An Austrian Take on ESG

This paper analyzes the contemporary debate about ESG – Environment, Social, Governance – using economic insights from Austrian Economics; particularly, on entrepreneurship, agency, and information asymmetry. These insights are contrasted to similar concepts in “mainstream” economics suggesting that the Austrian insight goes beyond them, first by stressing effectiveness in addition to efficiency and institutions in addition to law-likeliness. When applied to ESG, the Austrian insight portraits ESG as a special case of the socialist, or economic calculation debate causing misalignments between inter- and intrafirm goals, exacerbates agency problems and suffers from serious flaws in its conceptualization as well as methodology. Relying on entrepreneurship, however, could make ESG work. This paper, thus, applies Austrian economics to contemporary debates claiming that its insights provide a unique perspective but at the same time updating its research program.

A critical note on the scientific conception of economics: claiming for a methodological pluralism

Opponents of mainstream economics have not yet called attention to the lack of in-depth examination of the general scientific conception of modern economics. However, economic science cannot consistently fulfil the epistemological and ontological requirements of the scientific standards underlying this conception. What can be scientifically recognized as true cannot be answered, neither through the actual ontological structure of the object of observation nor through a methodological demarcation. These limitations necessarily lead to the claim for both a pragmatic and a radical methodological pluralism.

Academic discipline of economics as hedonist philosophy

Contemporary mainstream economics cannot be seen as disconnected from philosophical concerns. On the contrary, it should be understood as a defence for a specific philosophy, namely, crude quantitative hedonism where money would measure pleasure and pain. Disguised among a great mathematical apparatus involving utility functions, supply, and demand, lies a specific hedonist philosophy that every year is lectured to thousands of economic and business students around the world. This hedonist philosophy is much less sophisticated than that in ancient hedonist philosophers as Epicurus or Lucretius. Furthermore, it does not solve any of the systematic difficulties regularly faced by hedonist philosophy. However, the argument that economics is detached from philosophy works as a rhetorical artifice to protect its dominant underlying philosophy: Philosophical disputes would have to be addressed within the biased mathematical apparatus of quantitative hedonism. Economists and business students must learn to identify the underlying philosophy in mainstream economics and alternative philosophical systems.

The Dynamics of Labour Informality in Brazil, 2003-2019

This article examines the evolution of labour informality in Brazil between 2003 and 2019, a period marked by strong political, economic and social inflections. In the first section, we offer a brief reflection on the terms of the historical debate on informality and its relation to the transformations of the Brazilian economy. In section two we describe the remarkable process of labour formalisation that took place in the country between 2003 and 2014, pointing out its exceptionality and principal determinants. In section three, we note the reversal of this formalisation trend. With the recession of 2015–2016, informal and precarious work increased sharply, exacerbated by newly flexible labour laws and the emergence of new precarious labour relations. We conclude that the Brazilian experience in this new century shows that the formalisation of labour relations is strongly related to more general conditions of economic development and the solidity of public institutions. Furthermore, and in contrast to the views held in mainstream economics, initiatives to simplify and ease the regulatory framework appear to coexist with increasing levels of precariousness and informal work. KEYWORDS: labour informality; Brazilian labour market; public policy; labour regulation; gig economy

Integration of Knowledge (IoK) Methodological Reasoning of Islamic Economics (IE) as the Wisdom of Humanity: A Heterodox Economic Approach

The world increasingly needs an alternative approach to economic development. This paper endorses the Integration of Knowledge (IoK) approach as the wisdom of humanity through Islamic Economics (IE). A review of relevant literature through qualitative methodologies of library research, discourse and critical content analysis highlights the civilisational practices of integration, how development of economics diverged from such practices and how heterodox approaches reacted to such divergence. A section on learning the wisdom of humanity from each other emphasizes the inevitable historical civilizational integration (IoK) and exchange of knowledge. It follows with a literature review of the development of mainstream economics, how it abandoned such historical civilizational practice and its sound foundations, namely ontology, epistemology, axiology and methodology. A highlight of heterodox economics (HE) responses reveals the alternatives to the mainstream-focused positivistic approach to economics. The inadequacy of those alternatives led us to demonstrate Muslim responses and the centrality of IE as a comprehensive alternative heterodox economic approach. The analysis shows how IE grew along Islamisation of Knowledge (IOK) as two parallel and major intellectual iṣlaḥ (reform) and tajdīd (renewal) movements. A brief review of the development of each shows the potential of IE’s IoK methodological reasoning to revive the IoK approach in economics as the wisdom of humanity. The sound IE philosophical foundations, namely ontology, epistemology, axiology and methodology, have a major impact in that process. Thus, utilising the core IoK objective within IOK together with IE contributions shape the process of overcoming problems and issues of mainstream economics. Actionable recommendations to practitioners and academics depict how the IE approach to economics could be implemented and sustained along SDGs agenda.

Global Income Inequality, Trickle-Down Economics, and Charity in Islamic Economics

Islam promotes charity both at an individual as well as at the community/society level. Charity has been almost a moral issue rather than an economic one though it affects the society in terms of economics. Mainstream economics has ignored the application of charity model and how it can result in reducing economic disparities. Unfortunately, charity has been ignored by researchers in the context of it being an economic entity. In 2015, International Monetary Fund (IMF) and Organization for Economic Cooperation and Development (OECD) pinpointed the persisting issue of global income inequality and gave thumbs down to the populist approach of “trickle-down economics.” This study aims to theoretically examine how the concept of charity addresses the issue of global income inequality and denies trickle-down economics. The evidence suggest that countries can minimize income inequality by mobilizing the concept of charity. The concept of charity can result in a huge amount of transfers from the upper 10% to the lower 10% of the income bracket.

Recent Developments in Complexity in Economics

This research review identifies fundamental essays on the theory of complexity and its application in economics. The concept of complexity is linked to that of non-linearity, or rather of heterogeneity and interaction between agents. If a system is non-linear it cannot be broken down. When there is interaction, the total is not the sum of single causes, but rather the emergence of new facts. New properties appear that are not already present in the single elements. If the economic system is complex, mainstream economics is in a cul-de-sac where the macroeconomics is different from the microeconomics. The uncertain future and the agent-based models are the main tools for applying the theory of complexity.

Technical or political? The socialist economic calculation debate

The paper presents both the key arguments and the historical context of the socialist economic calculation debate. I argue that Oskar Lange presented the most developed strategy to deal with bourgeois economics, decisively helping to create the scientific consensus that rational economic calculation under socialism is possible. Lange’s arguments based on standard economic theory reveal that the most ardent defenders of capitalism cannot reject socialism on technical terms and that, as a consequence, the Austrian School was left with no choice but to diverge from mainstream economics in its search to develop a framework that could support its political position. This shows that Mises’ challenge from 1920 was solved and has been replaced by a political posture developed by Hayek and leading Austrians economists, who have been struggling since the 1980s to revise the standard interpretation of the socialist economic calculation debate. I argue that this revision should not be uncritically accepted and conclude that socialism cannot be scientifically rejected; it can only be politically rejected, by those whose economic interests it opposes.