# Toward a Baha'i Economic Model

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> Source: Bahá'í Library Online (bahai-library.com), curated by Jonah Winters. Used by permission of the curator. Original citation: Rick Schaut, Toward a Baha'i Economic Model, bahai-library.com.
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> 
> Toward a Bahá'í Economic Model
> 
> Rick Schaut
> 
> 1995-10
> 
> What follows is an attempt to develop three positive
> statements which might form the basis for such a Bahá'í
> Economic Model. This discussion is by no means complete.
> Indeed, the ideas are sparsely supported largely because
> I know that my audience is comprised largely of Bahá'ís
> who are as interested in developing a model as I am (or are
> just plain not interested at all). These remarks will not stand
> the light of critical analysis in an academic setting. They're
> not intended to.
> 
> Before I get into a discussion of the model, there are some basic
> observations I'd like to make. We have, essentially, solved
> the old Economic problem of not enough to go around. The
> world's productive capacity is sufficient to meet the basic
> needs of all its inhabitants. The problem is no longer an
> issue of production. It's an issue of distribution. At some
> point between Adam Smith and the Post-Keynesians, the
> goal of the system changed from satisfying the greatest
> number of needs to satisfying the greatest number of wants.
> The normative value of Western Economic paradigms is
> fading rapidly, and the tools begin to resemble the proverbial
> sledge-hammer being used to kill a fly.
> 
> Secondly, my starting point is to attempt to cast things in
> terms of the biological model offered by the Universal House
> of Justice in The Prosperity of Humankind. This implies,
> to me, a point of view which considers processes more important
> than static equilibria described in mechanical terms (the core
> of Neo-Classical Economics). The best that the Science of
> Economics, as it is currently practiced, is able to achieve in
> describing social change is in terms of movement from one
> equilibrium to another. Clearly this doesn't give us much
> understanding of how we got from one place to another. It
> only tells us that at one point there was one particular
> equilibrium condition and now there's a new set of conditions.
> 
> The Monetarists come a little closer to some notion of
> processes, but they fall short as well. While the initial thrust
> of the Monetarist school is in terms of the flow of funds in
> the system, the model bogs down in its focus on changes
> in the aggregate money supply. The analysis falls back into
> the same old saw of static equilibria. The analysis can
> tell us what happens to an equilibrium when one of the
> factors of that equilibrium changes, and, since the factors
> analyzed are variables under the control of monetary and
> fiscal authority, it forms a rudimentary guide for policy. But
> it still falls short of explaining fundamental behaviors and
> the relationship of those behaviors to the aggregate quantities
> that are the model's meat and potatoes.
> 
> That leaves us with a glance at the ideas of the iconoclasts
> and the new radicals. We can reject most of them offhand
> because, while they are adept at criticizing caricature
> capitalism, we don't need their help for such a criticism.
> We need their help for the basis of a new model. Most of
> these groups have nothing to offer but their criticisms.
> 
> Of the iconoclasts, however, one of the most well known is
> concerned with observing present behavior, and it is to his
> thoughts that I turn for a point of beginning:
> 
> The Planning Process
> 
> John Kenneth Galbraith discusses, in a number of essays,
> most notably The Affluent Society and The New Industrial
> State, something he calls the planning system; a system he
> refers to as the 'technostructure'. He notes that the production
> cycle, the time it takes to go from the design of a new product
> to the actual sale of a new product, takes sufficient time in a
> significant portion of the economy that firms cannot allow
> themselves to be at the mercy of markets. These firms are
> forced, then, to exercise some form of demand management.
> This demand management can take several forms from the
> effort to design a product in accordance to the needs of one's
> customers to advertising designed to convince people that
> buying a firm's product is worthwhile. Hence, where you
> see advertising and marketing, you are, in fact, seeing the
> result of planning.
> 
> I have two complaints with Galbraith's analysis. First, he
> doesn't take his own analysis far enough. While pressing this
> notion of planning as a means of describing the behavior of
> large corporations, he still believes that the Neo-Classical
> paradigm is adequate to describe supposedly more market-
> driven entities like dairy farmers in Wisconsin.
> 
> This failure isn't Galbraith's fault insofar as he has, likely,
> never spent time working on a dairy farm in Wisconsin.
> Nonetheless, the dairy farmer in Wisconsin plans just
> as much as the CEO of General Motors. Galbraith might
> be quick to claim that the CEO of General Motors is able,
> mostly through advertising, to exercise some control over
> the consumer's demand for the firm's product, but that's only
> because his busy life precludes him ever seeing his television
> ask, "Got milk?"
> 
> My second complaint with this analysis is its focus on
> structure rather than process. This is not to say that structure
> isn't important. Following the biological model pressed by
> the Universal House of Justice, we can note that certain cells
> in a human body perform different functions. However, these
> cells perform these functions through various processes. It
> is not possible to fully understand the function of the cell
> without understanding the processes through which these cells
> carry out their function.
