Economics and Buddhism would seem to have little in common with each other. The central question in Buddhist philosophy, however, is the same as that in economics:  what is the key to human happiness?  But Buddhism and economics answer this question opposite to one another.  In economics, wealth is the key to happiness — the wealthier you are the more goods and services you can consume. This is the essence of the classical view of economics as presented by Adam Smith (1723–1790) in his work The Wealth of Nations. In Buddhism, desires or “cravings” for goods and services are like addictions. Buying more goods and services does little or nothing to reduce the cravings. The only way to enhance one’s happiness is to reduce the cravings themselves. This was the central insight of Gotama (later known as the Buddha) 2,500 years ago, and it remains the core of Buddhist doctrine today. How is it that these two philosophies can approach the same central question from such different perspectives?  Can they learn from each other?

Buddhism is very mysterious and complex. Accordingly, the first challenge this study faced was to suggest a simple way to understand the core logic of Buddhism and to ask, “What might the Buddha have to say to Adam Smith?” In other words, what lessons does Buddhism, especially contemporary Zen Buddhist philosophy, have for economics? The second challenge for the study was to ask the reverse question,  “What could Adam Smith have to say to the Buddha?”; that is, what lessons might economics, not just that of Adam Smith, but modern economics as well, usefully have to help sharpen the message of Buddhist philosophy?

In economics, the point of life is to gratify the ambitions of the rational self; that is, to maximize utility through consumption of goods and services.  In Buddhism, by contrast, you gain utility when you “lose yourself.”  For example, when you read (or write) a book, the more you (metaphorically) “lose yourself” while doing it, the happier you are. This could also apply to playing basketball or fixing a motorcycle. Many North American readers were first introduced to this concept of Buddhism in Robert M. Pirsig’s classic book Zen and The Art of Motorcycle Maintenance, in which the central character experiences Zen (loses himself) by fixing his motorcycle. Pirsig showed how poetic even the process of fixing a motorcycle could be. The loss of self — more specifically, the loss of the distinction between subject and object, which results in the feeling of integration with your environment — is the essence of Buddhism.

Buddha’s Message to Adam Smith

What does this have to do with economics? What might the Buddha have to say to Adam Smith? For many people, their happiest moments are those when they follow the Buddhist approach (without even being conscious that it is Buddhist) and seek to lose, rather than gratify, themselves — that is, when they are “one” with an activity, other people, or the environment.  This does not mean they are religious, and such moments do not need to have anything to do with religion.  Rather, they have to do with the loss of ego, of the constant preoccupation with self and of self-gratification.

For the most part, economics misses this idea. In economics, the object does not influence the nature of the subject. Economics, therefore, has difficulty addressing relationships that a person might have with things, other people or the environment, other than in terms of either ownership or dominance. People either “consume” a product or “produce” it, they do not bond with the object in a way that changes the subject (i.e., the person). Yet, this is the character of many of our deepest experiences:  love, friendship, art, poetry, communing with nature or spiritual experiences. And this is also a characteristic of many successful systems of production or manufacturing that are employed, for example, by the Japanese and the Germans, where management and employees are motivated to “identify” or integrate with the firm in a manner that encourages them to produce high quality goods and services.[i] To sum up, Buddha’s main message to Smith is simply:  You can’t buy nirvana.  You can only get closer to it through losing yourself and integrating with your environment.

Adam Smith’s Message to the Buddha

Now ask the reverse question: What lessons does Adam Smith have for the Buddha? The first lesson concerns the nature of enlightenment. Enlightenment is often portrayed in Buddhist thought as a final state or nirvana.  One is either enlightened or one is not. But this idea has come in for heavy criticism among contemporary Buddhist philosophers.[ii]  And it does not correspond with the basic logic of economics. Economics is based on the idea of choice at the margin. In other words, individuals can decide to eat a little more or a little less, they can exercise once a day, once a week or once a month and so on. For this to apply to Zen Buddhism, enlightenment has to be divisible (choosing at the margin), so that you can have a little or a lot. And, it seems you can, although it requires training. One aspect of Buddhism, which has become very popular in the West, is mindfulness — the idea of focussing completely on one thing. Most people can easily learn to do this for very short periods of time.  Others, with training, can choose to do this for extended periods of time.

But there is much more to Buddhist enlightenment besides mindfulness. A second dimension (also involving choice) is loss of self; that is, the capacity to focus on something other than yourself. Someone might feel compassion for others, for instance, the plight of people after the devastation of a typhoon, while at the same time remaining aware that they themselves are experiencing that emotion. At the other extreme, a person might be so completely involved with the plight of others that they lose all self-consciousness. In between, it is possible to imagine various levels of self- versus other-awareness, and someone could, with effort, choose to train to become less self-conscious and more aware of others or the environment.

A third dimension of enlightenment is the breadth or extent of the environment with which a person integrates. This, too, is a dimension of choice.  At one extreme, this integration might be with a partner, immediate family, or a motorcycle.  At the other extreme, it is possible to imagine being one with the entire universe

The key economic concept being developed here is the new notion of the allocation of thought: how focussed, how compassionate and how broad or extensive is the subject of a single moment’s thought. Previous work in economics has neglected this area.

