reflections on av economy .pdf
Original filename: reflections-on-av-economy.pdf.pdf
This PDF 1.3 document has been generated by easyPDF SDK 7 7.0 / BCL easyPDF 7.00 (0355), and has been sent on pdf-archive.com on 05/12/2017 at 11:39, from IP address 157.50.x.x.
The current document download page has been viewed 220 times.
File size: 21 KB (9 pages).
Privacy: public file
Download original PDF file
Reflections on the Auroville Economy from a Mainstream Economic Perspective
I. A Few Fundamental Principles of Economic Theory
4. Politico-Economic Systems
II. The Auroville Economic System
6. The Auroville System in Theory
7. Problems With the Theory
8. The System in Practice
Here are some of my observations on the Auroville economy. In the first section I briefly touch on a
few points fundamental to understanding any economic system, while also explaining how
Auroville has a unique perspective on some of them.
Then I describe how The Mother wanted Auroville to function, and explain some of the problems I
see with this proposed system, followed by a brief look at the reality.
My criticism comes from a perspective that favors a market economy. Personally, I subscribe to the
Austrian school of economics, which is "heterodox" rather than mainstream. However, very few of
the differences between Austrian and mainstream views are directly relevant to Auroville (most are
on monetary and fiscal matters or on general methodology). The one important difference is that the
Austrian school is much more suspicious of centralized planning and control. Subscribing to a
heterodox school also means that I am very open to challenging mainstream views. I just feel that
one should attempt to understand what one is challenging.
I personally strongly support Auroville's efforts to practice the Integral Yoga. However, I also
believe that the Auroville economic system (neither the current actual one nor the one proposed by
The Mother) is necessary for or conducive to it.
On the point of contradicting or criticizing The Mother's views, I would like to add the following: It
seems to me that The Mother did see Auroville as an ongoing experiment and that she was very
capable of adapting to changing circumstances and new experiences. She also warned Aurovilians
not to take her words on Auroville as dogma. Aurovilians find themselves in the very difficult
situation of having to realize Auroville on the basis of what The Mother said at the founding of
Auroville, without any ongoing direct guidance (i.e. any objectively verifiable verbal
communication). In other words, if The Mother were still in her body, the subject of the economy
(as well as any other subject important to Auroville) could simply be discussed with her. Instead,
The Mother's words on this subject are seen as final and unalterable.
Still, perhaps going over the points below can generate some discussion and at least clarify
Aurovilians' views for themselves to some extent.
I. A Few Fundamental Principles of Economic Theory
All economic behavior is behavior in response to the economic problem: How do we fulfill infinite
desires with finite resources? Or: How do we meet an unlimited number of ends with limited
From a spiritual perspective, an obvious response will be to attempt to reduce one's desires so that
they will be a little less than infinite. However, this does not address the fundamental nature of
Scarcity — not in the sense of "squalor", but in the sense that any given resource cannot be
simultaneously applied to an infinite number of ends — is a metaphysical necessity. Even in a
theoretical "garden of Eden", where everything literally grows on trees, there would still be things
that are scarce — the use of one's own body, for instance. Two people could not stand in the exact
same spot. If they could, they would not have bodies they way we experience them; instead, people
would be living in separate worlds. In other words, scarcity is a fundamental quality of material
existence that allows interaction among people to be more meaningful. The flip-side is that this
potential overlap of ideas on how scarce resources should be used creates the potential for conflict
(i.e. two people wanting to "stand on the same spot"). The principle of ownership exists solely to
avoid or to settle such conflicts.
Ownership can be defined as the perceived right to exclusive control of a scarce resource. In other
words, the owner of any given resource has the final say on how it should be used.
A steward, on the other hand, is somebody who manages a scarce resource in the name and the
interest of the owner.
In Auroville, all property is considered the Divine's, with Aurovilians as stewards. Clearly, this is a
philosophical and not a legal distinction. "The Divine" is not a legal entity whose interests can or
will be represented in a secular court of law. In fact, one of mankind's greatest grievances with the
Divine is that he never seems to communicate his will in a way universally understood and agreed
upon by humanity. Therefore, while Aurovilians can attempt to manage their resources in a way that
they feel is most in line with what they believe to be the Divine Will, which human being has the
final say on how a given scarce resource is to be used must still be clearly established.
