Replacing the Concept of Externalities to Analyze Constraints on Global Economic Growth and Move Toward a New Economic Paradigm

Abstract

The prevailing economic paradigm has fallen short as a guide to policy making in this era of global economic crises. Numerous efforts are underway to revise it or replace it with a science of society that integrates intellectual disciplines. This paper makes a contribution to those efforts by arguing that the economic concept of externalities is no longer viable and that replacing it with the concept of an inclusive world economy provides new explanatory potential. The concept of externalities divides the world hierarchically, with the internal dominant and the external subordinate. In this way it gives any group of people the scientific legitimacy to conquer, manage and use other peoples and the natural world (the external) instrumentally; by extension, it drives the creation of ever newer technologies to do so. The concept fit the economic growth experiences of the emerging capitalist nations in the centuries prior to the 20th fairly well. Now that we live in a world in which all peoples, all economic activities, and all of the earth are tied together into a global economy that is no longer the case. The concept of an inclusive world economy fits our contemporary experiences better, aligns well with an integrated science approach, and provides new insights into prospects for economic growth.