Enlightenment, or nirvana, the Buddhist state of complete enlightenment, is then defined as the point where mindfulness is perfectly attained, loss of self is complete, and identification is with the entire universe.  It is easy to depict nirvana when defined this way, but it is very difficult to reach it in practice.

Why?  It becomes increasingly difficult to maintain focus the more completely a person tries to focus on just one thing.  Similarly, it gets harder to give up more of yourself.  At first, it is relatively easy to feel some degree of compassion for others or to care to some extent about the environment.  But, it gets harder the more a person tries to give up self-gratification in favour of compassion, and they may not want to go further along this path.  How far someone goes is a matter of choice, in which they compare the costs of continuing to do so with the perceived benefits. This is also the case with respect to broadening one’s identification with their immediate surroundings (for example, their family or the company where they work). But expanding one’s integration beyond some point can become increasingly difficult the more far-reaching the environment with which they are trying to identify. People typically are able to move along this path somewhat (choosing at the margin), but normally they are not able to attain nirvana, a state of complete happiness or enlightenment.

Adam Smith might also insist that a person can become more mindful, compassionate or have a broader concept of interdependence without being a Buddhist.  For example, one can identify with a family, company or nation-state, which may be positive for all affected — that is, love within a family, identification with a firm or patriotism.  But there can be a dark side to integration with a group, when it occurs against an external enemy. And of course, enmity itself is a great force for solidarity, and conflict — including terrorism and war — is encouraged by it. Therefore, only when integration is universal can we be confident that the result will be beneficial to everyone.

Buddhism and Economics Combined

This completes the basic messages of Adam Smith to the Buddha and the Buddha to Adam Smith.  Buddhism, in effect, says happiness comes from losing yourself, not from gratifying yourself. Economics modifies this by saying that losing yourself might sometimes be a good idea, but you can do so by degrees, that is, you can have a little Zen or a lot. It is also possible to have different kinds of integration, depending, for example, on how extensive the identification is. Put Buddhism and economics together and you have a new way of thinking — Buddhist economics.  This way of thinking has a number of implications, which are discussed in the study undertaken through a CIGI-INET grant.  Here are a few of them.

One application is to the idea of equality. It seems reasonable to assume that it would be more difficult for someone to integrate with others if there was a wide disparity between their incomes.  Too much inequality is inefficient as well as undesirable on simple equity grounds.

A second application is to the environment. The Buddhist perspective is that “all things have Buddha nature.” Combine this with the thinking of Ronald Coase, the Nobel prize-winning economist who argued that to solve problems such as pollution, the important place to start is to clearly assign property rights. For example, firms could be given rights to pollute to a certain degree, or people could be assigned the right to clean air. However, Coase never considered the possibility of assigning rights to the environment itself. But if animals, trees and mountains have no rights, then even if there are environmental groups willing to stand up for them, there will be over-exploitation of natural resources. Buddhist economics says that to prevent over-exploitation, the environment needs to be given legal rights independent of its value to humans

Finally, it is easy to see why Buddhism implies non-violence. If you are part of everything, then violence against someone or another living creature would be violence against yourself.  One application of these ideas is non-violent political protest, made famous by Mahatma Gandhi, and practiced by Nelson Mandela and Martin Luther King Jr.  Gandhi was a Jain, not a Buddhist, but Gandhi drew on Buddhist sources in developing this form of protest. Gandhi felt he had “to reduce himself to zero” for his cause to succeed, identifying with his enemies as well as his followers. He believed that non-cooperative but non-violent forms of protest, unlike violent conflict, could enable both sides to recognize each other’s point of view and, ultimately, to obtain a better outcome for both.

These subjects all need more research; however, there is no reason why economics can’t turn to Buddhism for inspiration and vice versa.

[i] Akerlof and Kranton have modelled identification with a firm, and Becker within a family.  See George Akerlof and Rachel Kranton, “Identity and the Economics of Organizations,” Journal of Economic Perspectives 19 (Winter 2005), 9–32, and Gary Becker, “A Theory of Social Interactions,” Journal of Political Economy, 1974.

[ii] See, for example, Steven T. Katz, ed., Mysticism and Philosophical Analysis. New York: Oxford University Press, 1978, or S. Heine and D. Wright, The Koan:  Texts and Contexts in Zen Buddhism.  New York:  Oxford University Press, 2000.

Ronald Wintrobe is professor of economics and co-director of the Political Economy Research Group at the University of Western Ontario.  He is the author of Rational Extremism: The Political Economy of Radicalism (2006),The Political Economy of Dictatorship (1998), and (with Albert Breton) of The Logic of Bureaucratic Conduct (1982), all published by Cambridge University Press. He has also written two radio programs on political economy for the Canadian Broadcasting Corporation's "Ideas" series.

The key economic concept being developed here is the new notion of the allocation of thought.