Socio-economic System

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What do you think worth and wealth is in the coming era?

What is worth really, in a modern era that has so many problems, such as encroachment on freedom and rights due to differences in principles and claims, and the widening gap in various fields? How can we create such a world of self-interest and altruism where we can recognize differences and support both the haves and the have nots? In this chapter, I will discuss the social and economic mechanisms that can bring about that solution.

Something of value in the coming era

It is said that there are two minimum requirements for people to live happily. The first is the ability to satisfy physiological needs such as appetite and desire for sleep. The second is to satisfy the desire for safety by ensuring physical and mental safety.

Only when these two requirements are satisfied will people be able to satisfy their other desires. According to Maslow’s Law, once these two basic requirements are satisfied people can begin to satisfy their social desires and desire for approval. These desires could be paraphrased as desires for equality and fairness, respectively. The former is a desire for simple equality, while the latter is a desire for equality in terms of results (gains), and may have greater value.

What happens if people don’t sleep for three days?

Have you ever been caught up in work or exams and lost sleep? Many of you may have been up all night for a day or two, but what if you’ve been sleepless for three days? If you’ve been up for two days, your body loses its ability to metabolize glucose and your immune system shuts down; and if you’ve been sleepless for three days, your whole body seems to shake uncontrollably, it becomes difficult to talk, and you may even hallucinate.

The same is true of appetite. It is said that globally 828 million people go to sleep hungry every night and more than 345 million people suffer from severe hunger. When the fundamental human needs for sleep and food are not satisfied, we no longer want to dress up or be recognized, let alone fulfill our dreams, and we can only think of satisfying our desire to survive.

In Maslow’s five-stage theory of desires, “physiological desires” for food, sleep and sex, and “safety desires” for physical and mental safety, are referred to as “material desires”. If these desires, which center on clothing, food, and housing, are not satisfied, more complex mental desires cannot be considered. Thus, material desires are defined as the basis of human happiness. This means that these basic desires need to be satisfied before we can think about our other desires, let alone the whole planet. Article 25 of the Constitution of Japan provides for “improving social welfare, security and public health” and a “minimum healthy and cultural life” as part of the right to life, and institutes mechanism to protect material desires so that people in Japan can build a peaceful and happy society without losing their reason.

Which bike is right for you?

The table below illustrates equality and equity using four examples: a tall man, an average-sized woman, a physically disabled woman, and a small child. The upper tier gives everyone the same bicycle, representing “equality”; however, only the average-sized women can ride this bicycle without any problems, while the tall man and the child find it very difficult to ride the bicycle, and the disabled woman can’t ride it at all. On the other hand, the lower tier gives each person a bicycle according to their size and circumstances, representing the idea of “equity,” and everyone can ride their bicycles without any problems.

You will see that the idea of “equality”, which gives everyone the same thing, makes the means uniform and does not solve the essential problem. On the other hand, the idea of “equity”, which gives the right bicycle to each individual, makes it possible to achieve “equality of opportunity”, that is, the opportunity to ride a bicycle comfortably in this case. Thus, the difference between “equality” and “equity” relates to both means and opportunity

Fig 1. The Difference between Equality and Equity
(Source: Weekly Keidanren Times, January 13, 2022)

When considering the fulfillment of the “material needs” and “spiritual needs” presented in the previous section, it is thus necessary to think in a way that leads to the essential solution of the problem by equalizing opportunities.

What is fairness?

I don’t think many people would disagree that society should achieve some form of fairness, but how can we achieve fairness among a diverse population? If we achieve fairness on one measure, logically we cannot achieve other measures of fairness at the same time. If we are to achieve a “fair society” our concept of fairness becomes very important. First, how should fairness be measured?

One way of thinking about the total amount of fairness in a society is to consider fairness in terms of the weight of each person, fairness in terms of the value of money, and fairness in terms of the incremental increase of each person’s happiness. Another way of thinking about fairness (common to democracy, capitalism, utilitarianism, etc.) is that a society should aim to maximize the total amount of money, happiness, etc., for each unit of the society while ensuring fairness.

The idea of maximizing the total amount of value created in society seems rational, but there are likely to be problems such as the failure to protect the interests of minorities in a democracy or to reduce the gap between rich and poor in a capitalist economic system. Maximizing the total amount of value alone does not address inequity of distribution, and it also ignores our diversity. It seems that if we are to solve inequality and other problems of inequity, we need to think on a scale that focuses on individual fairness while keeping diversity in mind.

So let’s look at the idea of fairness for individuals. The first thing that comes to mind is the fair distribution of happiness. While this may seem like the ultimate goal at first glance, happiness is inequitably distributed when there is persistent discrimination. For example, when persistent class discrimination is entrenched, this can result in obvious discrimination that can be left unaddressed if we only look at the fair distribution of happiness, because people in the lower classes feel the same amount of happiness about small improvements in their lives as more fortunate people feel about bigger improvements. Can this result, which gives a certain level of happiness to everybody (depending on how you look at it), be called a wonderful new world for us? When viewed as a practical measure to improve social equity, this idea has its problems.

