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«Living Wage and Optimal Inequality in a Sarkarian Framework Mark Friedman Colorado State University, USA Abstract Principles from the social thought ...»

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REVIEW OF SOCIAL ECONOMY, VOL. LXVI, NO. 1, MARCH 2008

Living Wage and Optimal Inequality

in a Sarkarian Framework

Mark Friedman

Colorado State University, USA

Abstract

Principles from the social thought of the Indian philosopher P.R.

Sarkar are employed to show that there exists an optimal level of economic

inequality that joins the values of economic justice and efficiency. Sarkar

favored establishing a living wage as well as a maximum wage that allows for

work incentives. It is argued that the primary justification for inequality is to provide incentives for individual productivity, and that the value of those incentives should not exceed the economic contributions they produce. To determine the relative importance of income incentives in motivating individual economic contributions, it is found necessary to develop a multifaceted model of human productivity. Such a model is developed using concepts from humanistic psychology. A Sarkarian individual productivity curve is introduced in diagrammatic analysis to demonstrate the existence of an optimal level of inequality, and also to explain the persistence of extreme income inequality.

Keywords: inequality, living wage, P.R. Sarkar, PROUT, productivity, Maslow

INTRODUCTION

For the past three decades, many have watched with growing unease as economic inequality in the US and the world has risen steadily. Nonetheless, economists have not agreed on how to respond. Given that it is deeply imbedded in mainstream neo-classical economic theory that there is an unavoidable trade-off between equity and efficiency, economists have been cautious in their response for fear that imposing measures to halt the growth of inequality will cause greater economic harm. Social economists have generally agreed that the so-called conflict between equity and efficiency is a false dichotomy. However, they also have not come to a consensus regarding remedies.

Review of Social Economy ISSN 0034-6764 print/ISSN 1470-1162 online Ó 2008 The Association for Social Economics http://www.informaworld.com DOI: 10.1080/00346760701668479

REVIEW OF SOCIAL ECONOMY

In this article, I will show that an equitable distribution does coincide with efficiency, given an appropriate social and economic framework. The argument will extend ideas presented in the social-economic theory developed by the Indian social philosopher P.R. Sarkar, who called his framework the Progressive Utilization Theory or PROUT. It is an efficiency argument that employs the simple idea that the primary justification for inequality is to provide incentives, and that the value of those incentives should not exceed the economic contributions theyare intended to produce. I will demonstrate that this kind of efficient limit to inequality exists.

Furthermore, at this limit, a reasonably defined just distribution coincides with an efficient one, that is one that maximizes output available for distribution.

Inherent in this theory is the assumption that human productivity will respond to material incentives. While the assumption is reasonable, the importance of material incentives can be exaggerated if other motivators for human productivity are not also accounted for. Focusing only on material incentives will be seen as inadequate, particularly in the context of social economics, which will not accept that human satisfaction results only from material rewards to the exclusion of social and other values. Therefore, I develop a humanistic theory of human productivity that includes a wide variety of determinants. I am aided by a previous productivity model developed by John Tomer based on the psychological theories of Abraham Maslow.

The argument will be presented in the following sequence. First, I will present an introduction to Sarkarian social thought, since his work is still unfamiliar in many parts of the world. To provide some orientation, I compare his thought with that of other social economists, and then point out the aspects of PROUT that are most relevant to the present discussion. While the argument for optimal inequality rests primarily on the ideas of Sarkar, it is also influenced by the theories of Abraham Maslow. I therefore have also included a short summary of Maslow’s ideas that are most relevant. There are close parallels between Maslovian psychology and Sarkarian thought, particularly in Maslow’s emphasis on the importance of meeting basic needs to develop psychologically healthy people. Maslow’s views on human motivation and productivity, which also play an important role in developing the humanistic model of productivity, are summarized. I then introduce the Sarkarian individual productivity curve, a productivity function based on the productivity model. The curve is used to diagrammatically demonstrate that a rational limit to inequality must exist. Two real-world applications of the Sarkarian productivity curve are presented in the final section.

LIVING WAGE AND OPTIMAL INEQUALITY

THE SARKARIAN FRAMEWORK

The social and economic thought of the Indian philosopher P.R. Sarkar (1924 – 1990) holds a rich potential to contribute to economic theory, although it has not yet received the attention it deserves. Sarkar was primarily recognized as a yoga master and spiritual teacher. In addition to his social thought, he has made significant contributions to the study of Indian religions and philosophies, history, and music. As his primary interest was the development of the spiritual potentialities of human beings, the focus of his economic system is to maximize human potential in all spheres, which he defined as the physical, psychic (i.e. mental), and spiritual. Underlying all aspects of his theory is the recognition that human beings are much less likely to achieve their higher potentialities when denied access to basic material and social requirements.





Sarkar is not alone in incorporating spiritual values into economic thought. Monsignor John Ryan (1906) is but one Western example, along with economists E.F. Schumacher (1974) and Herman Daly (see Daly and Cobb 1989). Ryan concluded that a living wage would be a powerful way to achieve universal economic security. However, Sarkar goes further in

PROUT to advocate a maximum wage, as is explained below. Daly (1991:

53 – 56) has made a similar proposal, although he advocated a maximum and minimum income rather than wage. Despite these scholars’ commitments to varying traditions, they were all guided by their spiritual outlooks to conclude that the distribution of society’s resources should be prioritized to ensure that all human beings are guaranteed access to the basic requirements of a decent life.

There are other parallels to Sarkarian thought in contemporary economics. Sarkar’s emphasis on developing a social framework that fosters the development of human potentialities is compatible with the welfare criterion more recently advocated by Amartya Sen (1999), that individual social, political, and economic capabilities are the best determinants of human welfare. There area also close parallels to Sarkarian thought in the humanistic economics expounded by Mark Lutz and Kenneth Lux (1979).

