Rethinking the Links between Human Relationships and Economic Efficiency Using Local Institutions: The Case of Two Emerging Economies

Abstract

:Emerging countries around the world have been growing fast over the last thirty years, with most of these countries basing their economic development on a state capitalism. Within these countries, there is a concentration of wealth in the hands of a few people. This fact confirms the analysis of Thorstein Veblen (1898) who shows the gap that exists between the vested interest of the rich and the unmet needs of the poor. The world happiness report (Helliwell, Layard and Sachs 2016) also shows for the emerging economies a gap between the world rank in economic growth and in wellbeing. I propose a new paradigm of development for two emerging economies, Brazil and South Africa, by putting human development in the center of economic development and by using different approaches in economics and psychology. My analysis links the theories of Carl Shapiro and Joseph E. Stiglitz regarding “efficiency wages” (1984) with the complexity approach (Le Moigne 1995). This approach combines the results of positive psychology (Kahneman 2011) with the role of local institutions for improving the economic development of emerging economies (Deaton 2016). In the first section of the article, I examine definitions of economic and human wealth. In the second section, I analyze the gaps that exist between the standard-of-living ranking and the wellbeing ranking for both Brazil and South Africa in order to present meso-happiness indexes linking the micro- and macro-levels of human wealth. In the last section, I analyze the way local institutions in Brazil and South Africa could create dynamic links for these countries’ efficient functioning in the world economy.