In order to understand International Development and Social Change, it is necessary to understand the relationship between economies and societies. Economic systems do not exist in nature, they are created through human action which takes place within a social system. As people form groups, they create a society, and within a society, humans work together and engage in adaptive strategies as a means of extracting their needs from the environment. Adaptive strategies are organized into livelihoods, which are tasks and duties that are carried out according to the positioning of the individual within their society. The organized system of exchange, production, distribution and consumption of resources taking place in a society and between societies is called an economy. This is why different societies create different economies; the two are inextricably linked. Therefore, in order to understand, operate and develop economic systems and/or anticipate or investigate the social changes that result from economic change, we need to to rely on analytical frameworks used to examine social phenomena. Social Theory encompasses ideas about how and why societies change by addressing social mechanisms such as power structures, social systems (gender, race, and ethnicity), revolutions and utopian visions, nature and the environment, and more. Contemporary social theory oftentimes focuses on core themes such as the nature of social life, the relationship between self and society, the structure of social institutions, the role and possibility of social transformation, and the effects of social categories such as gender, race and class. Watch the video for a brief over view of Functionalism, Conflict Theory, Social Constructionism, and Symbolic Interactionism as examples of social theory.
Social Theory and Economic Development
While Classical Economics is the scientific study of economies using laws and principles as predictive models for behavior and activity, socio-economics addresses the social mechanisms that operate within economic systems and influence economic activity. For a classical economist, economic activity is created by rational actors making informed choices in a neutral arena called the market, and economists rely on a wide range of formulas to predict market behavior. Watch the video below for a brief overview of classical economic perspectives such as The Invisible Hand, The Paradox of Thrift, The Phillips Curve, The Principle of Comparative Advantage, The Impossible Trinity, and Rational Choice Theory. Consider the ways that classical economics has informed the development theories presented in the previous lesson.
From an anthropological or sociological perspective, however, humans are far from rational actors and human behavior is governed by highly emotional and symbolic (ie irrational) moods, feelings and persuasions and these irrationalities operate within market mechanisms and affect economic outcomes. In the job market, for example, a rational actor would offer employment to the best possible candidate among the pool of applicants because the best candidate would maximize economic potential and thereby serve the best interests of the company. That is seldom the case, however. Watch the video clips from the film ‘Freakonomics’ below and consider; what is the symbolic action taking place and how does that symbolic action interact with irrationality in the market to generate an unpredictable economic outcome?
Based on the research presented in the videos, changes in naming patterns within a cultural community in the United States during the 60s-90s symbolically represented a movement to reclaim cultural identity. This human symbolic action interacted with the irrationality of racism and prejudice as applicants and resumes with names associated with African-American identity were significantly less likely to receive a job offer despite having the same exact qualifications as an applicant or resumes with a characteristically white name. The second video demonstrates that this is a worldwide trend. Similarly, economic irrationality is the underlying driver in the phenomenon known as an economic ‘bubble’ which is a direct result of buyer mania, or an upward movement in price combined with a willingness to pay significantly more than the actual value. To learn about bubbles, click here. While classical economics has been slow to acknowledge the role of emotion and irrationality in market mechanisms, commodity marketing experts have been quick to capitalize on ways that emotion and irrationality can be incorporated into market mechanisms.
Slovenian philosopher, Slavoj Zizek, offers an example of this in his book, First as Tragedy, then as Farse (2010), by highlighting the ways that companies such as the Starbucks Coffee Company incorporate charitable ‘feel-good’ elements in their marketing to persuade consumers to buy their products. By giving capitalism the ‘human face’ of charity Zizek argues, consumers make purchasing decisions motivated by guilt and conscience rather than a rational decision to maximize their outcome. According to Zizek, attaching charity to a product allows marketers to sell a feeling or emotion in the marketplace.
Social Inequality and Economies
One of the most salient aspects of social mechanisms within an economic system lies in the ways that social hierarchies inform, and are informed by, economic arrangements. Hierarchical structures in society such as sex, gender, race, ethnicity, citizenship, and other systems of inequality both influence and are influenced by market mechanisms such as employment, opportunity, pay rates, and bargaining power. It is therefore important to consider the ways that systems of inequality can create problems as well as present barriers to economic development programs aiming to solve problems. Systems of inequality are multi-scalar, or layered, and the intersection of multiple layers can exacerbate the negative outcomes of economic experiences for each individual. Towards the end of the semester, we will explore several analytical frameworks that address social inequalities from the household to international relations that can be used in development planning procedures
Identify a human emotion or irrationality and analyze the ways it operates within an economic system. What are the causes and consequences of that irrationality and how can it be ameliorated? Things to consider are economic ‘bubbles,’ buying frenzies, fads, religious proscriptions, maladaptive behaviors, dangerous or unhealthy products, sexism, racism, etc. (Be specific!) Feel free to post a video or written response. Do not forget that you must use terms and concepts from the lesson and respond to another student’s post in order to receive credit.
After you complete the discussion, move on to the Development Institutions lesson.