator" or "Gross National Happiness", which must emerge climate change crisis and currency crisis and oil supply crisis.

globalization chaos


Neoclassical economics is often blamed for problems of globalization, especially by the anti-globalization movement. There is a great deal of validity to this view, especially as cashflow or GDP is being used as a measure of economic success, instead of the classical "well-being" (however measured). Very life-negative trends are accelerated:

Some analysts fear that overly rapid industrialization (China)or commodification (Brazil, Indonesia) with little protection for natural commons? may lead to a chaotic monetary system may lead to overconsumption all 'round, and a total drastic ecological collapse - up to five billion casualties;

A "post-apocalyptic economics?" may need to be applied now in order to avoid that outcome - major monetary reforms to replace Bretton Woods institutions. The argument for this is that failing to do so ensures an ecological collapse after which "no amount of money or exchange value assigned to life is going to mean a darn, folks. It's just paper, and increasingly, paper circulating based on models of "built trust" and other nonsense. All nicely framed by "professionals" of course, with PowerPoint presentations." - Craig Hubley

micro-credit


So-called micro-credit? systems including those which attempt to trade directly on the potential of education to increase cashflow(external link) may work well enough in situations where there is little potential for extortion, abuse or cheating. Even a relatively small price such as the Net Present Value? of a developing nation person who is capable of using an advanced education, might provide to pay that person for:
  • the price of life that would be assigned his or her life, not in cash but advanced against one's life as collateral.
  • an insurance policy in favour of those who pay that price
  • whatever other derisking support structures and conditions both for the person and for the institution, e.g. terms that provide to favour the recipients family in case of a violent death, making it quite difficult to "insure and then murder"

So "someone in a village in Indonesia who has done well in school, the NPV of his life is valued at $100,000. And the institution is willing to lend him $10,000 for use for him to bring his $100,000 life value to fruition. He has to use the $10,000 for experiential apprenticeship education. And the $10,000 will be paid mostly straight to the educational institution. Perhaps some for his living." This of course would rely on actuarial? methods, which values lives against many metrics (health conditions, how hazardous the job is, which part of the country they live in etc)." - Bala Pillai?

This is a sympathetic point of view. Seewikinfo(external link) for such views in general. Also see Wikipedia for a neutral point of view on neoclassical economics(external link), which in fact contains many views propagated by its propagandists, i.e. Wikipedia is not neutral on this subject?.


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