Has The Economic Problem Become a Psychological Problem?

…the economic problem is not-if we look into the future the permanent problem of the human race.
Why, you may ask, is this so startling? It is startling because - if, instead of looking into the future, we look into the past - we find that the economic problem, the struggle for subsistence, always has been hitherto the primary, most pressing problem of the human race
JM Keynes from Economic Possibilities for our Grandchildren

Open any basic economic textbook and one of the first things you will see is a definition of the economic problem. It goes something like this; human needs and wants are always much greater than our ability to satisfy them. Put another way – resources are limited but human wants are never ending, therefore we have to make decisions about what is the most intelligent way to use our resources to create the greatest good for the greatest number. All economic systems and theories are born out of attempts to solve this problem.

An important question arises when looking at this problem of wants and needs. Because obviously the wants of a poor African villager are very different to those of an affluent Westerner. As basic needs such as food and shelter are satisfied, needs and desires still arise, but they become less and less essential. This is the critical distinction between the concept of needs versus that of wants. Many economic theories try to deal with this difference. For example, we tax more trivial wants such as luxury cars and then use those taxes to support more essential needs such as health care and education. But is it economically or psychologically wise to try to satisfy wants that are more and more trivial?

Many economists when they talk about the economic problem state that human wants are insatiable and then quickly pass on to the problem of how to satisfy these wants, rather than questioning – will satisfying insatiable desires really make us happy or is it even possible to satisfy them and what are the social and environmental consequences of trying to do so.

We have developed a technology that gives us the ability to provide for the comfortable living needs of everybody on the planet. We know how to do this with a minimum of drudgery. The prevailing idea that it is desirable to go on trying to satisfy trivial needs past this point only strengthens the bonds of our insecurities and feeds our addictions.

So is there a point where enough needs have been satisfied and we can say the economic problem has been solved – now we can really start living? I believe in most western countries we have gone well past that point. So much so that we now even have industries whose job it is to convince us that we have needs that we otherwise would probably not have had. As well as this there is the sense of meaninglessness that many in the affluent west feel in spite of their material riches.

We are living at the remarkable time when, if we chose, we could declare the economic problem solved. One of the biggest impediments to being aware of this great possibility, let alone doing anything about it, is that we continue to look at the situation through outdated, psychologically simplistic economic theory.