Buddhist Economics
A Middle Way for the Market Place
...Ven. P. A. Payutto...

Chapter One


The Problem of Specialization

In a discussion of Buddhist economics, the first question that arises is whether such a thing actually exists, or whether it is even possible. The image of a Buddhist monk quietly walking on alms round does not readily come to mind as an economic activity for most people. Skyscrapers, shopping centers and the stock market would more accurately fit the bill. At present the economics that we are acquainted with is a Western one. When talking of economics or matters pertaining to it, we use a Western vocabulary and we think within the conceptual framework of Western economic theory. It is difficult to avoid these constraints when talking about a Buddhist economics. We might find ourselves in fact discussing Buddhism with the language and concepts of Western economics. Even so, in the course of this book, I hope to at least provide some Buddhist perspectives on things that can be usefully employed in economics.

    While economic thinking has been in existence since the time of Plato and Aristotle, the study of economics has only really crystallized into a science in the industrial era. Like other sciences in this age of specialization, economics has become a narrow and rarefied discipline; an isolated, almost stunted, body of knowledge, having little to do with other disciplines or human activities.

    Ideally, the sciences should provide solutions to the complex, interrelated problems that face humanity, but cut off as it is from other disciplines and the larger sphere of human activity, economics can do little to ease the ethical, social and environmental problems that face us today. And given the tremendous influence it exerts on our market-driven societies, narrow economic thinking may, in fact, be the primary cause of some of our most pressing social and environmental troubles.

    Like other sciences, economics strives for objectivity. In the process, however, subjective values, such as ethics, are excluded. With no consideration of subjective, moral values, an economist may say, for instance, that a bottle of whiskey and a Chinese dinner have the same economic value, or that drinking in a night club contributes more to the economy than listening to a religious talk or volunteering for humanitarian work. These are truths according to economics.

    But the objectivity of economics is shortsighted. Economists look at just one short phase of the natural causal process and single out the part that interests them, ignoring the wider ramifications. Thus, modern economists take no account of the ethical consequences of economic activity. Neither the vices associated with the frequenting of night clubs, nor the wisdom arising from listening to a religious teaching, are its concern.

    But is it in fact desirable to look on economics as a science? Although many believe that science can save us from the perils of life, it has many limitations. Science shows only one side of the truth, that which concerns the material world. By only considering the material side of things, the science of economics is out of step with the overall truth of the way things are. Given that all things in this world are naturally interrelated and interconnected, it follows that human problems must also be interrelated and interconnected. One-sided scientific solutions are bound to fail, and the problems bound to spread.

    Environmental degradation is the most obvious and dangerous consequence to our industrialized, specialized approach to solving problems. Environmental problems have become so pressing that people are now beginning to see how foolish it is to place their faith in individual, isolated disciplines that ignore the larger perspective. They are starting to look at human activities on a broader scale, to see the repercussions their actions have on personal lives, society, and the environment.

    From a Buddhist perspective, economics cannot be separated from other branches of knowledge. Economics is rather one component of a concerted effort to remedy the problems of humanity; and an economics based on Buddhism, a "Buddhist economics," is therefore not so much a self-contained science, but one of a number of interdependent disciplines working in concert toward the common goal of social, individual and environmental well-being.

     One of the first to integrate the Buddha's teachings with economics (and indeed to coin the phrase "Buddhist economics") was E. F. Schumacher in his book Small is Beautiful.[*] In his essay on  Buddhist economics, Mr. Schumacher looks to the Buddhist teaching of the Noble Eightfold Path to make his case. He affirms that the inclusion of the factor of Right Livelihood in the Eightfold Path, in other words the Buddhist way of life, indicates the necessity of a Buddhist economics. This is Mr. Schumacher's starting point.

    Looking back, we can see that both the writing of Small is Beautiful, and the subsequent interest in Buddhist economics shown by some Western academics, took place in response to a crisis. Western academic disciplines and conceptual structures have reached a point which many feel to be a dead end, or if not, at least a turning point demanding new paradigms of thought and methodology. This has led many economists to rethink their isolated, specialized approach. The serious environmental repercussions of rampant consumerism have compelled economists to develop more ecological awareness. Some even propose that all new students of economics incorporate basic ecology into their curriculum.

