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Revisiting the economy by taking into account the different dimensions of well-being

Working Paper n.60 Gennaio 2009

Leonardo Becchetti, January 2009

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Summary :

In standard economic models benevolent governments are the unique actors in charge to tackle the problem of reconciling individual with social wellbeing in presence of negative externalities and insufficient provision of public goods. Some promising practices of grassroot economics suggest however that, even a minoritarian share of concerned individuals and socially responsible corporations which internalise externalities, significantly enhance the opportunities of promoting « sustainable happiness » harmonising creation of economic, social and environmental value.

The paper is divided into six sections (introduction and conclusions included). In the second section we provide a short survey of the most prominent ethical and solidarity economic initiatives currently at stake. More specifically we focus on microfinance, fair trade, responsible tourism, solidarity purchasing groups and the grassroot participated welfare initiative called “multiparty social contract”.

In the third section we highlight the importance of the role of concerned consumers and investors in supporting these initiatives. The latter, by voting with their portfolios, may increase economic convenience of corporate social responsibility, thereby transforming it from a residual element into an important factor on which competition among different producers may be played.

In the fourth section we generalise the previously described experiences by sketching a new theoretical background under the form of an “integrated general economic equilibrium” in which firms are conceived as multi-output productive units which generate material and immaterial products and affect not just creation of economic value, but also the social and environmental quality of the socioeconomic system. In this framework we point out that socially responsible firms and concerned individuals go beyond the traditional reductionism in the conception of firms and consumers in standard economic thinking since, with their action, may reconcile creation of economic, social and environmental value. In the fifth section we finally discuss the role of local, national and EU authorities in supporting ethical and solidarity initiatives. We emphasise here that some among the most prominent of them (microfinance, fair trade, ethical banking) have prospered without any government support but that such support can significantly tilt the competitive race toward socially responsible corporations with some ad hoc regulatory or fiscal measures. The final section concludes.

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