Evolution of Contractionary Economics

The time element in the development of contractionary economics requires consideration.

The theory's initial appearance must occur at the start of an economy's transformation in order to drive this process forward. At this early stage, the economy is still predominantly capitalist, and the functional framework will have to reflect the realities of the system's structure, incentives, and institutions.

As economic transformation proceeds, however, the economy will change in significant ways. For example, the first steps towards sustainable well-being will likely include the curtailment of corporate rights and the placement of tight restrictions on advertising.

These modifications will dramatically alter the economic landscape, which means that many of the components of the original functional framework will have to be modified as well. Such theoretical shifts will likely continue for years, until the logic of capitalism has been entirely supplanted and the corresponding institutional changes have been made.

Rapid theoretical evolution in the functional realm is a sharp departure from the past. Although a capitalist economy undergoes changes, it does so in relatively minor ways: new technologies, product mixes, trade relationships, etc.

The logic that drives the system, and the structural and institutional support for this logic, are fairly stable. Thus, while economic theory has from time to time innovated superficially, as with rational expectations and game theory, it is otherwise fixed in its principles, tools, and methods.

The development of contractionary economics will radically upset this longstanding stability.

Although much of the theoretical change will occur in the functional framework, the guiding framework — whether progressive or conservative — is not immune to modification. In its initial version it will be untested in the real world, and its performance will have to be observed carefully as objectives are set and results are evaluated.

It may turn out that some of the framework’s analytical methods are insufficiently refined, or that certain concepts and tools are missing. It will certainly be true that the information it needs to evaluate economic results will not be fully available. While a great deal is known about current economies, this knowledge is usually expressed in purely capitalist terms.

In the case of ENL, for example, an entirely new statistical infrastructure will have to be constructed to express economic outcomes in terms of human health and ecological limits.

Although considerable research has been done in both areas in recent decades, in most cases the findings are general and provide only a crude quantitative basis for economic guidance. A high priority will have to be placed on research that satisfies ENL’s data requirements.

A final comment: the development of contractionary economics has much in common with organic change. The latter rejects what is clearly destructive in capitalism but seeks to retain any features that may be useful in the drive towards sustainable well-being.1

Similarly, contractionary economics rejects economic ideas that are destructive to humankind and nature, but retains those concepts, tools, and analytical methods that are conducive to contractionary goals. The shared perspective is this: don't throw the baby out with the bathwater.

In other words, despite any revulsion we may feel towards a system or theory, we must retain our intellectual balance and discard only those elements that cause the damage we perceive. Anger is a fine motivator, but it has no place in either theoretical development or strategic thought.

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