The fact that Aurovilians wish to be good "stewards" of property in Auroville does not logically
require any specific economic system. There is in fact no reason to think that a collectivist system
will be more conducive to this effort than a system of private property.
In short, transcending one's sense of personal possessions is an individual yogic accomplishment
and not something that can or should be imposed on a collective level.
In economics, the term 'utility' is used to refer to a person's subjective sense of satisfaction and
happiness. It is assumed that people act with the goal to maximize their own utility. Utility cannot
be measured directly or established in advance. Instead, people "reveal their preference" through
their behavior. Productivity is a function of serving people's utility. In other words, a market
economy produces what people are willing to spend money on in an attempt to increase their
subjective sense of well-being.
An important problem with "consumerism" is that spiritual growth — and even wel-being in any
true sense — falls outside of its sphere: They can neither be produced nor traded. However, it is still
important to understand that the market is finely tuned to react to people's subjective preferences.
Even where no direct exchange of money is involved, it is still important for producers of any kind
to adapt to and reflect their costumers' values. By contrast, in a communist economy (i.e. a plan and
control economy) no such mechanism exists, and production plans are based on the arbitrary
judgment of bureaucrats.
A related point concerns the role of prices. Prices reflect a huge amount of information. In fact, it
could be said that prices are influenced by all events at all times. Remarkably, they combine
objective information (e.g. how many tons of rice are available) with subjective information (e.g.
how much people prefer rice over pasta).
Auroville's most important goal is to move from serving one's own utility to serving the Divine
Will. The first problem has already been mentioned above: No objective information on the Divine
Will is available.
There is also a larger metaphysical question involved here: Does the Divine "need" people to rise in
consciousness that they may serve his utility? Or are higher levels of consciousness reached
"merely" to be able to perceive the perfect unfolding of events according to an omnipotent will?
Potentially, these two views can result in very different approaches to creating an economic system.
The first will try to somehow incorporate "divine utility" into its economic equations. The second
assumes that the Divine's utility (i.e. Ananda) is assured, and leaves the concept of economic utility
entirely in the human sphere. I argue for the second approach.
A key insight in understanding many fundamental economic problems is that they have to be
analyzed at the margin. This means that one considers adding or subtracting the next single unit. For
example, this seems to solve the "water-diamond paradox" quite well: While water is infinitely
more precious than diamonds — because it is essential for life, whereas diamonds are mere
ornamentation — people that are not dying of thirst would rather have one more diamond than one
more bottle of water.
Marginalism is important in understanding income inequality, because in a market economy people
are paid according to their marginal productivity: It is calculated by how much the entire output
grows when the effort of any given worker is added, and the worker is paid that difference. That
output is measured, rather than input, is an obvious point. More subtle is the fact that the worker's
labor is seen in the context of the entire process, not in a disconnected or absolute sense. Among
other things, this means that one's marginal productivity can be increased by increasing the
productivity of people only very indirectly involved in one's own work. This is one reason why
people in high income economies generally have a higher income than people in other countries,
regardless of their profession; productive people are more productive when working together with
other productive people. As a result of paying people their marginal productivity, in a market
economy people both "put in" and "take out" an amount of wealth equal to their actual contribution
to the economy. Any other way of attempting to measure people's contribution will be much less
4. Politico-Economic Systems
It is useful to divide all possible politico-economic systems into four categories, based on two
criteria: the ownership of capital and the existence of a state.
Capital refers to "produced means of production".
(For example, land is not capital, since it has not been produced. On the other hand, a factory is
capital, because it needed to be built. As far as the question of ownership is concerned, however,
land and capital can often be grouped together.)
Capital encompasses a vast amount of technology and infrastructure that has a large impact on
peoples' lives. Therefore, the importance of the question who should have the right to control it
cannot be overstated.
A state is an entity that is considered to hold the monopoly on the legitimate use of force in its
territory. One way of summing up the state's perceived role in the economy is this: The market can
sell its services to the highest bidder, but must not use violence; the government can use violence,
but must not sell its services to the highest bidder.
The terms "capitalism" and "communism" are strongly emotionally colored for most people. Note
that here these terms are meant to denote or connote nothing beyond the definitions given below.
