The limit of economic thinking

Behavioral economics has clearly made the distinction between economics, psychology and sociology very fuzzy. Economic questions are not only economic but they are also simultaneously social and psychological. Economists are the frequent users of the phrase “other factors remaining same”. For example, they can show that other factors remaining same, more wealthy people are happier. But the other factors do not remain same and more wealthy people are not the happiest people. Likewise the social and psychological questions require answers which involve economic considerations.

The pre-capitalist society was based on force (slavery) or law (feudalism). Capitalist replaced them by economic contract and monetary incentive. This also created a division of society based on class. The working of societies of today does not adequately adhere to the capitalist model. The work is becoming more fragmented, flexible, based on credentials or education, and carries meaning beyond economics. In the less developed countries with widespread poverty, and a large number of people outside the formal economic system, incentive is not sufficient to run the system. While those within the capitalist framework have lost the working class consciousness and are identifying with middle classes, bourgeoisie, owners of knowledge and money, and managers, there is a large pool of those outside the system who want the security of economic contract even if it means exploitation. For them survival is more important than freedom from exploitation. Interestingly, even for this class of people survival cannot be distinguished from assertion of identities, other than the class identity. What does this mean for happiness and order? It means a number of things: