Justice

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Justice

Justitia by Maarten van Heemskerk, 1556. Justitia carries symbolic items such as: a sword, scales and a blindfold

 

Justice, one of the four cardinal virtues, by Vitruvio Alberi, 1589–1590. Fresco, corner of the vault, studiolo of the Madonna of Mercy, Palazzo Altemps, Rome

Justice, in its broadest context, includes both the attainment of that which is just and the philosophical discussion of that which is just. The concept of justice is based on numerous fields, and many differing viewpoints and perspectives including the concepts of moral correctness based on ethics, rationality, law, religion, equity and fairness. Often, the general discussion of justice is divided into the realm of social justice as found in philosophy, theology and religion, and, procedural justice as found in the study and application of the law. 

The concept of justice differs in every culture. Early theories of justice were set out by the Ancient Greek philosophers Plato in his work The Republic, and Aristotle in his Nicomachean Ethics. Throughout history various theories have been established. Advocates of divine command theory argue that justice issues from God. In the 1600s, theorists like John Locke argued for the theory of natural law. Thinkers in the social contract tradition argued that justice is derived from the mutual agreement of everyone concerned. In the 1800s, utilitarian thinkers including John Stuart Mill argued that justice is based on the best outcomes for the greatest number of people. Theories of distributive justice concern what is to be distributed, between whom they are to be distributed, and what is the proper distribution. Egalitarians argued that justice can only exist within the coordinates of equality. John Rawls used a social contract argument to show that justice, and especially distributive justice, is a form of fairness. Property rights theorists (like Robert Nozick) also take a consequentialist view of distributive justice and argue that property rights-based justice maximizes the overall wealth of an economic system. Theories of retributive justice are concerned with punishment for wrongdoing. Restorative justice (also sometimes called "reparative justice") is an approach to justice that focuses on the needs of victims and offenders.

Harmony

Justice by Luca Giordano

In his dialogue Republic, Plato uses Socrates to argue for justice that covers both the just person and the just City State. Justice is a proper, harmonious relationship between the warring parts of the person or city. Hence, Plato's definition of justice is that justice is the having and doing of what is one's own. A just man is a man in just the right place, doing his best and giving the precise equivalent of what he has received. This applies both at the individual level and at the universal level. A person's soul has three parts – reason, spirit and desire. Similarly, a city has three parts – Socrates uses the parable of the chariot to illustrate his point: a chariot works as a whole because the two horses' power is directed by the charioteer. Lovers of wisdom – philosophers, in one sense of the term – should rule because only they understand what is good. If one is ill, one goes to a medic rather than a farmer, because the medic is expert in the subject of health. Similarly, one should trust one's city to an expert in the subject of the good, not to a mere politician who tries to gain power by giving people what they want, rather than what's good for them. Socrates uses the parable of the ship to illustrate this point: the unjust city is like a ship in open ocean, crewed by a powerful but drunken captain (the common people), a group of untrustworthy advisors who try to manipulate the captain into giving them power over the ship's course (the politicians), and a navigator (the philosopher) who is the only one who knows how to get the ship to port. For Socrates, the only way the ship will reach its destination – the good – is if the navigator takes charge.

Divine command

Allegorical fresco cycle (cardinal virtues) by Renaissance painter Domenico di Pace Beccafumi from the Palazzo Pubblico in Siena, scene: ’'Justitia'’

Advocates of divine command theory argue that justice, and indeed the whole of morality, is the authoritative command of God. Murder is wrong and must be punished, for instance, because God says it so. Some versions of the theory assert that God must be obeyed because of the nature of his relationship with humanity, others assert that God must be obeyed because he is goodness itself, and thus doing what he says would be best for everyone.

A meditation on the Divine command theory by Plato can be found in his dialogue, Euthyphro. Called the Euthyphro dilemma, it goes as follows: "Is what is morally good commanded by God because it is morally good, or is it morally good because it is commanded by God?" The implication is that if the latter is true, then justice is beyond mortal understanding; if the former is true, then morality exists independently from God, and is therefore subject to the judgment of mortals. A response, popularized in two contexts by Immanuel Kant and C. S. Lewis, is that it is deductively valid to argue that the existence of an objective morality implies the existence of God and vice versa.

Natural law

Lex, justitia, pax (Latin for "Law, justice, peace") on the pediment of the Supreme Court of Switzerland

For advocates of the theory that justice is part of natural law (e.g., John Locke), it involves the system of consequences that naturally derives from any action or choice. In this, it is similar to the laws of physics: in the same way as the Third of Newton's laws of Motion requires that for every action there must be an equal and opposite reaction, justice requires according individuals or groups what they actually deserve, merit, or are entitled to. Justice, on this account, is a universal and absolute concept: laws, principles, religions, etc., are merely attempts to codify that concept, sometimes with results that entirely contradict the true nature of justice.

Despotism and skepticism

In Republic by Plato, the character Thrasymachus argues that justice is the interest of the strong – merely a name for what the powerful or cunning ruler has imposed on the people.

Mutual agreement

Advocates of the social contract agree that justice is derived from the mutual agreement of everyone concerned; or, in many versions, from what they would agree to under hypothetical conditions including equality and absence of bias. This account is considered further below, under 'Justice as fairness'. The absence of bias refers to an equal ground for all people concerned in a disagreement (or trial in some cases).

Subordinate value

According to utilitarian thinkers including John Stuart Mill, justice is not as fundamental as we often think. Rather, it is derived from the more basic standard of rightness, consequentialism: what is right is what has the best consequences (usually measured by the total or average welfare caused). So, the proper principles of justice are those that tend to have the best consequences. These rules may turn out to be familiar ones such as keeping contracts; but equally, they may not, depending on the facts about real consequences. Either way, what is important is those consequences, and justice is important, if at all, only as derived from that fundamental standard. Mill tries to explain our mistaken belief that justice is overwhelmingly important by arguing that it derives from two natural human tendencies: our desire to retaliate against those who hurt us, or the feeling of self-defense and our ability to put ourselves imaginatively in another's place, sympathy. So, when we see someone harmed, we project ourselves into their situation and feel a desire to retaliate on their behalf. If this process is the source of our feelings about justice, that ought to undermine our confidence in them.