    Mr. Schumacher's point that the existence of Right Livelihood as one of the factors of the Noble Eightfold Path necessitates a Buddhist economics has a number of implications. Firstly, it indicates the importance given to Right Livelihood (or economics) in Buddhism. Secondly, and conversely, it means that economics is taken to be merely one amongst a number of factors (traditionally eight) that comprise a right way of life, that is, one capable of solving the problems of life.

    Specialization can be a great benefit as long as we don't lose sight of our common goal: as a specialized study, economics allows us to analyze with minute detail the causes and factors within economic activities. But it is a mistake to believe that any one discipline or field of learning can in itself solve all problems. In concert with other disciplines, however, economics can constitute a complete response to human suffering, and it is only by fully understanding the contributions and limitations of each discipline that we will be able to produce such a coordinated effort.

    Unfortunately, as it stands, economics is grossly out of touch with the whole stream of causes and conditions that constitute reality. Economics, and indeed all the social sciences, are, after all, based on man-made or artificial truths. For example, according to natural laws, the action of digging the earth results in a hole. This is a fixed cause and effect relationship based on natural laws. However, the digging which results in a wage is a conventional truth based on a social agreement. Without the social agreement, the action of digging does not result in a wage. While economists scrutinize one isolated segment of the cause and effect process, the universe manifests itself in an inconceivably vast array of causes and conditions, actions and reactions. Focused as they are on the linear progression of the economic events that concern them, economists forget that nature unfolds in all directions. In nature, actions and results are not confined to isolated spheres. One action gives rise to results, which in turn becomes a cause for further results. Each result conditions further results. In this way, action and reaction are intertwined to form the vibrant fabric of causes and conditions that we perceive as reality. To understand reality, it is necessary to understand this process.


The Two Meanings of Dhamma

For many people, the term "Buddhist economics" may evoke the image of an ideal society where all  economic activity -- buying and selling, production and consumption -- adheres to strict ethical standards. But such an idealized image, attractive as it may sound, does not convey the full depth of the Buddha's teachings. The Buddha's teachings point to Dhamma, or truth. In Buddhism the term Dhamma is used to convey different levels of truth, both relative truths and ultimate truth.

    Those truths regarding ethical behavior -- both on a personal day-to-day basis and in society -- are called cariyadhamma. These are the truths related to matters of good and evil. Dhamma in its larger sense is saccadhamma, truth, or sabhavadhamma, reality: it includes all things as they are and the laws by which they function. In this sense, Dhamma is used to describe the entire stream of causes and conditions, the process by which all things exist and function.

    Unlike the narrower scope of cariyadhamma, which refers to isolated ethical considerations, sabhavadhamma points to nature or reality itself, which is beyond concerns of good and evil. In this all-encompassing sense, Dhamma expresses the totality of natural conditions, that which the various branches of science seek to describe.

    Thus, the Buddha's teachings give us more than just ethical guidelines for a virtuous life. His teachings offer a grand insight into the nature of reality. Given the twofold meaning of the term Dhamma, it follows that an economics inspired by the Dhamma would be both attuned to the grand sphere of causes and conditions and, at the same time, guided by the specific ethical teachings based on natural reality. In other words, Buddhist economists would not only consider the ethical values of economic activity, but also strive to understand reality and direct economic activity to be in harmony with "the way things are."

    Ultimately, economics cannot be separated from Dhamma, because all the activities we associate with economics emerge from the Dhamma. Economics is just one part of a vast interconnected whole, subject to the same natural laws by which all things function. Dhamma describes the workings of this whole, the basic truth of all things, including economics. If economics is ignorant of the Dhamma -- of the complex and dynamic process of causes-and-effects that constitutes reality -- then it will be hard pressed to solve problems, much less produce the benefits to which it aims.

