An economic system comprises the totality of institutions and organizations that specify property relations within a given society and that channel and influence the distribution of goods and services. This dry definition covers an amazing diversity of economies at all levels of development: the altruistic foragers of the Kalahari Desert in southern Africa; the highly competitive fishing societies on the Canadian Pacific coast; the egalitarian Lepcha farmers of Sikkim; the intricately structured caste agriculturalists in Uttar Pradesh, India; the industrialized market economies of West Europe; and the former centrally planned economies of East Europe.

How can we make sense of this exuberant profusion, which represents a tribute to humanity's ingenuity at organizing itself? In this book, I look at economic systems in a comparative fashion and ask four key questions about them: Is the number of these systems infinite or do particular institutions and organizations consistently cluster together in a few distinct patterns? If such patterns exist, are they a function of the environment, the social or political structure, or the level of economic development; or are they relatively independent entities? What impact do economic systems have on the performance of the economy? How do they originate, develop, and change?

This study applies a uniform method of analyzing economic systems at various stages of development, ranging from foraging to advanced industrial/service economies. Although such an approach does not result in a generalized “theory of economic systems,” whatever that may mean, it does permit us to discover for economies with any given focus of production an important order arising out of the chaos of case studies, statistics, anecdotes, and factoids that govern most discussions. As a result, theorizing can begin about their institutional orders from a solid empirical base.

The most important empirical results can be quickly summarized: Economies at every stage of development feature a small number of distinct economic systems, defined in terms of particular groups of institutions that cluster together. From the statistical analysis presented in previous chapters, many of these economic systems do not seem to be generally determined by the social structure, political organization, or physical environment of the societies but rather appear as independent entities, worthy of study in their own right.

These economic systems provide an analytical framework within which a variety of economic activities can be placed in context and examined. Designation of the economic system also allows us to distinguish those characteristics typical of all societies with the same focus of production from those that are shared only by those societies with the same system and those that are unique to a given society. Moreover, in certain cases, these economic systems have an important impact on the performance of the economy.

Hunting, gathering, and fishing economies can change from one type of foraging economic system to another, and it is as important to understand these dynamic aspects of the system as it is to know the static elements of the system at a single point in time. Unfortunately, the evidence for such systemic transformations of these economies is skimpy and, as a result, this type of systemic transformation has received relatively little attention in the ethnographic literature. Foraging systems can also change into agricultural systems. The evidence for this transition – the “neolithic revolution” – is more abundant and has engendered a vast literature, but I am uncomfortable with it.

When discussing the transition from foraging to farming, most archaeologists and anthropologists adopt a bottom-up approach and usually rest their argument on a small number of cases, generalizing from these results to all transitions in other places. Such a procedure rests on the dubious assumption that the transition proceeded in a similar fashion all over the world. By way of contrast, economists have adopted a top-down approach. In previous years, they usually started from one or more of four general propositions about the causes of the transition (Weisdorf: 2003a): that it was a result of diminishing returns in foraging as the population increased; that it was a result of a general decrease in foraging productivity arising from a change in climate or an extinction of the plants and animals being foraged; that it was a result of a rise in the productivity of agriculture due to the invention or borrowing of more productive techniques in farming; or that it was a result of a shift in preferences for nonfood items that could be obtained only by exchanging agricultural goods.

I have long been discontented with the field of comparative economic systems and this book is the result of my efforts to show what I think this discipline should be about.

In the twentieth century, comparative economists focused too narrowly on industrialized economies and paid little attention to preindustrial societies. Because these latter societies have been rapidly disappearing, we are losing an important part of our potential subject matter. Comparative economists also have few overarching approaches to deal usefully with a wide variety of market and nonmarket economies in a coherent fashion. Although case studies of an enormous number of market and nonmarket economies are available, the literature is so rich and varied that it is difficult to gain perspective. What is necessary, of course, is to look at a large number of societies with different types of economic systems with the same analytic tools. In dealing with preindustrial economic systems, this also requires a considerable familiarity not just with economics but with history and anthropology as well.

For several decades, I have been writing in my mind a book that would analyze foraging (hunting, gathering, fishing), agricultural (herding, planting), and industrial/service economic systems with a unified analytic approach that would take advantage of the rich factual information on these economies now at hand – the kind of book that nineteenth-century social scientists tried to write without adequate factual materials and case studies.

In past millennia, foraging (hunting, gathering, or fishing) proved a highly successful method of adaptation, allowing humans to spread and survive over most land areas on the planet. In the analysis of preindustrial societies, it is tempting to group together all foraging societies because they operated in quite different ways from those based primarily on agriculture. But, as I show herein, more insights can be gained by looking at their different types of economic systems.

Given the fact that very few “pure” foraging societies now exist, it is necessary to rely on how these societies functioned at some pinpointed date many years ago. As a result, this is an exercise in historical analysis, utilizing the vast store of ethnographies written over the past centuries to arrive at new insights. Because all of the societies in my sample have greatly changed since the pinpointed date, I use the past tense in discussing them. The sample, reviewed in detail, includes forty-four different foraging societies from Africa, Asia, Australia, and the Americas.