Theories of distributive justice

Theories of distributive justice need to answer three questions:

1. What goods are to be distributed? Is it to be wealth, power, respect, opportunities or some combination of these things?
2. Between what entities are they to be distributed? Humans (dead, living, future), sentient beings, the members of a single society, nations?
3. What is the proper distribution? Equal, meritocratic, according to social status, according to need, based on property rights and non-aggression?

Distributive justice theorists generally do not answer questions of who has the right to enforce a particular favored distribution. On the other hand, property rights theorists argue that there is no "favored distribution." Rather, distribution should be based simply on whatever distribution results from lawful interactions or transactions (that is, transactions which are not illicit).

This section describes some widely held theories of distributive justice, and their attempts to answer these questions.

Social justice

Social justice is concerned with the just relationship between individuals and their society, often considering how privileges, opportunities, and wealth ought to be distributed among individuals. Social justice is also associated with social mobility, especially the ease with which individuals and families may move between social strata. Social justice is distinct from cosmopolitanism, which is the idea that all people belong to a single global community with a shared morality. Social justice is also distinct from egalitarianism, which is the idea that all people are equal in terms of status, value, or rights, as social justice theories do not all require equality. For example, sociologist George C. Homans suggested that the root of the concept of justice is that each person should receive rewards that are proportional to their contributions. Economist Friedrich Hayek argued that the concept of social justice was meaningless, saying that justice is a result of individual behavior and unpredictable market forces. Social justice is closely related to the concept of relational justice, which is concerned with the just relationship with individuals who possess features in common such as nationality, or who are engaged in cooperation or negotiation.

Fairness

J. L. Urban, statue of Lady Justice at court building in Olomouc, Czech Republic

In his A Theory of Justice, John Rawls used a social contract argument to show that justice, and especially distributive justice, is a form of fairness: an impartial distribution of goods. Rawls asks us to imagine ourselves behind a veil of ignorance that denies us all knowledge of our personalities, social statuses, moral characters, wealth, talents and life plans, and then asks what theory of justice we would choose to govern our society when the veil is lifted, if we wanted to do the best that we could for ourselves. We don't know who in particular we are, and therefore can't bias the decision in our own favour. So, the decision-in-ignorance models fairness, because it excludes selfish bias. Rawls argues that each of us would reject the utilitarian theory of justice that we should maximize welfare (see below) because of the risk that we might turn out to be someone whose own good is sacrificed for greater benefits for others. Instead, we would endorse Rawls's two principles of justice:

• Each person is to have an equal right to the most extensive total system of equal basic liberties compatible with a similar system of liberty for all.
• Social and economic inequalities are to be arranged so that they are both
  • to the greatest benefit of the least advantaged, consistent with the just savings principle, and
  • attached to offices and positions open to all under conditions of fair equality of opportunity.

This imagined choice justifies these principles as the principles of justice for us, because we would agree to them in a fair decision procedure. Rawls's theory distinguishes two kinds of goods – (1) the good of liberty rights and (2) social and economic goods, i.e. wealth, income and power – and applies different distributions to them – equality between citizens for (1), equality unless inequality improves the position of the worst off for (2). 

In one sense, theories of distributive justice may assert that everyone should get what they deserve. Theories disagree on the meaning of what is "deserved". The main distinction is between theories that argue the basis of just deserts ought to be held equally by everyone, and therefore derive egalitarian accounts of distributive justice – and theories that argue the basis of just deserts is unequally distributed on the basis of, for instance, hard work, and therefore derive accounts of distributive justice by which some should have more than others.

According to meritocratic theories, goods, especially wealth and social status, should be distributed to match individual merit, which is usually understood as some combination of talent and hard work. According to needs-based theories, goods, especially such basic goods as food, shelter and medical care, should be distributed to meet individuals' basic needs for them. Marxism is a needs-based theory, expressed succinctly in Marx's slogan "from each according to his ability, to each according to his need". According to contribution-based theories, goods should be distributed to match an individual's contribution to the overall social good.

Property rights

In Anarchy, State, and Utopia, Robert Nozick argues that distributive justice is not a matter of the whole distribution matching an ideal pattern, but of each individual entitlement having the right kind of history. It is just that a person has some good (especially, some property right) if and only if they came to have it by a history made up entirely of events of two kinds:

• Just acquisition, especially by working on unowned things; and
• Just transfer, that is free gift, sale or other agreement, but not theft (i.e. by force or fraud).

If the chain of events leading up to the person having something meets this criterion, they are entitled to it: that they possess it is just, and what anyone else does or doesn't have or need is irrelevant.

On the basis of this theory of distributive justice, Nozick argues that all attempts to redistribute goods according to an ideal pattern, without the consent of their owners, are theft. In particular, redistributive taxation is theft.

Some property rights theorists (like Nozick) also take a consequentialist view of distributive justice and argue that property rights based justice also has the effect of maximizing the overall wealth of an economic system. They explain that voluntary (non-coerced) transactions always have a property called Pareto efficiency. The result is that the world is better off in an absolute sense and no one is worse off. Such consequentialist property rights theorists argue that respecting property rights maximizes the number of Pareto efficient transactions in the world and minimized the number of non-Pareto efficient transactions in the world (i.e. transactions where someone is made worse off). The result is that the world will have generated the greatest total benefit from the limited, scarce resources available in the world. Further, this will have been accomplished without taking anything away from anyone unlawfully.

Welfare-maximization

According to the utilitarian, justice requires the maximization of the total or average welfare across all relevant individuals. This may require sacrifice of some for the good of others, so long as everyone's good is taken impartially into account. Utilitarianism, in general, argues that the standard of justification for actions, institutions, or the whole world, is impartial welfare consequentialism, and only indirectly, if at all, to do with rights, property, need, or any other non-utilitarian criterion. These other criteria might be indirectly important, to the extent that human welfare involves them. But even then, such demands as human rights would only be elements in the calculation of overall welfare, not uncrossable barriers to action.

