Studies of Economic Change

Decision Tree

"Uncomfortable, brutal, and short", must have been life about 25,000 years ago with about 3 million humans says a philosopher. Furthermore we can assume that humans settled down about 14,000 years ago because of these high demands caused by the nature and environment. The conditions of life improved by the efforts of humans step by step so that the population increased to about 1 billion humans 1800 AD caused by a higher life expectation. Then the pressure of the population induced the industrial revolution in the midst of the 19th century. Even if we argue that contrary to that the industrial revolution might have caused the population explosion we have to consider that there is an alternating process at least.

The consequence is that high demands induce an evolutionary process. Without high demands a social improvement cannot be expected at all.

If a society is once developed further growth induces less additional value (marginal utility). This is the general statement of the "law" of diminishing marginal utility: "The size of one and the same pleasure decreases if we continue with the pleasure until saturation comes into effect at least." [Translated by the author] But the saturation of the markets causes more and more competition which accelerates the evolutionary development and the increase of the productivity. As a result the economic growth slows down because of the decreasing demand.

The continuation of the contrary trends of the diminishing marginal utility and the evolutionary development causes economic regression which is expected to correlate with individual repression. This assumption is confirmed by chapter 3, the forecast of the unemployment rate, and chapter 4, the worst case, if political passivity determines the decision making process or if the social groups block themselves by struggling against each other.

It cannot be repeated often enough: A sustainable development of the economy requires a change of perspectives as economic growth does not solve the social and economic problems. What Descartes suggested a long time ago for his own studies has to be transferred to all other subjects: We have to restrict to the facts which are really certain even. Therefore we have to focus on strengthening basic research in economic policy. To keep chains of causations which are obviously false but accepted as true leads to a dead end. Let us hope that the persistence of our so called "elites" who never have been confronted with existential fear or even know individual poverty only from schoolbooks can be overcome in time.

The main conclusion is that the starting point of the civilisation is determined by an evolutionary process caused by high demands while developed societies are characterised by a decline of the additional value (marginal utility) until the market are saturated. And these are the basic assumptions of the "Studies of Economic Change".