The major conclusions can be readily stated: Foraging societies reveal six quite distinct economic systems, whose different organizing principles are readily interpretable. Such economic systems are, in most cases, unrelated to those ecological, social, and political variables that have received the bulk of attention by anthropologists. In brief, these economic systems are independent entities worthy of study by themselves.

In this chapter, I focus on economic systems of the industrialized OECD nations. These might seem simpler to analyze than foraging and agricultural economies, because we can draw upon more plentiful and standardized information. But, the complexity of these advanced economic systems also raises difficulties that were not necessary to confront in previous chapters.

The discussion begins with a cluster analysis to define the types of economic systems, using readily available data on forty different institutions and organizations. Although the results are not startling, they do confirm our intuitions, as well as the conclusions of several other studies using many fewer indicators. I then analyze the impact of these economic systems on the functioning of the economy, a task not possible for foraging and agricultural systems because of the lack of suitable data. Finally, I look at various political, ideological, social, and cultural correlations that might indicate why these countries adopted their current economic systems. In the following chapter, I examine how these advanced market systems have evolved over time and where they are heading.

Defining the Economic Systems

Data and Statistical Technique

We face a kaleidoscope of classifications and approaches when looking at the literature on economic systems of advanced market economies. A possible alternative to the cluster analysis used in previous chapters is a factor analysis to derive “ideal types,” but because all of the OECD nations had mixed economies, this did not prove fruitful.

CLASSICAL BASIC RIGHTS AND FULL PROCESS-FREEDOM

“Men are free and equal in rights.” The rights in which men are so declared equal are the classical basic rights, or simply basic rights, or basic freedoms. They constitute the legal and social ethical basis of modern democratic societies (although the term “democracy” does not refer to their main part, the “rights of man,”but only to their political part, the “rights of the citizen”). They constitute the base, core, and fountainhead of their constitutions – they are commonly presented as their preamble. Hence, they constitute, in these societies, the most basic and general rule of the law, its prime source, and the most basic and general rule of the relations between persons and between them and institutions. This does not prevent a number of violations of these rights, strictly understood, by lawful rules in these societies. We will notably find examples of this fact in fiscal systems, and we will also see that these violations are not necessary for their very purposes – such as realizing a just redistribution. We will also see, moreover, that these violations also reveal an imperfect application of the political basic rights because they induce inefficiencies in Pareto's sense, hence a lack of respect for the principle of unanimity, whereas this principle is implied by the democratic participation required by these rights.

REALIZATION, IMPLEMENTATION, INFORMATION

The realization of the required distribution or policy depends on the information, motivation, and power of the appropriate agents. This chapter considers the question of the realization and implementation of ELIE schemes, and in particular that of information. The basic issues are presented in Sections 2 and 3 and the various aspects are more fully developed in Section 5, whereas Section 4 shows the problems of an alternative conception influential in economics. Section 2 notes the required information, the fact that ELIE can be achieved by purely interindividual rights, the various moral aspects of this distribution, the various ways in which people's motives associate self-interest and social and ethical views, and the consequences for implementation and information about individual capacities. Section 3 discusses the question of obtaining the required information, which concerns wage rates for given capacities, in observing labour markets, paysheets, and the characteristics of labour, as concerns, notably, the questions of education and training and the intensity of labour (effort). The conclusion is that this information is, on the whole, more easily obtained than that needed for other taxes or aids. The economic literature about “optimum income taxation” puts forward the issue of information, but raises a number of logical and conceptual problems that are noted in Section 4. Finally, an Appendix considers more in depth the issue of obtaining the information about the value of given capacities. It shows how the nature of ELIE favours individuals'participation in this respect.

ERASING SELF-INTEREST FROM JUDGMENTS ABOUT DISTRIBUTIONS: THE METHODS

The just, global distribution determined by endogenous social choice derives from individuals' conceptions of justice, and only from this part of their overall judgments. Hence, it should not be directly influenced by individuals' special relation to their own interest. Individuals' self-interested judgments should therefore be banned from the individuals' evaluations on which the global evaluation is based: the individuals'overall judgments used should be laundered for their self-interest, or individuals'non-self-interested evaluations should be singled out from their overall judgment for use in the global evaluation. Not uncommonly, individuals have a dual standard, one self-interested and the other moral and impartial, which they express in different occasions. However, individuals also often have an integrated view resting on both motives, and the relative importance they attach to them can be very varied. Individuals also have preferences favouring the situation of particular others for reasons irrelevant to impartial justice, notably the closeness of the social relation with them. This extends self-interest into self-centeredness. No practical effect results if this concerns family altruism because an individual's income is in fact her household's. Self-centeredness is more generally considered in Section 4.4, and in Chapter 21 where it will be the basis of one method of solution.

Erasing the self-interested motive in the individuals' evaluations can be done in various ways. One can analyze the structure of the overall preferences of each individual and try to discriminate among the effects of various motives for banning those of self-interest.