Theories of retributive justice

Walter Seymour Allward's Justitia (Justice), outside Supreme Court of Canada, Ottawa, Ontario Canada

 

Theories of retributive justice are concerned with punishment for wrongdoing, and need to answer three questions:

1. why punish?
2. who should be punished?
3. what punishment should they receive?

This section considers the two major accounts of retributive justice, and their answers to these questions. Utilitarian theories look forward to the future consequences of punishment, while retributive theories look back to particular acts of wrongdoing, and attempt to balance them with deserved punishment.

Utilitarianism

According to the utilitarian, justice requires the maximization of the total or average welfare across all relevant individuals. Punishment fights crime in three ways:

1. Deterrence. The credible threat of punishment might lead people to make different choices; well-designed threats might lead people to make choices that maximize welfare. This matches some strong intuitions about just punishment: that it should generally be proportional to the crime.
2. Rehabilitation. Punishment might make bad people into better ones. For the utilitarian, all that 'bad person' can mean is 'person who's likely to cause bad things (like suffering)'. So, utilitarianism could recommend punishment that changes someone such that they are less likely to cause bad things.
3. Security/Incapacitation. Perhaps there are people who are irredeemable causers of bad things. If so, imprisoning them might maximize welfare by limiting their opportunities to cause harm and therefore the benefit lies within protecting society.

So, the reason for punishment is the maximization of welfare, and punishment should be of whomever, and of whatever form and severity, are needed to meet that goal. This may sometimes justify punishing the innocent, or inflicting disproportionately severe punishments, when that will have the best consequences overall (perhaps executing a few suspected shoplifters live on television would be an effective deterrent to shoplifting, for instance). It also suggests that punishment might turn out never to be right, depending on the facts about what actual consequences it has.

Retributivism

The retributivist will think consequentialism is mistaken. If someone does something wrong we must respond by punishing for the committed action itself, regardless of what outcomes punishment produces. Wrongdoing must be balanced or made good in some way, and so the criminal deserves to be punished. It says that all guilty people, and only guilty people, deserve appropriate punishment. This matches some strong intuitions about just punishment: that it should be proportional to the crime, and that it should be of only and all of the guilty. However, it is sometimes argued that retributivism is merely revenge in disguise. However, there are differences between retribution and revenge: the former is impartial and has a scale of appropriateness, whereas the latter is personal and potentially unlimited in scale.

Restorative justice

Restorative justice (also sometimes called "reparative justice") is an approach to justice that focuses on the needs of victims and offenders, instead of satisfying abstract legal principles or punishing the offender. Victims take an active role in the process, while offenders are encouraged to take responsibility for their actions, "to repair the harm they've done – by apologizing, returning stolen money, or community service". It is based on a theory of justice that considers crime and wrongdoing to be an offense against an individual or community rather than the state. Restorative justice that fosters dialogue between victim and offender shows the highest rates of victim satisfaction and offender accountability.

Mixed theories

Some modern philosophers have argued that Utilitarian and Retributive theories are not mutually exclusive. For example, Andrew von Hirsch, in his 1976 book Doing Justice, suggested that we have a moral obligation to punish greater crimes more than lesser ones. However, so long as we adhere to that constraint then utilitarian ideals would play a significant secondary role.

Theories

Bonino da Campione, Justice, c. 1357, National Gallery of Art

Rawls' theory of justice

It has been argued that 'systematic' or 'programmatic' political and moral philosophy in the West begins, in Plato's Republic, with the question, 'What is Justice?' According to most contemporary theories of justice, justice is overwhelmingly important: John Rawls claims that "Justice is the first virtue of social institutions, as truth is of systems of thought." In classical approaches, evident from Plato through to Rawls, the concept of 'justice' is always construed in logical or 'etymological' opposition to the concept of injustice. Such approaches cite various examples of injustice, as problems which a theory of justice must overcome. A number of post-World War II approaches do, however, challenge that seemingly obvious dualism between those two concepts. Justice can be thought of as distinct from benevolence, charity, prudence, mercy, generosity, or compassion, although these dimensions are regularly understood to also be interlinked. Justice is the concept of cardinal virtues, of which it is one. Metaphysical justice has often been associated with concepts of fate, reincarnation or Divine Providence, i.e., with a life in accordance with a cosmic plan. The association of justice with fairness is thus historically and culturally inalienable.

Equality before the law

Law raises important and complex issues concerning equality, fairness, and justice. There is an old saying that 'All are equal before the law'. The belief in equality before the law is called legal egalitarianism. In criticism of this belief, the author Anatole France said in 1894, "In its majestic equality, the law forbids rich and poor alike to sleep under bridges, beg in the streets, and steal loaves of bread." With this saying, France illustrated the fundamental shortcoming of a theory of legal equality that remains blind to social inequality; the same law applied to all may have disproportionately harmful effects on the least powerful.

Classical liberalism

Equality before the law is one of the basic principles of classical liberalism. Classical liberalism calls for equality before the law, not for equality of outcome. Classical liberalism opposes pursuing group rights at the expense of individual rights.

Religion and spirituality

Abrahamic justice

Moses with the Tablets of Law, by Rembrandt van Rijn

Jews, Muslims and Christians traditionally believe that justice is a present, real, right, and, specifically, governing concept along with mercy, and that justice is ultimately derived from and held by God. According to the Bible, such institutions as the Mosaic Law were created by God to require the Israelites to live by and apply His standards of justice.

The Hebrew Bible describes God as saying about the Judeo-Christian patriarch Abraham: "No, for I have chosen him, that he may charge his children and his household after him to keep the way of the Lord by doing righteousness and justice;...." (Genesis 18:19, NRSV). The Psalmist describes God as having "Righteousness and justice [as] the foundation of [His] throne;...." (Psalms 89:14, NRSV).

