Salman Ahmed Shaikh
Restraint is a human trait which is required in choice behaviour in markets as well. There is talk about economics of enough. Diane Coyle in his book “Economics of Enough” talks about creating a sustainable economy, i.e. having enough to be happy without cheating the future.
UN Sustainable Development Goal 12 talks about responsible consumption and production. FAO reports that one-third of food produced for human consumption is lost or wasted globally, which amounts to about 1.3 billion tonnes per year.
If something is abundant, it is valued less. Water maybe precious for life. But, its value in exchange will not reflect it. Exchange in market is done by living human beings. If their decision horizon concerns short term self-interest, then their behaviour may not be compatible with what is suitable keeping in view the welfare of society at large and future generations.
Exchange in markets by firms is analysed through the solitary lens of profit maximization. Nobel Laureate Milton Friedman regarded profit maximization as not only a self-interested goal, but a social responsibility. However, markets do not incorporate social costs. Prices determined in the market do not reflect negative externality costs. Social value creation or lost does not feature in price.
Moreover, efficiency loss in massive food waste is not incorporated in microeconomic analysis of market exchange as efficiency is viewed from the narrow perspective of loss in consumer and producer surplus in market exchange. Economics is neutral between two efficient outcomes, one egalitarian and the other where there is zero consumer surplus in first-degree price discrimination under monopoly.
Nobel Laureate Amartya Sen argues for fostering commitment in choice behaviour. Commitment is central to his vision of an alternative to mainstream rational choice theory. But, what can bring commitment?
In resource economics, Hotelling’s rule suggests that owners of non-renewable resources will only produce a supply of their basic commodity if it can provide a rate of return in excess of the rate of return on financial instruments.
For instance, if the natural resource price is expected to appreciate by 10% whereas the return on interest based investment is 7%, then the natural resource owner will not extract and will wait. On the other hand, if the natural resource price is expected to appreciate by 7% whereas the return on interest based investment is 10%, then the natural resource owner will extract and sell the natural resource and invest the proceeds in interest based investments.
A natural resource with intrinsic value shall not be compared with receipt of little more fiat currency. Fiat currency does not have intrinsic value. An illuminating, enlightening and informative book cannot be valued just by measuring the cost of printing and binding.
Another important thing to consider is that experiential learning has deep effects. A living experience transfers not only information, but deep emotions. Earth hour is an example of learning and observing restraint, albeit for a very brief period. But, lighting out still does not touch deeply the emotion and state of how is it like to be not eating or drinking. FAO reports that one out of 9 people go to bed hungry.
Fasting in the full-month of Ramadan every year teaches restraint by experiencing it for a considerable period. An excercise of self restraint over the whole month affects life style, habits and preferences. It brings humility, discipline, restraint, self-control and social consciousness about issues of hunger and deprivation. It is more powerful to share a state of being for the whole month in restraint than an hour of lighting out. It encourages solidarity and pro-social behaviour.
At the spiritual level, it reminds a human about his or her true state among the different species on the planet. The single source of creation as encapsulated in the concept of Tawheed undermines the tendency to feel ‘fittest survivors’. It brings humility, congeniality and peaceful co-existence with other life in the environment.