    Yet this is precisely the trouble with modern economic thinking. Lacking any holistic, comprehensive insight and limited by the narrowness of their specialized view, economists single out one isolated portion of the stream of conditions and fail to consider results beyond that point. An example: there exists a demand for a commodity, such as whiskey. The demand is supplied by production -- growing grain and distilling it into liquor. The whiskey is then put on the market and then purchased and consumed. When it is consumed, demand is satisfied. Modern economic thinking stops here, at the satisfaction of the demand. There is no investigation of what happens after the demand is satisfied.

    By contrast, an economics inspired by Dhamma would be concerned with how economic activities influence the entire process of causes and conditions. While modern economics confines its regard to events within its specialized sphere, Buddhist economics would investigate how a given economic activity affects the three interconnected spheres of human existence: the individual, society, and nature or the environment. In the case of the demand for a commodity such as whiskey, we would have to ask ourselves how liquor production affects the ecology and how its consumption affects the individual and society.

    These are largely ethical considerations and this brings us back to the more specialized meaning of Dhamma, that relating to matters of good and evil. It is said in the Buddhist scriptures that good actions lead to good results and bad actions lead to bad results. All of the Buddha's teachings on ethical behavior are based on this principle. It is important to note here that, unlike the theistic religions, Buddhism does not propose an agent or arbitrating force that rewards or punishes good and evil actions. Rather, good and evil actions are seen as causes and conditions that unfold according to the natural flow of events. In this regard, Dhamma (in the sense of ethical teachings) and Dhamma (in the sense of natural reality) are connected in that the Buddhist ethical teachings are based on natural reality. Ethical laws follow the natural law of cause and effect: virtuous actions naturally lead to benefit and evil actions naturally lead to harm, because all of these are factors in the stream of causes and conditions.

    Given its dynamic view of the world, Buddhism does not put forth absolute rules for ethical behavior. The ethical value of behavior is judged partly by the results it brings and partly by the qualities which lead to it. Virtuous actions are good because they lead to benefit; evil actions are evil because they lead to harm. There is a belief that any method used to attain a worthy end is justified by the worthiness of that end. This idea is summed up in the expression "the end justifies the means." Communist revolutionaries, for instance, believed that since the objective is to create an ideal society in which all people are treated fairly, then destroying anybody and anything which stands in the way of that ideal society is justified. The end (the ideal society) justifies the means (hatred and bloodshed).

    The idea that "the end justifies the means" is a good example of a human belief which simply does not accord with natural truth. This concept is a human invention, an expedient rationalization which contradicts natural law and "the way things are." Beliefs are not evil in themselves, but when they are in contradiction with reality, they are bound to cause problems. Throughout the ages, people with extreme political and religious ideologies have committed the most brutal acts under the slogan "the end justifies the means." No matter how noble their cause, they ended up destroying that which they were trying to create, which is some kind of happiness or social order.

    To learn from history, we must analyze all the causes and conditions that contributed to the unfolding of past events. This includes the qualities of mind of the participants. A thorough analysis of the history of a violent revolution, for example, must consider not only the economic and social climate of the society, but also the emotional and intellectual makeup of the revolutionaries themselves and question the rational validity of the intellectual ideals and methods used, because all of these factors have a bearing on the outcome.

    With this kind of analysis, it becomes obvious that, by the natural laws of cause and effect, it is impossible to create an ideal society out of anything less than ideal means -- and certainly not bloodshed and hatred. Buddhism would say that it is not the end which justifies the means, but rather the means which condition the end. Thus, the result of slaughter and hatred is further violence and instability. This can be witnessed in police states and governments produced by violent revolution -- there is always an aftermath of tension, the results of kamma, which often proves to be intolerable and social collapse soon follows. Thus the means (bloodshed and aggression) condition the end (tension and instability).

    Yet while ethics are subject to these natural laws, when we have to make personal ethical choices right and wrong are not always so obvious. Indeed, the question of ethics is always a highly subjective matter. Throughout our lives, we continually face -- and must answer for ourselves -- questions of right and wrong. Our every choice, our every intention, holds some ethical judgment.

    The Buddhist teachings on matters relating to good and evil serve as guides to help us with these subjective moral choices. But while they are subjective, we should not forget that our ethical choices inevitably play themselves out in the world according to the objective principle of causes and conditions. Our ethics -- and the behavior that naturally flows from our ethics -- contribute to the causes and conditions that determine who we are, the kind of society we live in and the condition of our environment.