The New Testament also describes God and Jesus Christ as having and displaying justice, often in comparison with God displaying and supporting mercy (Matthew 5:7).

Theories of sentencing

In criminal law, a sentence forms the final explicit act of a judge-ruled process, and also the symbolic principal act connected to his function. The sentence can generally involve a decree of imprisonment, a fine and/or other punishments against a defendant convicted of a crime. Laws may specify the range of penalties that can be imposed for various offenses, and sentencing guidelines sometimes regulate what punishment within those ranges can be imposed given a certain set of offense and offender characteristics. The most common purposes of sentencing in legal theory are:

Theory	Aim of theory	Suitable punishment
Retribution	Punishment imposed for no reason other than an offense being committed, on the basis that if proportionate, punishment is morally acceptable as a response that satisfies the aggrieved party, their intimates and society.	Tariff sentences Sentence must be proportionate to the crime
Deterrence	To the individual – the individual is deterred through fear of further punishment. To the general public – Potential offenders warned as to likely punishment	Prison Sentence Heavy Fine Long sentence as an example to others
Rehabilitation	To reform the offender's behavior	Individualized sentences Community service orders moral education vocational education
Incapacitation	Offender is made incapable of committing further crime to protect society at large from crime	Long prison sentence Electronic tagging Banning orders
Reparation	Repayment to victim(s) or to community	Compensation Unpaid work Reparation Schemes
Denunciation	Society expressing its disapproval reinforcing moral boundaries	Reflects blameworthiness of offense punishment in public punishment reported to public

In civil cases the decision is usually known as a verdict, or judgment, rather than a sentence. Civil cases are settled primarily by means of monetary compensation for harm done ("damages") and orders intended to prevent future harm (for example injunctions). Under some legal systems an award of damages involves some scope for retribution, denunciation and deterrence, by means of additional categories of damages beyond simple compensation, covering a punitive effect, social disapprobation, and potentially, deterrence, and occasionally disgorgement (forfeit of any gain, even if no loss was caused to the other party).

Evolutionary perspectives

"Justice as a naked woman with a sword and balance" by Lucas Cranach the Elder, 1537

 

Evolutionary ethics and an argued evolution of morality suggest evolutionary bases for the concept of justice. Biosocial criminology research argues that human perceptions of what is appropriate criminal justice are based on how to respond to crimes in the ancestral small-group environment and that these responses may not always be appropriate for today's societies.

Reactions to fairness

‘'Justitia'’, copper engraving by Jost Amman, made between 1539 and 1591

 

Studies at UCLA in 2008 have indicated that reactions to fairness are "wired" into the brain and that, "Fairness is activating the same part of the brain that responds to food in rats... This is consistent with the notion that being treated fairly satisfies a basic need". Research conducted in 2003 at Emory University involving capuchin monkeys demonstrated that other cooperative animals also possess such a sense and that "inequity aversion may not be uniquely human".

Institutions and justice

Painted Coat of Arms of Pope Paul V, ceiling of the room of the geographical maps, Vatican City

 

Stained glass of the Saint-Paul church in Montluçon France

 

Allegory of Justice. Ceiling of galleria del Poccetti in the Palazzo Pitti (Florence)

 

In a world where people are interconnected but they disagree, institutions are required to instantiate ideals of justice. These institutions may be justified by their approximate instantiation of justice, or they may be deeply unjust when compared with ideal standards – consider the institution of slavery. Justice is an ideal the world fails to live up to, sometimes due to deliberate opposition to justice despite understanding, which could be disastrous. The question of institutive justice raises issues of legitimacy, procedure, codification and interpretation, which are considered by legal theorists and by philosophers of law.

Cultural economics

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Cultural_economics

Cultural economics is the branch of economics that studies the relation of culture to economic outcomes. Here, 'culture' is defined by shared beliefs and preferences of respective groups. Programmatic issues include whether and how much culture matters as to economic outcomes and what its relation is to institutions. As a growing field in behavioral economics, the role of culture in economic behavior is increasingly being demonstrate to cause significant differentials in decision-making and the management and valuation of assets.

Applications include the study of religion, social norms, social identity, fertility, beliefs in redistributive justice, ideology, hatred, terrorism, trust, family ties, long-term orientation, and the culture of economics. A general analytical theme is how ideas and behaviors are spread among individuals through the formation of social capital, social networks and processes such as social learning, as in the theory of social evolution and information cascades. Methods include case studies and theoretical and empirical modeling of cultural transmission within and across social groups. In 2013 Said E. Dawlabani added the value systems approach to the cultural emergence aspect of macroeconomics.

Development

Cultural economics develops from how wants and tastes are formed in society. This is partly due to nurture aspects, or what type of environment one is raised in, as it is the internalization of one's upbringing that shapes their future wants and tastes. Acquired tastes can be thought of as an example of this, as they demonstrate how preferences can be shaped socially.

A key thought area that separates the development of cultural economics from traditional economics is a difference in how individuals arrive at their decisions. While a traditional economist will view decision making as having both implicit and explicit consequences, a cultural economist would argue that an individual will not only arrive at their decision based on these implicit and explicit decisions but based on trajectories. These trajectories consist of regularities, which have been built up throughout the years and guide individuals in their decision-making process.

Combining value systems and systems thinking

Economists have also started to look at cultural economics with a systems thinking approach. In this approach, the economy and culture are each viewed as a single system where "interaction and feedback effects were acknowledged, and where in particular the dynamic were made explicit". In this sense, the interdependencies of culture and the economy can be combined and better understood by following this approach.

Said E. Dawlabani's book MEMEnomics: The Next-Generation Economic System combines the ideas of value systems (see value (ethics)) and systems thinking to provide one of the first frameworks that explores the effect of economic policies on culture. The book explores the intersections of multiple disciplines such as cultural development, organizational behavior, and memetics all in an attempt to explore the roots of cultural economics.

