The general goal of economics is to increase overall welfare for members of a society. So how we define welfare sets the foundation for how economics is used.
Generally, economists use the phrase "standard of living" to differentiate from quality of life. Standard of living refers to the level material comfort available to a person. This is different from quality of life which has many definitions, but for the purposes of this article I will define it vaguely as "what makes life worth living".
Economists usually use this differentiation to stay away from the arena of philosophy and religion to focus solely on material factors of life. Economics is essentially a study of scarcity and choice, and has a much broader scope than just money or material wellbeing. It just isn't often used this way.
Life does not separate easily into little boxes, and sometimes we are faced with choices between what is profitable, and what is right.
What does this mean?
A trick we can use in economics is to redefine phenomena under economic terms and use the science to look at regular problems from another perspective.
The idea of thinking of morality in terms of moral capital help us to understand choices we need to face often in our lives. Just like on a national level, when policy makers need to sometimes choose between social and economic development, sometimes we need to make choices between economic and moral investment.
Let's forget about the other points on this recurring graph and just talk about points B and C.
Here economic capital refers to what we own and can measure; Our tangible goods, such as clothing, gadgets, a house/apartment, a car, etc. Moral capital refers to the immeasurables; how much regret we have, our pride, our peace of mind, our joy of life, etc. We can define what is "right" from the question above as what increases our moral capital.
If we are a salesperson for example, selling a car that we know will break down to a person that cannot afford it. We have the choice to sell the product anyway and convince them it is good, or advise them against buying the product.
Choice 1: Sell.
Incentive - We get commission, perhaps improve our chance for a promotion.
Cost - The regret from taking advantage of the customer, reinforcing the idea that other people are our enemy, and that we must take from them to advance in life.
Choice 2: Advise against.
Incentive - Clear conscience, reinforcing the idea that people are there to help each other.
Cost - Loss of commission, possible problems with our boss, risk losing our job.
This is an example of a choice we can make. Choice 1 increases our economic capital and is a choice at point B on the graph, and choice 2 increases our moral capital and is at point C. Most of us might like to think that we would make choice 2. In reality most of us would make choice 1. Why?
If we are honest with ourselves we would probably admit that getting commission and the chance for promotion is clearly worth more than the small pang of regret we get from selling to this one customer. We might even have convinced ourselves that we feel nothing ("if they're stupid enough to buy it, it's not my fault!").
Part of the problem with this view is that it looks at each choice in isolation. And here's where the economics comes in.
Economics defines the difference between consumption and investment, short-term and long-term. Namely, that consumption increases a persons short-term welfare, but investment increases long-term welfare. If a country spends less money on cars now and puts that money into car factories, in the future it can produce more cars.
People are the same. We can look at our choices in the short-term, as a type of consumption. We think we can "consume" our current peace of mind for economic gain, because we can just get more later. But it doesn't work like that.
Our emotional state is very much a case of long-term investment. Who we become is a result of where we have "invested" our choices. When we chose the moral choice in the example above, the result may not be big now, but we are increasing our moral capital. If we save just $20 a week, it might not seem like much, but it can accumulate to a lot over time. Individual moral actions may not seem to create a big result, but over time we can accumulate a great emotional stability, peace of mind and a sense of joy with life.
Sometimes it is not so easy, sometimes we need to make an immoral choice to survive, but whether we normally reach for point B, or C, or D throughout our life will determine what our life becomes.
We can be materially rich and morally poor, we can be morally rich and materially poor, or we can be somewhere in between.
Where do you want to be?