If a psychological measure such as happiness cannot practically be used to assess social equity, what measure should be used to capture it? Given that we are inherently diverse, and that we are unable to change our assumptions on our own, equity must be measured using a whole bundle of measures that reflect diversity. On a slightly different note, should the focus be placed on equity of outcomes or equity of prerequisites to achieve outcomes? It is conceivable that those who have equity of prerequisites to achieve outcomes have greater freedom to make choices about their future, so it may be that the value of freedom to choose one’s own future should be considered here.

If freedom is in itself an important value, along with fairness, then many of you would think that the focus of fairness should be on the equity of prerequisites for outcomes, as this also enhances freedom (in a more extreme example, people may even want the freedom to be unhappy).

In light of the above, I feel that there is a certain rationality in the idea that we should achieve equity in prerequisites for outcomes—or, as Amartya Sen put it, the “fairness of freedom”—across a diverse bundle of measures that reflect the essential diversity of our society.

How to achieve equity

We have considered the idea that we as a society should achieve the “fairness of freedom”, which is a prerequisite for achieving results using a diverse bundle of measures that reflect our intrinsic diversity, but how exactly do we achieve this?

As individuals, we have preconditions such as innate and diverse talents, but we cannot choose those preconditions before we are born. Specifically, we are given a bundle of preconditions that are very diverse, including a variety of talents (for example, athletic, artistic and academic talents) as well as our gender, race, nationality, region, education, freedom to choose a career, social security system, and our parents’ financial strength; society must strive to achieve fairness while recognizing these diverse preconditions. Moreover, because we have the freedom to lead our own lives not all these preconditions are necessarily used; for example, many talents end up not being used to their fullest extent.

There are many preconditions that cannot be observed in modern society. On the other hand, as a result of us exercising our freedom, some relationships can only be observed in terms of their diverse outcomes. These preconditions cannot be observed at first glance, so their inequities seem undetectable. But by relying on a wealth of information about diverse outcomes and analyzing their fairness for bias, we may be able to detect and remedy inequities in the underlying preconditions.

Social cultivation

ave you ever heard of social cultivation? In today’s society, you can easily share your thoughts with the whole world through SNS, video distribution, and of course this E6 Visionary Blog. Once upon a time, news of incidents and accidents that happened on street corners would be published in newspapers and discussed on news programmes, and there was a time lag before the situation was reported. Now, however, everyone can take photos and videos on their mobile phones in real time and distribute them on the spot, and scenes that were previously imagined on the basis of the words of an announcer or a journalist are now directly visible in first-hand videos. In other words, there are more news reports with a realistic sense of presence, unfiltered by the media, and there are more opportunities for viewers to decide about the relevant issues.

In this modern society, in exchange for the freedom to express one’s own diverse thoughts and impressions of every event, one must simultaneously evaluate the claims that are made. I also believe that the number of people who unintentionally throw their lives out of whack by doing so has overwhelmingly lincreased. If the claim unintentionally or deliberately ends up hurting people, or if there a reciprocal exchange of retaliatory messages, is that diversity?

When considering social and economic systems that ensure fairness, we believe it is important to realize a society in which value visualization and redistribution are sustainable. In order to make redistribution systems sustainable, voluntary “good deeds” that are not enforceable must be encouraged. In other words, “social recharge” is needed as an emotional social foundation.

Rain moistens the earth, and water slowly seeps underground and eventually becomes groundwater, and this is where the word “recharge” is derived from: it means tthe gradual cultivation of water so that it seeps into nature. To induce voluntary good deeds without coercion, human beings need an environment in which they can gradually nourish and nurture their virtues, personalities, education, culture and spirituality over time. We define this as the “recharge power of society”, or in other words an emotional social foundation.

What devices are needed to instill recharge power in society? In the first place, society is made up of various communities, such as homes and schools, so we need to consider aspects that affect individuals (such as the values of each community and individiual well-being), and aspects that affect society as a whole (such as education and incentives). We need devices tailored to the level of each of the communities that constitute society.

What is the community of the future?

History shows that the way communities have been structured has changed as technology has advanced. For example, in agrarian societies people were self-sufficient in food and homogenous communities were formed with a focus on community and family. In industrialized societies following the Industrial Revolution, the division of labor advanced throughout society and company-centered communities were formed with an emphasis on efficiency.

So how will communities change in the future? Technology has enabled us to transcend geographic and language barriers and connect with people around the world. Relationships have moved from being fixed to being resilient and flexible, and community formation has extended beyond the real world into virtual spaces. As a result, flexible relationships with diverse communities can help people find comfortable places or create new value. On the other hand, it can also make it easier for like-minded people to gather together, widening the divides between communities.

In a society where diverse individuals feel a sense of well-being, it is important not to be bound by fixed communities but to have the freedom to participate in them or to leave them, and to be able to gain empathy with others through value exchange in the communities in which they participate. This autonomous alignment of values through value exchange is the force that transforms communities and societies in their desired directions. On the other hand, in a society that can connect with people from all over the world, it is necessary to thelp reduce isolation and to care for those who do not want to be connected.

The right to know

One of the preconditions for the social and economic system in which we live is fairness. The right to know things is a major factor in this. This right to know leads to each person leading a good life and achieving self-fulfillment, for example by realizing what they want to do or recognizing their dreams. We need systems that give people an equal opportunity to know “what’s out there” and “what kind of jobs are out there” as they move forward through their long lives.

One such system is education. Japan has a Fundamental Law of Education, which defines the principles of education. The following shows Articles 3 and 4 of the Fundamental Law of Education.

(The philosophy of lifelong learning)

Article 3: Every citizen must be able to learn at any opportunity and in any place throughout their lifetime, so that they can polish their personality and lead a fulfilling life. A society must be realized where the results of learning can be appropriately utilized.

(Equal educational opportunities)

Article 4: All citizens must be given equal opportunities to receive education according to their abilities, and must not be discriminated against in education on the basis of race, creed, gender, social status, economic position or family origin.

Fundamental Law of Education in Japan

For example, let’s say you give some kids a book describing jobs from all over the world. Would the kids understand what jobs were out there? Do you think, “they’ll know that if they read the book, that’s a given”? What if, then, these were children who could not attend school and thus did not receive a minimum level of education allowing them to read and write? Perhaps they would never know what kind of jobs were out there.

If a minimum level of education, such as the ability to read and write, is not widespread, problems such as the inability to convey what one wants to say arise. Basic education thus needs to be equalized. It is highly desirable that children all over the world have equal access to education, but there are countries in the world where education is not widespread because of poverty. Some people may think, “even if you can’t go to school, you can still learn through the Internet”. However, there are many countries in the world where there are not enough schools and teachers, and where communication facilities and environments such as the internet are not available. On the other hand, there are countries where communication facilities and environments are in place but are not freely available. Each country has a different information strategy, and it is very difficult to solve this challenge right away. Even if it takes time, I think it is very important that we gradually increase opportunities for children around the world to “get to know the world” by promoting digital materials, narrowing the digital divide, and loosening regulations.

Perspectives for thinking about socioeconomic systems

In thinking about socioeconomic systems, I extend to some extent the original worldview presented by John Rawls to stimulate thinking.

Suppose that we begin in a state of hypothetical equality, and we can choose the principles we will follow to arrange the structure of our society from now on. We are not told what part of the society we are to be placed in according to the principles agreed upon, and we are not told at all whether we are male or female, white or black or Asian, members of what religion, what talents we have, how wealthy our parents are, or what part of the country we will be born in. On the contrary, we do not know whether we will be born into society as it is now or 100 years into the future. Moreover, there may be cases where we will be born as animals or plants, and if we become animals or plants we may be raised by humans, but we will know nothing at all aout them. Under such circumstances, what kind of socioeconomic system would we wish to build for the world of 2050?

What are socioeconomic systems for?

When we take a bird’s eye view of our activities in the socioeconomic system of the society we want to be in the future, we can see it as a situation where we are facing resource constraints due to the natural environment and other factors, and we are working toward some social goal under these constraints. On the one hand, as individuals, we seek to maximize freedom and happiness under resource constraints, but on the other hand, if we do not know where we are in the structure of society we may try to achieve some kind of fairness as a social goal so that we can be reasonably satisfied with whatever position we are in. Efficiency in the context of resource constraints is something that should be maximized as long as the fairness of society is preserved.

Furthermore, the extent to which we should consider social goals as members of society should also be expanded. Thinking about the future requires us to embrace the perspective of sustainability when considering everything from as human beings to the silent creatures, the earth and the natural environment, and not only the members of the present world but also the members of the future world.

The new power and potential we have today

Fortunately, we live in a world that is heavily influenced by technology, with big data and computational power allowing analysis of the drivers of precondition bias based on information about diversity outcomes. The fairness of preconditions, which has historically been considered only on a very limited scale (such as in relation to income and education levels), can be a powerful driver of improvement toward a more equitable society by the empirical analysis and evaluation of a wider variety of preconditions; for example, by causally inferring preconditions through supervised learning and evaluating social policies through reinforcement learning to maximize social welfare.