Growth

The advancing pace of new technology is transforming how the public consumes and shares culture. The cultural economic field has seen great growth with the advent of online social networking which has created productivity improvements in how culture is consumed. New technologies have also lead to cultural convergence where all kinds of culture can be accessed on a single device. Throughout their upbringing, younger persons of the current generation are consuming culture faster than their parents ever did, and through new mediums. The smartphone is a blossoming example of this where books, music, talk, artwork and more can all be accessed on a single device in a matter of seconds. This medium and the culture surrounding it is beginning to have an effect on the economy, whether it be increasing communication while lowering costs, lowering the barriers of entry to the technology economy, or making use of excess capacity.

An example of culture being consumed via smartphone.

This field has also seen growth through the advent of new economic studies that have put on a cultural lens. For example, a recent study on Europeans living with their families into adulthood was conducted by Paola Sapienza, a professor at Northwestern University. The study found that those of Southern European descent tend to live at home with their families longer than those of Northern European descent. Sapienza added cultural critique to her analysis of the research, revealing that it is Southern European culture to stay at home longer and then related this to how those who live at home longer have fewer children and start families later, thus contributing to Europe's falling birthrates. Sapienza's work is an example of how the growth of cultural economics is beginning to spread across the field.

Sustainable development

An area that cultural economics has a strong presence in is sustainable development. Sustainable development has been defined as "...development that meets the needs of the present without compromising the ability of future generations to meet their own needs...". Culture plays an important role in this as it can determine how people view preparing for these future generations. Delayed gratification is a cultural economic issue that developed countries are currently dealing with. Economists argue that to ensure that the future is better than today, certain measures must be taken such as collecting taxes or "going green" to protect the environment. Policies such as these are hard for today's politicians to promote who want to win the vote of today's voters who are concerned with the present and not the future. People want to see the benefits now, not in the future.

Economist David Throsby has proposed the idea of culturally sustainable development which compasses both the cultural industries (such as the arts) and culture (in the societal sense). He has created a set of criteria in regards to for which policy prescriptions can be compared to in order to ensure growth for future generations. The criteria are as follows:

1. Advancement of material and non-material well-being: implies balance amongst economic, social, and cultural forces
2. Intergenerational equity and the maintenance of cultural capital: current generation must recognize their responsibility to future generations
3. Equity within the present generation: distribution of cultural resources must be fair
4. Recognition of interdependence: policy must understand the connections between economic, cultural and other variables within an overall system.

With these guidelines, Throsby hopes to spur the recognition between culture and economics, which is something he believes has been lacking from popular economic discussions.

Cultural finance

Cultural finance a growing field in behavioral economics that studies the impact of cultural differences on individual financial decisions and on financial markets. Probably the first paper in this area was "The Role of Social Capital in Financial Development" by Luigi Guiso, Paola Sapienza, and Luigi Zingales. The paper studied how well-known differences in social capital affected the use and availability of financial contracts across different parts of Italy. In areas of the country with high levels of social capital, households invest less in cash and more in stock, use more checks, have higher access to institutional credit, and make less use of informal credit. Few years later, the same authors published another paper "Trusting the Stock Market" where they show that a general lack of trust can limit stock market participation. Since trust has a strong cultural component, these two papers represent important contribution in cultural economics. 

In 2007, Thorsten Hens and Mei Wang pointed out that indeed many areas of finance are influenced by cultural differences. The role of culture in financial behavior is also increasingly being demonstrated to have highly significant effects on the management and valuation of assets. Using the dimensions of culture identified by Shalom Schwartz, it has been proved that corporate dividend payments are determined largely by the dimensions of Mastery and Conservatism. Specifically, higher degrees of conservatism are associated with greater volumes and values of dividend payments, and higher degrees of mastery are associated with the total opposite. The effect of culture on dividend payouts has been further shown to be closely related to cultural differences in risk and time preferences.

A different study assessed the role of culture on earnings management using Geert Hofstede's cultural dimensions and the index of earnings management developed by Christian Leutz; which includes the use of accrual alteration to reduce volatility in reported earnings, the use of accrual alteration to reduce volatility in reported operating cash flows, use of accounting discretion to mitigate the reporting of small losses, and the use of accounting discretion when reporting operating earnings. It was found that Hofstede's dimension of Individualism was negatively correlated with earnings management, and that uncertainty avoidance was positively correlated. Behavioral economist Michael Taillard demonstrated that investment behaviors are caused primarily by behavioral factors, largely attributed to the influence of culture on the psychological frame of the investors in different nations, rather than rational ones by comparing the cultural dimensions used both by Geert Hofstede and Robert House, identifying strong and specific influences in risk aversion behavior resulting from the overlapping cultural dimensions between them that remained constant over a 20-year period.

In regards to investing, it has been confirmed by multiple studies that greater differences between the cultures of various nations reduces the amount of investment between those countries. It was proven that both cultural differences between nations as well as the amount of unfamiliarity investors have with a culture not their own greatly reduces their willingness to invest in those nations, and that these factors have a negative impact with future returns, resulting in a cost premium on the degree of foreignness of an investment. Despite this, equity markets continue to integrate as indicated by equity price comovements, of which the two largest contributing factors are the ratio of trade between nations and the ratio of GDP resulting from foreign direct investment. Even these factors are the result of behavioral sources, however. The UN World Investment Report (2013) shows that regional integration is occurring at a more rapid rate than distant foreign relations, confirming an earlier study concluding that nations closer to each other tend to be more integrated. Since increased cultural distance reduces the amount of foreign direct investment, this results in an accelerating curvilinear correlation between financial behavior and cultural distance.

Culture also influences which factors are useful when predicting stock valuations. In Jordan, it was found that 84% of variability in stock returns were accounted for by using money supply, interest rate term structure, industry productivity growth, and risk premium; but were not influenced at all by inflation rates or dividend yield. In Nigeria, both real GDP and Consumer Price Index were both useful predictive factors, but foreign exchange rate was not. In Zimbabwe, only money supply and oil prices were found to be useful predictors of stock market valuations. India identified exchange rate, wholesale price index, gold prices, and market index as being useful factors. A comprehensive global study out of Romania attempted to identify if any factors of stock market valuation were culturally universal, identifying interest rates, inflation, and industrial production, but found that exchange rate, currency exchange volume, and trade were all unique to Romania.

