There is far more to the subject of economics than mere considerations of financial relationships between people and the way of enhancing the profitability of organizations. While certain people pay more attention to the materialistic strategies and approaches within economics, the field thoroughly studies the way people, organizations, governments, and communities allocate resources. This work reviews several facets that the modern field of economics routinely integrates and refutes the counterargument that the human relationship and individual behavior aspects belong in the space of management. Economics refers to human activities, with the idea that a person acts rationally, seeking the highest amount of advantages or usefulness. Such an idea transcends the solely financial application – it may be used as an aid in decision-making and goal achievement, for instance, in treating addictions. Economics’ scope thus must span beyond profit maximization since one of the keys to success is focusing on people and inspiring them to achieve organizational goals through a defined plan.
The irrelevance of profit maximization as the primary strategy within an economic organization is evidently supported by the shift of production priorities of the companies. As one of the most demonstrative examples, society has started to pay more attention to sustainable production. At its core, this strategy requires companies to invest in better production methods and supply chains which directly contradicts the principles of profit maximization. Although sustainable production does not correspond to the approach of profit maximization, many companies, including clothing manufacturers, food production businesses, and electronics companies, invest in implementing sustainable practices. Modern companies restructure their workflow to address the concerns of their buyers – and sustainability has been gradually increasing in the extent of its importance as new generations concerned with the environment appear in the market. For instance, Haleem et al. (2021) support the idea of economics working effectively beyond profit maximization by describing the pressure from stakeholders that push companies towards investing in better means of production. Thus, the authors examine the impact of stakeholder pressure on the strategies of businesses and the overall effect of stakeholders’ tendencies and global trends dynamics on the key economic investments.
Essentially, economics focuses on studying the aspects beyond the administrative processes that help a business achieve maximum profits. If the focus of economics were solely on enhancing profits, this field would not emphasize the studies related to human behavior and the way psychology affects people’s economic decisions. According to Rodnick (2012), “if economics were only about profit maximization, it would be just another name for business administration. It is a social discipline, and society has other means of cost accounting besides market prices” (p. 11). This way, the author presents the various elements of interest that economic scientists study, such as human behavior, motivation, and methods of inspiring people to achieve the targets. The adjacent areas connected to the sole profit orientation aspect empathize with the versatility of economic focus. Furthermore, the studies of individual approaches and behavior patterns of people act as evidence of the fact that economics is a social concept developed by people. As such, all social concepts majorly rely on people’s individual features and the general social dynamics due to the factor of personal instability.
Behavioral economics is an example of how this science aims to study the specifics of actions connected to economic relationships. A great example of its versatility is presented through the study by Field et al. (2020), examining addiction recovery patterns through the lens of behavioral economics. Gal (2018) points out that the scholars who work in this field have a specific interest in the correlation between economic expectations and reality. For instance, presenting the monetary value of abstinence effectively aided in combating addiction: “reduction in the value or utility (benefit/cost ratio) of substance use that may be combined with an increase in the value or utility of competing substance-free activities” (Field et al., 2020, p. 8). According to Gal (2018), the key concept behind behavioral economics is increasing accuracy through “incorporating more realistic assumptions about how humans behave” (para. 2). Hence, the prejudice about the primary importance of maximizing the profit of an organization creates misconceptions related to the way people are expected to behave within the economics field. On the contrary, behavioral economics juxtaposes the unrealistic expectations about people’s productivity and natural human responses in specific situations. This way, this science aims to determine the healthy boundaries of any economic relationship.
However, some people believe that individual behavior and people-based financial management are not an inherent part of economics itself but are instead an adjacent area. Thus, a central alternative point of view is that there are other, irrelevant to core economic concepts fields that are concerned with inspiring employees and helping organizations reach their goals. Neiva (2020), for instance, states explicitly that such factors as the natural behavior of people, motivation, inspiration, and healthy communication are more relevant in the context of management. The author harshly differentiates between the two fields and attaches different approaches to them. Neiva (2020) attaches a materialistic value to economics and a communication value to management. This way, the behavioral characteristics of the individuals are not considered relevant in the field of economics and are more closely associated with leadership. This counterargument may nevertheless be disputed: managerial science, unlike economics, does not cover as many individual aspects of human communication, focusing solely on the issue of employee productivity. Oppositely, economics is concerned with the elements of psychology and behavior of consumers, community members, and other stakeholders. Managerial sciences would thus be irrelevant without the combination with behavioral economics.
In summary, economics is beyond profit maximization since many factors besides enhancing the efficiency of production affect businesses and their leaders. Economics is concerned with numerous fields beyond merely increasing profits. In fact, one of the keys to success is the concentration on people and the encouragement to reach corporate goals through a clear strategy. Without the basic comprehension of the human factor within economics, the field would not be able to operate the processes that majorly involve personal communication, teamwork, and efficient leadership. Hence, for future managers and organization leaders, it is essential to understand that economics is more than earnings maximization to be able to achieve the goals of their organizations. Economists should pay more attention to the aspects of economics that are closely related to the individuals and their natural reactions and responses within the economic context. This way, the field can be comprehended more efficiently in the context of cooperation and basic communication strategies. Once the focus of this field centers on the effective management of people, the shift of priorities will help the organizations reach their strategic goals without the involvement of profit maximization strategies.
References
Field, M., Heather, N., Murphy, J. G., Stafford, T., Tucker, J. A., & Witkiewitz, K. (2020). Recovery from addiction: Behavioral economics and value-based decision making.Psychology of Addictive Behaviors, 34(1), 182–193. Web.
Haleem, F. Farooq, S. Cheng, Y., Waehrens, B.V. (2022). Sustainable management practices and stakeholder pressure: A systematic literature review.Sustainability, 14, 1–23. Web.
Gal, D. (2018). Why is behavioral economics so popular? The New York Times. Web.
Neiva, E. R., Macambira, M. O., & Ribeiro, E. M. B. A. (2020). Management practices, well-being and supportive behavior. Revista de Administração Mackenzie, 21(1), 1–27. Web.
Rodnick, D. (2012). The globalization paradox: Democracy and the future of the world economy. W. W. Norton & Company.