INTRODUCTION

ELIE results from a philosophy but ends up with a specific practical and simple distributive scheme. It can thus be compared not only with philosophies of social ethics and justice, but also with the specific distributive schemes that are applied or proposed. Chapter 14 noted these schemes, the relevant issues of the comparison, and the corresponding properties of ELIE. Taxation based on income has been considered in Chapter 11, and in Chapter 10 for the theory of the “welfarist optimum income taxation” because of its particular stand concerning information. The focus will now be on schemes of assistance, guaranteed minimum income, “negative income tax” or “income tax credit,” and “universal allocation” or “basic income,” along with ELIE. These schemes are first introduced in considering the rationales that led to them (Section 2). We then consider and compare the issues of financing, efficiency and incentives, freedom and dignity, information and realization, and comprehensiveness (Sections 3 to 7). The structural properties of the schemes will then be shown and compared (Section 8). Finally, the various relevant aspects of each scheme will be summarized (Section 9). ELIE will sometimes be considered for the case of unidimensional labour and proportional earnings (fixed wage rates), where it becomes EDIE(equal duration income equalization – see Chapters 8 and 9).

RATIONALES

ELIE, whose structure results from consensus and social and basic freedoms, manifests rights in society's resources (more specifically, its human resources). Its direct rationale is not the satisfaction of needs.

Introduction

This chapter outlines the solution of the problem of macrojustice implied by the premises presented in Part I, the essentials of this derivation, and the general properties of this result. Further chapters present this solution, its reason, and its properties with formal models which are increasingly refined, notably as concerns the description of labour and of its yielding product and income. This leads to the successive consideration of constant wage rates, more general individual productivities, explicit modeling of all the characteristics of labour, and total or partial involuntary unemployment. Another chapter discusses the question of information for the implementation of the distributive policy, and Part III compares the obtained scheme with present policies, proposals of assistance schemes, and philosophers' and economists' conceptions.

The present chapter can thus be said to present “the philosophy” of the question – as common language uses this term. It uses no explicit formalization. Readers particularly familiar with formal models may prefer to begin by reading Chapters 9 or 11 (and 13 for the treatment of involuntary unemployment). Chapter 11 presents the most general case, but Chapter 9, which considers labour measurable as a quantity and fixed wage rates, permits an easy discussion of the main issues – actual cases can often be presented in this way for reasons and with adjustments that will be presented in Chapter 8.

The present chapter divides in two parts.

THE GENERAL PROBLEM

Resources are to be distributed (acquiescing to particular “natural” or “spontaneous” allocations is to be seen as particular possible solutions). From the general principle or method of endogenous social choice, this distribution will have to follow unanimous informed and reflective opinions intervening directly or indirectly (reasons for respecting basic freedoms can also be directly valued). The distribution concerning macrojustice is considered here. Hence, as we have seen, it will have to respect basic rights and process-freedom, Pareto efficiency, and other applications of the principle of unanimity. These criteria will turn out to allocate a number of rights in resources to particular individuals and to discard others from the concern of macrojustice. In the end, there will remain the rent-rights in productive capacities, which will be allocated according to the appropriate equality.

This outcome will result from a selection in each of four dichotomies. (1) Resources can be produced or given (nonproduced or “natural”). (2)They can be nonhuman or human, that is, capacities. (3)Capacities can be (roughly) eudemonistic (and consumptive) or productive (usable in production). (4) Rights in a resource can be rights to use and benefit from the use, or rights to the value of its a priori availability or rent.

The reason for the selection will be process-freedom for dichotomies (1) and (4). It will be the fact that the topic is macrojustice for dichotomies (2) and (3), but for different specific reasons: the large relative importance of capacities and specificities of the allocation of nonhuman natural resources for choice (2), and the consensual irrelevance of eudemonistic (and properly consumptive) capacities for choice (3).

PRESENTATION AND BASIS

Presentation

This chapter derives the structure of global (overall) distributive justice in macrojustice implied by endogenous social choice, equal labour income equalization (ELIE), and shows its various properties and meanings, in the standard case (linear production functions, Section 1.2). In Section 2, the ELIE structure is derived from the duality of goods and measures (consumption-income and labour-leisure), process-freedom, and the required equality. Then, the various aspects or meanings of this result are pointed out, such as equal sharing of an equal share of the income value of productive capacities, partial equal pay for equal work, from each equally in labour (or according to her capacities) and to each equally, remuneration according to desert for one part and merit for the other part, general balanced labour reciprocity, or partial proportional compensation of productivity differentials. Section 3 focuses on the logic of ELIE. It considers the limiting cases of unemployment income of the less able, labour duty of the ablest, and highest incomes and labours. Section 4 displays the geometry of ELIE. It shows that freedom, and hence equal freedom, can be considered in two ways, directly as process-freedom or in the space of the result, and it characterizes ELIE in these two cases. The consequences of particular rights and rules, such as a workfare rule or a right to idleness, are pointed out in Section 5. Section 6 gathers the various meanings or meaningful properties of ELIE, and the meanings of the crucial coefficient k.