Geographical origins of cultural traits

Geographical characteristics were linked recently to the emergence of cultural traits and differences in the intensity of these cultural traits across regions, countries and ethnic group. Geographical characteristics that were favorable for the usage of the plow in agriculture contributed to a gender gap in productivity, and to the emergence of gender roles in society. Agricultural characteristics that led to a higher return to agricultural investment generated a process of selection, adaptation, and learning, that increase the level of long-term orientation in society.

Capital accumulation

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https://en.wikipedia.org/wiki/Capital_accumulation

Capital accumulation (also termed the accumulation of capital) is the dynamic that motivates the pursuit of profit, involving the investment of money or any financial asset with the goal of increasing the initial monetary value of said asset as a financial return whether in the form of profit, rent, interest, royalties or capital gains. The aim of capital accumulation is to create new fixed and working capitals, broaden and modernize the existing ones, grow the material basis of social-cultural activities, as well as constituting the necessary resource for reserve and insurance. The process of capital accumulation forms the basis of capitalism, and is one of the defining characteristics of a capitalist economic system.

Definition

The definition of capital accumulation is subject to controversy and ambiguities, because it could refer to:

• a net addition to existing wealth
• a redistribution of wealth.

Most often, capital accumulation involves both a net addition and a redistribution of wealth, which may raise the question of who really benefits from it most. If more wealth is produced than there was before, a society becomes richer; the total stock of wealth increases. But if some accumulate capital only at the expense of others, wealth is merely shifted from A to B. It is also possible that some accumulate capital much faster than others. When one person is enriched at the expense of another in circumstances that the law sees as unjust it is called unjust enrichment. In principle, it is possible that a few people or organisations accumulate capital and grow richer, although the total stock of wealth of society decreases.

In economics and accounting, capital accumulation is often equated with investment of profit income or savings, especially in real capital goods. The concentration and centralisation of capital are two of the results of such accumulation (see below). 

Capital accumulation refers ordinarily to:

• real investment in tangible means of production, such as acquisitions, research and development, etc. that can increase the capital flow.
• investment in financial assets represented on paper, yielding profit, interest, rent, royalties, fees or capital gains.
• investment in non-productive physical assets such as residential real estate or works of art that appreciate in value.

and by extension to:

• human capital, i.e., new education and training increasing the skills of the (potential) labour force which can increase earnings from work.
• social capital, i.e. the wealth and productive capacity that the people in a society hold in common, rather than as individuals or corporations.
• etc.

Both non-financial and financial capital accumulation is usually needed for economic growth, since additional production usually requires additional funds to enlarge the scale of production. Smarter and more productive organization of production can also increase production without increased capital. Capital can be created without increased investment by inventions or improved organization that increase productivity, discoveries of new assets (oil, gold, minerals, etc.), the sale of property, etc.

In modern macroeconomics and econometrics the term capital formation is often used in preference to "accumulation", though the United Nations Conference on Trade and Development (UNCTAD) refers nowadays to "accumulation". The term is occasionally used in national accounts.

Measurement of accumulation

Accumulation can be measured as the monetary value of investments, the amount of income that is reinvested, or as the change in the value of assets owned (the increase in the value of the capital stock). Using company balance sheets, tax data and direct surveys as a basis, government statisticians estimate total investments and assets for the purpose of national accounts, national balance of payments and flow of funds statistics. Usually, the reserve banks and the Treasury provide interpretations and analysis of this data. Standard indicators include Capital formation, Gross fixed capital formation, fixed capital, household asset wealth, and foreign direct investment.

Organisations such as the International Monetary Fund, UNCTAD, the World Bank Group, the OECD, and the Bank for International Settlements used national investment data to estimate world trends. The Bureau of Economic Analysis, Eurostat and the Japan Statistical Office provide data on the US, Europe and Japan respectively.

Other useful sources of investment information are business magazines such as Fortune, Forbes, The Economist, Business Week, etc., and various corporate "watchdog" organisations and non-governmental organization publications. A reputable scientific journal is the Review of Income and Wealth. In the case of the US, the "Analytical Perspectives" document (an annex to the yearly budget) provides useful wealth and capital estimates applying to the whole country.

Demand-led growth models

In macroeconomics, following the Harrod–Domar model, the savings ratio (${\displaystyle s}$) and the capital coefficient (${\displaystyle k}$) are regarded as critical factors for accumulation and growth, assuming that all saving is used to finance fixed investment. The rate of growth of the real stock of fixed capital (${\displaystyle K}$) is:

${\displaystyle {{\Delta K} \over K}={{{\Delta K} \over Y} \over {K \over Y}}={s \over k}}$

where ${\displaystyle Y}$ is the real national income. If the capital-output ratio or capital coefficient (${\displaystyle k={K \over Y}}$) is constant, the rate of growth of ${\displaystyle Y}$ is equal to the rate of growth of ${\displaystyle K}$. This is determined by ${\displaystyle s}$ (the ratio of net fixed investment or saving to ${\displaystyle Y}$) and ${\displaystyle k}$. 

A country might, for example, save and invest 12% of its national income, and then if the capital coefficient is 4:1 (i.e. $4 billion must be invested to increase the national income by 1 billion) the rate of growth of the national income might be 3% annually. However, as Keynesian economics points out, savings do not automatically mean investment (as liquid funds may be hoarded for example). Investment may also not be investment in fixed capital (see above).

Assuming that the turnover of total production capital invested remains constant, the proportion of total investment which just maintains the stock of total capital, rather than enlarging it, will typically increase as the total stock increases. The growth rate of incomes and net new investments must then also increase, in order to accelerate the growth of the capital stock. Simply put, the bigger capital grows, the more capital it takes to keep it growing and the more markets must expand.