Transforming the socioeconomic system into what we want it to be

Which direction should modern society move in to achieve social goals? Our society, as Otto Neurat says, is like a single ship sailing across an ocean, and we have no choice but to progressively rearrange the components of our existing social infrastructure without sinking the ship. For example, the practical improvement of society will require mechanisms to solve problems from a bird’s-eye view, using highly developed mechanisms to improve the efficiency of resource use; market economies and engines are good examples of this.

A bird’s-eye view of the challenges of modern society

A market economy based on capitalism is an efficient mechanism in the sense that it maximizes resource efficiency through price determination, but when evaluated from the perspective of fairness, it becomes clear that capitalism discounts the imbalances mentioned above, and while information on the value of goods is efficiently distributed, anything other than that which can be converted into money is discounted as an externality. As a result, we face the following contemporary challenges:

  • ・Growing inequality (requiring human security and fairness)
  • ・The externalities of future generations (requiring consideration of future ethics and principles of sustainable development)
  • ・Abandonment of anything but monetary value (requiring community, mutual aid, animal welfare, environmental enrichment, life centrism, and globalism)

These challenges are caused by the flow of value to social goals that accompany economic activities, and by the truncation of information about the distribution of goods.

When we buy goods, we cannot determine how much impact our economic activities have on social goals because we do not visualize how the goods impact social goals. As a result, even those of us who are inherently empathetic and reach out to the people in front of us may be mercilessly complicit in the destruction of equity because we are ignorant, and empathy is not encouraged by the global socioeconomic system.

Improving mechanisms to help guide an equitable society toward a just future will require us to make good use of our well-developed mechanisms for the efficient use of resources as an engine to enhance social equity and solve problems.

Built-in value visualization and social value enhancement mechanisms

When fairness with regard to people, other organisms, and nature overall cannot be visualized globally, it is difficult to drive empathic consideration globally. To visualize the interplay of fractured value chains, it will be necessary for those involved in these value chains to drive awareness.

This will require the visualization of global value flows. It is conceivable that the value of people, organisms, and nature can be visualized through the value chain of goods. Here, we define the values that ensure fairness in terms of the prerequisites for producing the well-being of people, organisms, and nature, as follows.

Well-being of people: Ensuring human security by means of a wealth redistribution mechanism that balances reduced capabilities (a mechanism that ensures the fairness of freedom).

Well-being of organisms: Disclosure of information on animal welfare and environmental enrichment, and redistribution of the costs for the maintenance of the animal environment (a mechanism that ensures the protection of biological rights).

Well-being of nature: A framework that enables end-users to bear the costs of disclosure and restoration of the global environment (a mechanism that ensures responsibility is taken for nature and the rights of future generations).

By creating a system in which information on the value can be grasped by those of us at the end of economic activity chains, it is conceivable that we could drive a mechanism for the redistribution of value and the betterment of society.

Fig 2. Well-being of human, biology, and nature

Embodying social system design for value visualization

What kind of system is needed to achieve this? First of all, after designing the overall system, an existing global social system in which knowledge can be used could be based on the financial system, which distributes the intangible value of “credit” globally. We learn from capital markets that the following systems are necessary to ensure the creation and distribution of value.

  • ・Value visualization, empirical research, and educational systems
  • ・Third-party evaluation, auditing, and value disclosure systems
  • ・Comprehensive incentive systems for value
  • ・Ultra-long-term fiduciary instruments for value management, such as trust systems and nonprofit organizations
  • ・Risk digestion, processing and transfer systems, such as insurance and safety nets for value
  • ・Linkage with other value systems, such as currencies

In addition, a global, decentralized, autonomous mechanism, rather than one single government, may be an appropriate of finding institutional instruments that support these activities. Taking a page from the decentralized financial systems of Web 3.0, it is worth considering designing a decentralized platform to replace the unnecessary systems of central institutions. Participants in such a platform could exchange and receive certain crypto-asset-like tokens as incentives for activities that enhance the value of society.

It is also worth considering that although money is lost when it is consumed, the cumulative effect of this consumption creates net value which is not separate from the consumption of exchange value, and should be managed separately for each entity even if it is coordinated with monetary value. Although this cumulative value is economically worthless, in itself it represents the “value for the purpose of the act” as seen at the social level. Each act can thus be expected to have a secondary effect, contributing to the establishment of a global empathetic identity in a global symbiotic society.

A society that supports harmony between global health and individual well-being

A society that takes advantage the efficiency of the market economy while overcoming externalities and increasing the value of society can be summarized in terms of economic (efficiency) mechanisms that manage resource constraints, mechanisms that protect the balance between freedom and equality, and expansion of the diversity of stakeholders, as shown in Fig 3.

Fig 3. A society that supports the harmony between the health of the Earth and the well-being of individuals

We need to change the structure of society to move toward a just future, and shouldn’t we build a society that supports harmony between the health of the earth and individual happiness by making the values of individuals that support it compatible with the health of the Earth?