    One of the most profound lessons of the Buddha's teachings is the truth that internal, subjective values are directly linked to the dynamic of external objective reality. This subtle realization is at the heart of all ethical questions. Unfortunately, most people are only vaguely aware of how their internal values condition external reality. It is easy to observe the laws of cause and effect in the physical world: ripe apples fall from trees and water runs down hill. But because people tend to think of themselves as individuals separate from the universe, they fail to see how the same laws apply to internal subjective values, such as thoughts and moral attitudes. Since ethics are "subjective," people think they are somehow unconnected to "objective" reality.

    According to the Buddhist view, however, ethics forms a bridge between internal and external realities. In accordance with the law of causes and conditions, ethics act as "subjective" causes for "objective" conditions. This should be obvious when we consider that, in essence, ethical questions always ask, "Do my thoughts, words and deeds help or harm myself and those around me?" In practice, we rely on ethics to regulate the unwholesome desires of our subjective reality: anger, greed, hatred. The quality of our thoughts, though internal, constantly conditions the way we speak and act. Though subjective, our ethics determine the kind of impact our life makes on the external, objective world.


How Ethics Condition Economics

To be sure, the distinction between economics and ethics is easily discernible. We can look at any economic situation either from an entirely economic perspective, or from an entirely ethical one. For example, you are reading this book. From an ethical perspective, your reading is a good action, you are motivated by a desire for knowledge. This is an ethical judgment. From the economic perspective, on the other hand, this book may seem to be a waste of resources with no clear benefit. The same situation can be seen in different ways.

    However, the two perspectives are interconnected and do influence each other. While modern economic thinking rejects any subjective values like ethics, the influence of ethics in economic matters is all too obvious. If a community is unsafe -- if there are thieves, the threat of violence, and the roads are unsafe to travel -- then it is obvious that businesses will not invest there, tourists will not want to go there, and the economy will suffer. On the other hand, if the citizens are law-abiding, well-disciplined and conscientiously help to keep their community safe and clean, businesses will have a much better chance of success and the municipal authorities will not have to spend so much on civic maintenance and security.

    Unethical business practices have direct economic consequences. If businesses attempt to fatten their profits by using substandard ingredients in foodstuffs, such as by using cloth-dye as a coloring in children's sweets, substituting chemicals for orange juice, or putting boric acid in meatballs (all of which have occurred in Thailand in recent years), consumers' health is endangered. The people made ill by these practices have to pay medical costs and the government has to spend money on police investigations and prosecution of the offenders. Furthermore, the people whose health has suffered work less efficiently, causing a decline in productivity. In international trade, those who pass off shoddy goods as quality merchandise risk losing the trust of their customers and foreign markets -- as well as the foreign currency obtained through those markets.

    Ethical qualities also influence industrial output. If workers enjoy their work and are industrious, productivity will be high. On the other hand, if they are dishonest, disgruntled or lazy, this will have a negative effect on the quality of production and the amount of productivity.

    When it comes to consumption, consumers in a society with vain and fickle values will prefer flashy and ostentatious products to high quality products which are not so flashy. In a more practically-minded society, where the social values do not tend toward showiness and extravagance, consumers will choose goods on the basis of their reliability. Obviously, the goods consumed in these two different societies will lead to different social and economic results.

    Advertising stimulates economic activity, but often at an ethically unacceptable price. Advertising is bound up with popular values: advertisers must draw on common aspirations, prejudices and desires in order to produce advertisements that are appealing. Employing social psychology, advertising manipulates popular values for economic ends, and because of its repercussions on the popular mind, it has considerable ethical significance. The volume of advertising may cause an increase in materialism, and unskillful images or messages may harm public morality. The vast majority of ads imbue the public with a predilection for selfish indulgence; they condition us into being perfect consumers who have no higher purpose in life than to consume the products of modern industry. In the process, we are transformed into 'hungry ghosts,' striving to feed an everlasting craving, and society becomes a seething mass of conflicting interests.

