Socioeconomics Foundations Notes
Economics for Everyone
Ha-Joon Chang argues that economics is for everyone and encourages involvement in discussions about economic fundamentals.
Diverse Economic Theories
There isn't one right economic theory; diverse approaches are needed to fully understand the economy, as each makes different assumptions and has underlying political and ethical values.
Key Economic Thinkers and Their Views
Several economists have different views on:
- the economy's composition (individuals vs. classes),
- human nature (selfishness, rationality),
- the world's certainty,
- the most important production domain.
They also have different policy recommendations, such as free markets, socialist revolution, or government intervention.
Neoclassical Economics
Relates supply and demand to individual rationality and the ability to maximize utility or profit.
Complexity and Humility in Economic Theory
Given the complexity of the world and the partial nature of economic theories, one should be humble about the validity of their own theory and keep an open mind.
Global Temperature Rise Impacts
Global temperature increases of 1.5°C, 2.0°C, 3.0°C, and 4.0°C have significant impacts on:
- coral reefs,
- sea level rise,
- water shortages,
- food production,
- flora and fauna.
Climate Change Risks
Economic analyses of climate change often fail to incorporate the largest risks, including crossing climate tipping points, which can undermine economic growth, exacerbate poverty, and destabilize communities.
Alternative Climate Policies
Alternative policies include:
- business as usual,
- abatement costs and damages,
- social cost of carbon.
These policies can limit temperature increases with hard caps or averaging periods.
Rising Sea Surface Temperatures
Daily sea surface temperatures are increasing, with the world entering "unknown territory" after recent heat records.
EU Financial Shocks from Climate Change
The EU faces increasing risk of systemic financial shocks from climate change, with temperatures expected to rise by at least 3°C by 2050.
Institutional Economics
Emphasizes the analysis of institutions and social rules that guide actions, including transaction costs.
Institutions
Institutions structure social interactions, create stable expectations, and depend on shared habits of thought and behavior. They constrain and enable behavior.
Rules
Rules are socially transmitted, customary normative injunctions that are potentially codifiable. They require enforcement to become customary.
Habits
Habits are constitutive material of institutions, enhancing their durability and normative authority. They create mechanisms of conformism and normative agreement.
Norms
Norms develop in society due to reciprocating intentions and expectations, involving a network of mutual beliefs rather than agreements.
Organizations
Organizations are special institutions with criteria to establish boundaries, principles of sovereignty, and chains of command.
Markets as Social Institutions
Markets are sets of social institutions, not merely mechanisms, and their origins are often ignored.
Self-Enforcement vs. External Enforcement
Language is the basic social institution. Institutions can arise in an undesigned way through structured interactions, but self-organizing institutions require language.
Types of Knowledge in Transdisciplinary Research
- Systems knowledge: analytical and descriptive knowledge of the current state.
- Target knowledge: knowledge about desired future developments.
- Transformation knowledge: knowledge about how to move from the current state to the desired state.
Institutional Economics and Transdisciplinary Research
Institutional economics helps address the three types of knowledge by:
- analyzing existing institutions,
- assessing alternative institutional arrangements,
- understanding how institutional change occurs.