> 
> The observation that our economy is planned, as decentralized
> as that planning process is, is not new. What is new, and what
> I believe Bahá'ís have the most to offer, is in an understanding
> of the planning process, for, wherever there exists a planning
> process, the principles of consultation apply. Indeed, this can
> form the first positive statement we can make about an economy:
> the extent to which the planning process conforms to the
> principles of Bahá'í consultation determines the 'success' of
> that process.
> 
> This leads to some notion of what constitutes 'success' in
> this model. In a broad sense, success for a planning process
> depends upon the extent to which the process meets or
> exceeds the goals set for it. While it's possible to note
> that we can set whatever goals we want for our economic
> system, such a step moves out of the model-building mode I
> want to maintain in the present discussion.
> 
> However, if we stay in this model-building mode, we can
> note that the planning process is capable of setting its own
> goals. In fact, we can observe that it does. Firms set
> production goals and earnings goals. Households set various
> goals of their own. And individuals set their own goals in
> relation to the planning process. In a sense, then, we can note
> that the planning process determines its own success.
> 
> The breadth of literature discussing Bahá'í consultation is
> sufficient evidence that this subject is deep enough to warrant
> significant discourse. However, the goal of the present essay
> is to provide some foundational thoughts for the development
> of a model. The actual development of a model will take the
> collaboration of minds greater than this essay's author. So,
> let's leave the discussion of the planning process per se and
> turn to the second area where I think Bahá'ís can offer some
> thoughts to students of Economics.
> 
> The Individual and the Planning Process
> 
> If we are to fully understand the planning process, we need
> a more complete theory of the individual. A utility theory
> which holds the accumulation of material goods and means
> as the highest aspiration of the individual doesn't adequately
> explain behavior we can presently observe. The richest
> human being in the world continues to work despite the
> fact that he has more money than he can spend in his lifetime
> on himself (he can, certainly, give that money away, but he
> simply is not able to spend it on himself).
> 
> Why does this man continue to work? He could, if he wanted
> to, live a life of complete leisure and be none the worse for
> wear. Clearly, something other than simple remuneration
> motivates him, and it motivates him to work. In this
> context, the Bahá'í notion of our dual nature can form the
> basis of a theory which explains such behavior.
> 
> Secondly, we can also note that no scientific, technological
> or artistic advance in human society came from people who
> were, at the time, thinking of their own physical comfort.
> They might have been motivated by the desire for physical
> comfort, but their efforts required thinking about things outside
> themselves. This implies that progress in the planning process
> has to do with the extent to which individuals can transcend
> their physical needs.
> 
> This notion of our dual nature, then, gives us a basis for
> understanding the individual's role in the planning process,
> and leads to the second positive statement we can make in
> this model: the extent to which the planning process is
> successful is directly related to the extent to which individual
> participants have developed those qualities inherent in their
> spiritual nature.
> 
> Planning Units and Structure
> 
> The last issue I'd like to address in this model is the concept
> of a planning unit and the observations we can make about
> the structure of these units. Again, drawing from the
> biological model, we should think of these units as collections
> of individuals (individuals being the analogue of the cell) where
> each collection performs a specific function in the planning
> process (or exercises some form of authority over the domain
> of a particular goal adopted by the planning process).
> 
> If we examine the large firm, it's relatively easy to see these
> planning units. Research and development, marketing and
> sales, and finance all operate over portions of the domain of
> the firm's goals. In addition, we can see hierarchies of planning
> units within each of these units. For example, the research and
> development department of a large firm can have development
> teams which are responsible for specific product ideas, and
> each product team can be broken down into specific feature
> teams.
> 
> So, we see two kinds of relationships between planning units:
> lateral and hierarchical. Units which have lateral relationships
> operate in complimentary spheres of the planning process
> while hierarchical units operate at different levels within the
> same sphere of the planning process.
> 
> There is a good deal of literature in the field of Business
> Management which addresses aspects of both of these kinds of
> relationships. All of this literature can be summarized in the
> following, and last, positive statement of the present model: the
> extent to which planning units can appreciate their role in the
> overall planning process has a bearing on the success of the
> planning process.
> 
> I think these three statements can form the basis of a coherent
> model of Economic behavior. I think it has a good deal of
> explanatory power. For example, it can form the framework
> of an explanation for the failure of Soviet Socialism and
> some of the difficulties faced by the US capitalist system.
> 
> There are, however, some shortcomings I am not yet able
> to address. For example, the model doesn't directly address
> questions of employment. Though one could, possibly, draw
> the question into the planning process itself, that is one
> can allow full employment to be a goal that the planning
> process can chose to adopt, but I'm not fully satisfied with
> that notion since it gives us no way of stating, explicitly,
> how full employment can be reached.
> 
> METADATA
> 
> Views11670 views since posted 1997; last edit 2012;
> 
> previous at archive.org.../schaut_bahai_economic_model;
> URLs changed in 2010, see archive.org.../bahai-library.org
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> Citation: ris/489
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> — *Toward a Baha'i Economic Model (Used by permission of the curator)*