    Moreover, advertising adds to the price of the product itself. Thus people tend to buy unnecessary things at prices that are unnecessarily expensive. There is much wastage and extravagance. Things are used for a short while and then replaced, even though they are still in good condition. Advertising also caters to peoples' tendency to flaunt their possessions as a way of gaining social status. When snob-appeal is the main criterion, people buy unnecessarily expensive products without considering the quality. In extreme cases, people are so driven by the need to appear stylish that they cannot wait to save the money for the latest gadget or fashion -- they simply use their credit cards. Spending in excess of earnings can become a vicious cycle. A newer model or fashion is advertised and people plunge themselves deeper and deeper into debt trying to keep up. In this way, unethical advertising can lead people to financial ruin. It is ironic that, with the vast amount of 'information technology' available, most of it is used to generate 'misinformation' or delusion.

    On the political plane, decisions have to be made regarding policy on advertising -- should there be any control, and if so, of what kind? How is one to achieve the proper balance between moral and economic concerns? Education is also involved. Ways may have to be found to teach people to be aware of how advertising works, to reflect on it, and to consider how much of it is to be believed. Good education should seek to make people more intelligent in making decisions about buying goods. The question of advertising demonstrates how activities prevalent in society may have to be considered from many perspectives, all of which are interrelated.

    Taking a wider perspective, it can be seen that the free market system itself is ultimately based on a minimum of ethics. The freedom of the free market system may be lost through businesses using unscrupulous means of competition; the creation of a monopoly through influence is one common example, the use of thugs to assassinate a competitor a more unorthodox one. The violent elimination of rivals heralds the end of the free market system, although it is a method scarcely mentioned in the economics textbooks.

    To be ethically sound, economic activity must take place in a way that is not harmful to the individual, society or the natural environment. In other words, economic activity should not cause problems for oneself, agitation in society or degeneration of the ecosystem, but rather enhance well-being in these three spheres. If ethical values were factored into economic analysis, a cheap but nourishing meal would certainly be accorded more value than a bottle of whiskey.

    Thus, an economics inspired by Buddhism would strive to see and accept the truth of all things. It would cast a wider, more comprehensive eye on the question of ethics. Once ethics has been accepted as a legitimate subject for consideration, ethical questions then become factors to be studied within the whole causal process. But if no account is taken of ethical considerations, economics will be incapable of developing any understanding of the whole causal process, of which ethics forms an integral part.

    Modern economics has been said to be the most scientific of all the social sciences. Indeed, priding themselves on their scientific methodology, economists take only measurable quantities into consideration. Some even assert that economics is purely a science of numbers, a matter of mathematical equations. In its efforts to be scientific, economics ignores all non-quantifiable, abstract values.

    But by considering economic activity in isolation from other forms of human activity, modern economists have fallen into the narrow specialization characteristic of the industrial age. In the manner of specialists, economists try to eliminate all non-economic factors from their considerations of human activity and concentrate on a single perspective, that of their own discipline.

    In recent years, critics of economics, even a number of economists themselves, have challenged this "objective" position and asserted that economics is the most value-dependent of all the social sciences. It may be asked how it is possible for economics to be free of values when, in fact, it is rooted in the human mind. The economic process begins with want, continues with choice, and ends with satisfaction, all of which are functions of mind. Abstract values are thus the beginning, the middle and the end of economics, and so it is impossible for economics to be value-free. Yet as it stands, many economists avoid any consideration of values, ethics, or mental qualities, despite the fact that these will always have a bearing on economic concerns. Economists' lack of ethical training and their ignorance of the workings of mental values and human desire is a major shortcoming which will prevent them from solving the problems it is their task to solve. If the world is to be saved from the ravages of overconsumption and overproduction, economists must come to an understanding of the importance of ethics to their field. Just as they might study ecology, they should also study ethics and the nature of human desire, and understand them thoroughly. Here is one area in which Buddhism can be of great help.


[*] Small is Beautiful, Economics as if People Mattered, by E. F. Schumacher, first published by Blond and Briggs Ltd., London, 1973. [Back to text]


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