The Harrodian model has a problem of unstable static equilibrium, since if the growth rate is not equal to the Harrodian warranted rate, the production will tend to extreme points (infinite or zero production). The Neo-Kaleckians models do not suffer from the Harrodian instability but fails to deliver a convergence dynamic of the effective capacity utilization to the planned capacity utilization. For its turn, the model of the Sraffian Supermultiplier grants a static stable equilibrium and a convergence to the planned capacity utilization. The Sraffian Supermultiplier model diverges from the Harrodian model since it takes the investment as induced and not as autonomous. The autonomous components in this model are the Autonomous Non-Capacity Creating Expenditures, such as exports, credit lead consumption and public spending. The growth rate of these expenditures determines the long run rate of capital accumulation and product growth.

Marxist concept

In Karl Marx's economic theory, capital accumulation is the operation whereby profits are reinvested into the economy, increasing the total quantity of capital. Capital was understood by Marx to be expanding value, that is, in other terms, as a sum of capital, usually expressed in money, that is transformed through human labor into a larger value and extracted as profits. Here, capital is defined essentially as economic or commercial asset value that is used by capitalists to obtain additional value (surplus-value). This requires property relations which enable objects of value to be appropriated and owned, and trading rights to be established.

Over-accumulation and crisis

The Marxist analysis of capital accumulation and the development of capitalism identifies systemic issues with the process that arise with expansion of the productive forces. A crisis of overaccumulation of capital occurs when the rate of profit is greater than the rate of new profitable investment outlets in the economy, arising from increasing productivity from a rising organic composition of capital (higher capital input to labor input ratio). This depresses the wage bill, leading to stagnant wages and high rates of unemployment for the working class while excess profits search for new profitable investment opportunities. Marx believed that this cyclical process would be the fundamental cause for the dissolution of capitalism and its replacement by socialism, which would operate according to a different economic dynamic.

In Marxist thought, socialism would succeed capitalism as the dominant mode of production when the accumulation of capital can no longer sustain itself due to falling rates of profit in real production relative to increasing productivity. A socialist economy would not base production on the accumulation of capital, instead basing production on the criteria of satisfying human needs and directly producing use-values. This concept is encapsulated in the principle of production for use.

Concentration and centralization

According to Marx, capital has the tendency for concentration and centralization in the hands of richest capitalists. Marx explains:

"It is concentration of capitals already formed, destruction of their individual independence, expropriation of capitalist by capitalist, transformation of many small into few large capitals.... Capital grows in one place to a huge mass in a single hand, because it has in another place been lost by many.... The battle of competition is fought by cheapening of commodities. The cheapness of commodities demands, caeteris paribus, on the productiveness of labour, and this again on the scale of production. Therefore, the larger capitals beat the smaller. It will further be remembered that, with the development of the capitalist mode of production, there is an increase in the minimum amount of individual capital necessary to carry on a business under its normal conditions. The smaller capitals, therefore, crowd into spheres of production which Modern Industry has only sporadically or incompletely got hold of. Here competition rages.... It always ends in the ruin of many small capitalists, whose capitals partly pass into the hands of their conquerors, partly vanish."

Rate of accumulation

In Marxian economics, the rate of accumulation is defined as (1) the value of the real net increase in the stock of capital in an accounting period, (2) the proportion of realized surplus-value or profit-income which is reinvested, rather than consumed. This rate can be expressed by means of various ratios between the original capital outlay, the realized turnover, surplus-value or profit and reinvestment's (see, e.g., the writings of the economist Michał Kalecki).

Other things being equal, the greater the amount of profit-income that is disbursed as personal earnings and used for consumption purposes, the lower the savings rate and the lower the rate of accumulation is likely to be. However, earnings spent on consumption can also stimulate market demand and higher investment. This is the cause of endless controversies in economic theory about "how much to spend, and how much to save".

In a boom period of capitalism, the growth of investments is cumulative, i.e. one investment leads to another, leading to a constantly expanding market, an expanding labor force, and an increase in the standard of living for the majority of the people.

In a stagnating, decadent capitalism, the accumulation process is increasingly oriented towards investment on military and security forces, real estate, financial speculation, and luxury consumption. In that case, income from value-adding production will decline in favour of interest, rent and tax income, with as a corollary an increase in the level of permanent unemployment.

As a rule, the larger the total sum of capital invested, the higher the return on investment will be. The more capital one owns, the more capital one can also borrow and reinvest at a higher rate of profit or interest. The inverse is also true, and this is one factor in the widening gap between the rich and the poor.

Ernest Mandel emphasized that the rhythm of capital accumulation and growth depended critically on (1) the division of a society's social product between necessary product and surplus product, and (2) the division of the surplus product between investment and consumption. In turn, this allocation pattern reflected the outcome of competition among capitalists, competition between capitalists and workers, and competition between workers. The pattern of capital accumulation can therefore never be simply explained by commercial factors, it also involved social factors and power relationships.

Circuit of capital accumulation from production

Strictly speaking, capital has accumulated only when realized profit income has been reinvested in capital assets. But the process of capital accumulation in production has, as suggested in the first volume of Marx's Das Kapital, at least 7 distinct but linked moments:

• The initial investment of capital (which could be borrowed capital) in means of production and labor power.
• The command over surplus-labour and its appropriation.
• The valorisation (increase in value) of capital through production of new outputs.
• The appropriation of the new output produced by employees, containing the added value.
• The realisation of surplus-value through output sales.
• The appropriation of realised surplus-value as (profit) income after deduction of costs.
• The reinvestment of profit income in production.

All of these moments do not refer simply to an economic or commercial process. Rather, they assume the existence of legal, social, cultural and economic power conditions, without which creation, distribution and circulation of the new wealth could not occur. This becomes especially clear when the attempt is made to create a market where none exists, or where people refuse to trade.

In fact Marx argues that the original or primitive accumulation of capital often occurs through violence, plunder, slavery, robbery, extortion and theft. He argues that the capitalist mode of production requires that people be forced to work in value-adding production for someone else, and for this purpose, they must be cut off from sources of income other than selling their labor power.

