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Humanistic Economics

Humanistic Economics aiming at a general interest audience can be seen as a response to the modern world operating on the philosophy supplied by the prevailing economic way of thinking:  the economics that is taught in introductory Principles of Economics courses in colleges and universities, now all over the globe. One dissident economist, the humanistic scholar/activist, E.F. Schumacher, famous for his celebrated book, Small Is Beautiful, has described this economics as a “religion of materialism.” Conventional economics has long subscribed to the principles of unlimited wants and the redundancy of the concept of human needs: this is why it's a religion of materialism. It creates an artificial world where there are only wants. Traditional economics further maintains that “rational” behavior is to try to satisfy these unlimited wants. Since this is impossible, there is always scarcity. Scarcity, then, for economics is not a result of a given economic or social system, or a set of values, but is the fundamental nature of reality. As an economics textbook states in its opening lines, “The world is an inhospitable place.” Each individual’s particular wants are determined by their self-interest. Self-regarding behavior is taken as the rational (and efficient) pursuit of one’s wants.

Humanistic economics differs from this “religion of materialism” in all fundamental respects. To begin with, it draws a difference between needs and wants. The humanistic psychologist Abraham Maslow described human motivation as consisting of a hierarchy of needs, which he defined as physiological needs, safety and security, belongingness and self-esteem, and self-actualization. When a person satisfies lower needs on the hierarchy, he or she can then move on to higher needs. It is from Maslow that the term humanistic was imported into economics to label this tradition in economic thought.

The concept of lower and higher needs (or hierarchy) describes a polarity, which goes from the physical at one end to the nonphysical (or spiritual) at the other, with gradations in between. An economics founded on such a concept is no longer a religion of materialism but a study of how individuals and society can be encouraged to move from the material to the nonmaterial (which also can be seen as aesthetics, morality, creativity, and other nonmaterial interests and fulfillments). Since the nonmaterial interests, by definition, don’t require much material consumption, the world from this perspective is no longer that much of “an inhospitable place.“

The two ends of the polarity of human motivation can be seen to define two different “selves“—a lower and a higher. Standard economics is the economics of only the lower self. Thus it describes human beings and the world they inhabit as only the world of the lower self, sadly truncated view of the person and a truncated world. Humanistic economics envisions itself as a richer economics--describing a world of real persons, with lower and higher motives, in a world that can serve everyone’s real needs, rather than their often misguided material wants. Each self means a direction—the lower downward and the higher upward. Since you can’t go in two directions at the same time, tension results.

In humanistic economics, the more important choice is between lower and higher values, and such moral choice is seen to be influenced by the social structure embedding its citizens. In other words, social institutions can play an important role in the making of human choice. Long before Abraham Maslow, it was the 20th century British economist John Hobson who pointed to security as the catalyst for higher self-identification. Almost a century ago, in his book Work and Life (1929), he articulated a foundational pillar of humanistic economics in such manner that it warrants quoting him in full:

“When moralists talk of altering human nature they are often misunderstood to mean that instincts and desires deeply implanted in our inherited animal outfit can be eradicated and others grafted on. No such miracles are possible or needed. But substantial changes in our environment and in our social institutions can apply different stimuli to human nature and evoke different physical responses. For example, by alterations in the organization and government of business and industries, so as to give security of employment and of livelihood to workers, and some increased “voice” to them in the conditions of work, it seems reasonably possible to modify the conscious stress of personal gain-seeking and to educate a clearer sense of social solidarity and service. The insecurity of livelihood has been a growing factor in the discontent of modern workers, and that it increases with an education that reveals the “social” cause of that insecurity in the absence of any reliable economic government. Security is, therefore, the first essential in any shift of the relative appeal to social and moral motives.” (p. 45, emphasis added).
Of course, employment security is just one way to assist people in making truly rational choices, another more traditional one, has been a strong sense of community and mutual assistance. Local economy, therefore, is, all things being equal, generally preferred to global economy, and so are worker coops to multinational corporations.

By the same logic, and pulling people in the downward direction happens in an atomistic and insecure society under the yoke of relentless individual competition. As a result, wherever possible, cooperation trumps competition.

The realization that there are social institutions affecting morality and altruism, complements, but in no way diminishes, traditional thinking hinging individual morality, religion, or spirituality.

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