Economic irrationality

But what does it mean when we say something is uneconomic? [...]

No, I am asking what it means, what sort of meaning the method of economics actually produces. And the answer to this question cannot be in doubt: something is uneconomic when it fails to earn an adequate profit in terms of money. The method of economics does not, and cannot, produce any other meaning. [...]

The market therefore represents only the surface of society and its significance relates to the momentary situation as it exists there and then. There is no probing into the depths of things, into the natural or social facts that lie behind them. In a sense, the market is the institutionalisation of individualism and non-responsibility. Neither buyer nor seller is responsible for anything but himself. It would be “uneconomic" for a wealthy seller to reduce his prices to poor customers merely because they are in need, or for a wealthy buyer to pay an extra price merely because the supplier is poor. Equally, it would be "uneconomic” for a buyer to give preference to home-produced goods if imported goods are cheaper. He does not, and is not expected to, accept responsibility for the country’s balance of payments.

small-is-beautifulp. 28–30

(emphasis added)

Irrationality is the violation of a set of tightly circumscribed rules by ordinary people In Real Life; simple rules, which are derived at least in part from difficulties in being able to describe a complex system comprehensively as well as comprehensibly.

While the materialist is mainly interested in goods, the Buddhist is mainly interested in liberation. But Buddhism is ‘The Middle Way’ and therefore in no way antagonistic to physical well-being. It is not wealth that stands in the way of liberation but the attachment to wealth; not the enjoyment of pleasurable things but the craving for them. The keynote of Buddhist economics, therefore, is simplicity and non-violence. From an economist’s point of view, the marvel of the Buddhist way of life is the utter rationality of its pattern—amazingly small means leading to extraordinarily satisfactory results.

For the modem economist this is very difficult to understand. He is used to measuring the "standard of living” by the amount of annual consumption, assuming all the time that a man who consumes more is “better ofF’ than a man who consumes less. A Buddhist economist would consider this approach excessively irrational: since consumption is merely a means to human well-being, the aim should be to obtain the maximum of well-being with the minimum of consumption.

small-is-beautifulp. 40–1

(emphasis added)


small-is-beautiful Schumacher, Ernst Friedrich. 2001. Small Is Beautiful: A Study of Economics as If People Mattered. Random House. ↩︎ 1 2