Freer markets aid more human well-being and happiness

Since the start of the pandemic it's been a relatively awful period in modern human history. No, it's not quite as deadly as World War II, or quite as destructive, but it's been destructive none the less. Sadly, the longer it lingers the more damage it will do.

One of the most important lessons from the pandemic is the reminder that the ultimate resource truly is people. It's not capital or natural resources; it's human productivity. Letting millions die will always be destructive to the economy.

That is one of the most humane lessons we can garner from economics. Each of us benefits because others benefit. Our well-being is directly tied to the well-being of millions of other people.

Some cultures cut people out of the economy

The small shopkeeper in a township is better off when those who live near his shop see their wealth increase. The more they have, the more they spend with him, and the more he has. The more business he has, the more help he needs to hire, and the wealthier the neighbourhood.

The more inclusive an economy, the more it produces and the fewer impoverished individuals there are.

Some cultures cut people out of the economy. For instance, some have refused to treat women as equal to men. One result is they cut out of their economy very productive individuals whose efforts would improve the lives of everyone. This doesn't just make women worse off, it further impoverishes men as well.

According to the 
International Monetary Fund, development is a process of expanding freedoms equally for all people  – male and female. Countries with more female participation in the economy tend to be more productive than those that exclude them.

This inclusionary aspect of economic development covers most people in most places, most of the time. This is why social tolerance is so important to wealth creation.

A policy of wealth destruction

Excluding people, or promoting intolerance of them, is counter-productive; it's a policy of wealth destruction. Including women, immigrants, and LGBT individuals, for instance, increasing wealth increases prosperity for all people.

According to the 
Williams Institute at the University of California Los Angeles School of Law, 'we do not draw a firm conclusion… whether more rights cause higher levels of development or whether more developed countries tend to have more rights. The theoretical perspectives suggest that both directions are likely at work'.

They observed nations 'with more rights for LGBT people' have higher 'per capita income and higher levels of well-being'. From this they conclude, correctly I think, that the benefit of rights extend beyond purely economic outcomes to well-being measured as education attainment and life expectancy.

It may not be immediately obvious, but it is accurate to say, living in a nation tolerant of others means longer lives on average for everyone. Nations that are prosperous see tolerance increase and as tolerance increases wealth increases even more.

This leads to benefits that are much harder to measure. When we talk about economic prosperity we are usually talking about hard numbers, dollars and cents, cash, profits, etc. These are all things that can be quantified. But some important thinkers have observed another process as economic prosperity increases: people seek out their own personal fulfilment as well.

A pyramid of human needs

The psychologist Abraham Maslow developed a 'pyramid of human needs' which shows how human needs shift as they become more prosperous. At the bottom of the pyramid are needs such as food, shelter, and safety. These are needs common to all and relatively the same for each. I call them 'herd needs' because they remain similar no matter who we are. Our individuality doesn't really change them.

Many people seem to think economic development stops there. It fulfils our physical needs and that’s the end of it. Maslow argued as those needs are met, 'higher order' needs arise, and at the top of the pyramid are self-actualisation needs. These are the very opposite of herd needs, they are entirely individualistic and change dramatically from one individual to the next.

Economic development provides for them by freeing people up to seek satisfaction for these needs. These do more than fill your stomach: they elevate your spirit and make you happier.

The first stages of economic development fill the stomach, but the more developed the society, the more inner needs people are able to fulfil. It improves your entire standard of living, including expanding individual happiness. This creates paradoxes that confuse many people but still remain true.

The most selfish things I can do  – that is the thing that most serves my own self-interest  –  is to protect the rights and freedoms of others. Those who preach intolerance and exclusion aren't just hurting the economy, but themselves as well. That's not selfish, it's stupid.

One message from the Holiday season has been 'on earth peace and good will toward men'. That is what freer markets ultimately strive to obtain. It's more than just profit, or jobs, it's human well-being and happiness.

This article was first published on BBrief on 22 December 2021.

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