They employed the humanistic psychology of Abraham Maslow to argue that an economy should satisfy basic requirements such as physical needs as a prerequisite to allowing humans to satisfy higher needs and achieving selfactualization.

Sarkar summarized his philosophy in a short book called Ananda Sutram, first published in English in 1961. The outline of his social-economic system PROUT is found in the fifth chapter (reproduced in Sarkar 1992). The book,

REVIEW OF SOCIAL ECONOMY

written in the traditional Indian Sanskrit sutra form, consists of concise aphorisms followed by explanatory commentaries. The ninth and tenth sutras, listed and discussed below, are most relevant for our purpose of developing of a theory of optimal inequality.

The ninth sutra is: ‘‘The minimum necessities of all should be guaranteed in any particular age’’ (Sarkar 1987: 23). This is seen as the primary function and duty of any economy. Without the necessities of life—food, clothing, medical care, housing, and education—human beings cannot progress to achieve individual potentialities or develop a high level of culture. Nor can they undertake rigorous spiritual disciplines that can lift their minds to the supreme bliss of union with the ‘‘Infinite Consciousness,’’ which Sarkar would regard as the ultimate goal of individuals and society.

Sarkar stressed that a healthy economy and society require that the basic necessities not be distributed directly by any official agency. Rather, they should be purchased in the marketplace with income earned in useful employment. He further advocated a government policy of 100 percent employment, with a minimum wage set at a level adequate to purchase necessities. The standard for minimum necessities will change with time and place, but should be continually improving.

The tenth sutra is: ‘‘The surplus goods and services, after distributing the minimum necessities, are to be given according to the social value of the individual’s production’’ (Sarkar 1987: 23). After people in an economy are able to provide the minimum necessities to all, they will have to decide how to distribute the remaining surplus. Sarkar opposes dividing the surplus equally, seeing it as a violation of the diversity of nature (1987: 22 – 23).

Sarkar also does not endorse the communist ideal, ‘‘From each according to his abilities, to each according to his needs.’’ Under PROUT, incentives do matter and it is not considered unjust for the worker who is more productive to earn more, once each member of society has access to the basic necessities.

The guiding principle is that the surplus is to be used specifically as an incentive to coax greater service to society from the especially capable. This sort of incentive is known in PROUTist economics by the Sanskrit word atiriktum. Atiriktum may be given in the form of salary, but that is not its only form. Since its purpose is to increase the capacity of those with high potential to benefit society, atiriktum can take the form of special taskrelated privileges. For example, a talented researcher may be given access to expensive specialized equipment, such as an electron microscope, or a particularly effective and selfless social worker may be offered more staff.

In an article published shortly before his death in 1990, ‘‘Minimum necessities and maximum amenities’’ (Sarkar 1989: 31), Sarkar expanded on

LIVING WAGE AND OPTIMAL INEQUALITY

the relationship between minimum necessities and amenities offered the meritorious. He stressed that, even with the minimum necessity rule, people should not be left with a bare-bones existence. While amenities need to be provided to the meritorious elite, common people should be assured of a living standard that is appropriate for that time and plac, and allows what most consider to be a reasonably dignified and stress-free life. Further, continuous efforts should be made to raise the minimum standard.

In this section, introducing the social thought of P.R. Sarkar, I have summarized his views on how the output of society should be distributed. In order to facilitate human development, meeting minimum needs should take priority, and then more amenities may be made available to the meritorious as an incentive to provide more service to society. As we use these elements of the Sarkarian framework to develop our theory of optimal inequality, it becomes necessary to understand the relationship between incentives and productivity in healthy human beings and in a healthy society. Insights from the humanistic psychology of Abraham Maslow are particularly helpful to this end.

MASLOW AND EUPSYCHIAN MANAGEMENT

It is not controversial that some disparity of income can encourage the most talented to be more productive and to accept jobs that are more challenging.

We have also noted that in the Sarkarian view some income inequality can be beneficial to society if it actually provides an incentive for greater productivity. However, it must be recognized that human motivation is complex; there are many reasons why humans choose to be productive, only one of which is income. This is critically important to the present argument that there are rational limits to inequality because the more that non-income motivators contribute to productivity, the need to rely on income incentives alone is diminished. From the standpoint of society, the justification for extreme inequality is weakened. It is therefore necessary for a theory of optimal inequality to be based on a well-rounded understanding of the motivation behind human productivity. The insights from the psychologist Abraham Maslow are of considerable help.

Maslow has explored the motivation to be productive at length. He found that healthy, self-actualizing people become devoted to their work because of their interest in the work itself, not because of external rewards. He reverses the usual assumption of the disutility of work prevalent in neoclassical economics, which demand explanations for exerting effort in work. Maslow asks ‘‘Why do people not create or work? Rather than, why do they create’’

REVIEW OF SOCIAL ECONOMY

(Maslow 1965: 8). He asserts that it can be assumed that everyone has the motivation to create and work; it is the inhibitions to these motivations which must be explained.

Maslow’s explanation points to negative aspects of the work environment.

On the other hand, a well-managed, positive work environment can greatly enhance the natural desire to do good work. Eupsychian management, Maslow’s term for employing strategies to foster such a positive environment, can spread benefits throughout society. A virtuous cycle develops wherein a good organization improves the people working in it, who in turn improve the industry, and eventually society as a whole. Good management, Maslow asserts, can be ‘‘a utopian or revolutionary technique’’ (Maslow 1965: 1). Maslow found it counter-productive to assume people will avoid work if given the chance. Most ‘‘are for good workmanship, are against wasting time and inefficiency, and want to do a good job, etc...’’ (Maslow 1965: 17).



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