Simple and expanded reproduction

In volume 2 of Das Kapital, Marx continues the story and shows that, with the aid of bank credit, capital in search of growth can more or less smoothly mutate from one form to another, alternately taking the form of money capital (liquid deposits, securities, etc.), commodity capital (tradeable products, real estate etc.), or production capital (means of production and labor power). 

His discussion of the simple and expanded reproduction of the conditions of production offers a more sophisticated model of the parameters of the accumulation process as a whole. At simple reproduction, a sufficient amount is produced to sustain society at the given living standard; the stock of capital stays constant. At expanded reproduction, more product-value is produced than is necessary to sustain society at a given living standard (a surplus product); the additional product-value is available for investments which enlarge the scale and variety of production.

The bourgeois claim there is no economic law according to which capital is necessarily re-invested in the expansion of production, that such depends on anticipated profitability, market expectations and perceptions of investment risk. Such statements only explain the subjective experiences of investors and ignore the objective realities which would influence such opinions. As Marx states in Vol.2, simple reproduction only exists if the variable and surplus capital realized by Dept. 1—producers of means of production—exactly equals that of the constant capital of Dept. 2, producers of articles of consumption (pg 524). Such equilibrium rests on various assumptions, such as a constant labor supply (no population growth). Accumulation does not imply a necessary change in total magnitude of value produced but can simply refer to a change in the composition of an industry (pg. 514).

Ernest Mandel introduced the additional concept of contracted economic reproduction, i.e. reduced accumulation where business operating at a loss outnumbers growing business, or economic reproduction on a decreasing scale, for example due to wars, natural disasters or devalorisation.

Balanced economic growth requires that different factors in the accumulation process expand in appropriate proportions. But markets themselves cannot spontaneously create that balance, in fact what drives business activity is precisely the imbalances between supply and demand: inequality is the motor of growth. This partly explains why the worldwide pattern of economic growth is very uneven and unequal, even although markets have existed almost everywhere for a very long time. Some people argue that it also explains government regulation of market trade and protectionism.

Origins

According to Marx, capital accumulation has a double origin, namely in trade and in expropriation, both of a legal or illegal kind. The reason is that a stock of capital can be increased through a process of exchange or "trading up" but also through directly taking an asset or resource from someone else, without compensation. David Harvey calls this accumulation by dispossession. Marx does not discuss gifts and grants as a source of capital accumulation, nor does he analyze taxation in detail (He couldn't, as he died even before completing his major book, Das Kapital). Nowadays the tax take is often so large (i.e., 25-40% of GDP) that some authors refer to state capitalism. This gives rise to a proliferation of tax havens to evade tax liability.

The continuation and progress of capital accumulation depends on the removal of obstacles to the expansion of trade, and this has historically often been a violent process. As markets expand, more and more new opportunities develop for accumulating capital, because more and more types of goods and services can be traded in. But capital accumulation may also confront resistance, when people refuse to sell, or refuse to buy (for example a strike by investors or workers, or consumer resistance).

Capital accumulation as social relation

"Accumulation of capital" sometimes also refers in Marxist writings to the reproduction of capitalist social relations (institutions) on a larger scale over time, i.e., the expansion of the size of the proletariat and of the wealth owned by the bourgeoisie. 

This interpretation emphasizes that capital ownership, predicated on command over labor, is a social relation: the growth of capital implies the growth of the working class (a "law of accumulation"). In the first volume of Das Kapital Marx had illustrated this idea with reference to Edward Gibbon Wakefield's theory of colonisation:

"...Wakefield discovered that in the Colonies, property in money, means of subsistence, machines, and other means of production, does not as yet stamp a man as a capitalist if there be wanting the correlative — the wage-worker, the other man who is compelled to sell himself of his own free-will. He discovered that capital is not a thing, but a social relation between persons, established by the instrumentality of things. Mr. Peel, he moans, took with him from England to Swan River, West Australia, means of subsistence and of production to the amount of £50,000. Mr. Peel had the foresight to bring with him, besides, 3,000 persons of the working-class, men, women, and children. Once arrived at his destination, “Mr. Peel was left without a servant to make his bed or fetch him water from the river.” Unhappy Mr. Peel, who provided for everything except the export of English modes of production to Swan River!"

— Das Kapital, vol. 1, ch. 33

In the third volume of Das Kapital, Marx refers to the "fetishism of capital" reaching its highest point with interest-bearing capital, because now capital seems to grow of its own accord without anybody doing anything. In this case,

"The relations of capital assume their most externalised and most fetish-like form in interest-bearing capital. We have here ${\displaystyle M-M'}$, money creating more money, self-expanding value, without the process that effectuates these two extremes. In merchant's capital, ${\displaystyle M-C-M'}$, there is at least the general form of the capitalistic movement, although it confines itself solely to the sphere of circulation, so that profit appears merely as profit derived from alienation; but it is at least seen to be the product of a social relation, not the product of a mere thing. (...) This is obliterated in ${\displaystyle M-M'}$, the form of interest-bearing capital. (...) The thing (money, commodity, value) is now capital even as a mere thing, and capital appears as a mere thing. The result of the entire process of reproduction appears as a property inherent in the thing itself. It depends on the owner of the money, i.e., of the commodity in its continually exchangeable form, whether he wants to spend it as money or loan it out as capital. In interest-bearing capital, therefore, this automatic fetish, self-expanding value, money generating money, are brought out in their pure state and in this form it no longer bears the birth-marks of its origin. The social relation is consummated in the relation of a thing, of money, to itself.—Instead of the actual transformation of money into capital, we see here only form without content."

— "Das Kapital", vol.1, ch. 24

Markets with social influence

Product recommendations and information about past purchases have been shown to influence consumers choices significantly whether it is for music, movie, book, technological, and other type of products. Social influence often induces a rich-get-richer phenomenon (Matthew effect) where popular products tend to become even more popular.