1. Capitalism is a system under a state where capital is privately owned.
2. Communism is a system under a state where capital is collectively owned.
3. Anarcho-Capitalism is a system where capital is privately owned and no use of force is
4. Anarcho-Communism is a system where capital is collectively owned and no use of force is
The most common system in the world today is capitalism, while there are few states left that have
a system that is truly communist. No anarchies exist apart from small communities that are not
recognized by states as anarchies.
Most of what The Mother said about Auroville suggests an anarcho-communist system. However,
she also spoke about certain forms of central control and enforcement that would result in a more
communist system. (She herself called it "an adaptation of the communist system".)
The subject of money is something I would like to cover in more detail separately. For the purpose
of this article, I assume the following to be the case:
1. Money is a tool for increasing the efficiency of trade.
2. Where a prohibition on trade is not enforced, some form of money will always emerge.
3. Using money in a spiritual way is a matter of individual responsibility in the context of the
practice of Yoga, not a matter of collective economic organization.
II. The Auroville Economic System
6. The Auroville System in Theory
Here is how The Mother envisioned the Auroville economic system, the way I understand it:
There are to be no compulsory contributions.
Every Aurovilian is to contribute voluntarily through work or in kind. Money is to be contributed by
people with large savings and by those who have sold excess goods. (It is not clear to me to what
extent The Mother approved of goods to be produced specifically for export, but the emphasis was
clearly on Aurovilians providing goods and services directly to Auroville.)
Auroville provides the basic needs for all.
Auroville is to be self-supporting. (However, construction of Auroville buildings and infrastructure
should be done with outside help to speed up the process.)
There must be no circulation of money among Aurovilians. By extension, this means that
Aurovilians must not trade with each other. The only way to obtain resources is through request
and/or by passing them down the chain of a production process.
There is to be no private accumulation of capital, no inheritance, no borrowing and no interest.
In essence, this means the following:
All contribute in various ways and to varying degrees, depositing their contributions in a common
pot. Then, all take out of the pot just enough to cover their basic needs. This can happen either
directly and individually (e.g. in the Pour Tous system) or collectively and centrally planned (e.g.
construction of roads).
7. Problems With the Theory
Here are some of the problems that I see with this system:
The first is precisely looking at the economy as a "pot" in the sense of a zero-sum game, i.e. a pool
of resources that achieves nothing beyond the redistribution of those resources. This ignores the
principle of "gains from trade": Trade does not simply rearrange wealth; it creates wealth. Even
though trade does not add goods or services to the economy, their more efficient allocation results in
greater wealth (remember that wealth is based on utility, which is subjective). If you have two left
shoes and your neighbor has two right shoes, a trade turns four useless objects into two functional
pairs of shoes. When two people trade, both are better off — otherwise they wouldn't do it.
Therefore, trade should be encouraged and made easier and more efficient. Instead, the proposed
Auroville system systematically eliminates everything that could make trade efficient. For example,
one of the greatest gains in efficiency comes from using money instead of bartering — a practice
Auroville seeks to eliminate.
The reason many economists favor the market mechanism is that it facilitates cooperation among
strangers. Nobody would suggest that all forms of cooperation require such a mechanism. For
example, in a small group of people — usually a family — the simple sharing of resources
according to the "communist" ideal can work very well. This tends to work less well once one has
crossed the "anonymity barrier", i.e. once one is asked to share with people one hardly knows.
Aurovilians make an admirable effort to remove this barrier and treat each other as part of one
family. While this can still work for a few hundred people, it simply doesn't seem realistic that
every Aurovilian will care for thousands or tens of thousands of people the way they would for their
This also means that Auroville cannot effectively harness the principle of "economies of scale".
Instead, scale often works against it. If you lose on every sale, don't try to make up for it in volume.
The two main problems with communism fully apply to the Auroville economy: the incentive
problem and the calculation problem.
If you take from each according to his ability and give to each according to his need, you reward
need and punish ability. This also tends to nurture a strong sense of entitlement where a lot of goods
and services are expected to be provided for "free" or paid for by "society".
The system rewards immediate gratification, because it prohibits or prohibitively discourages
saving and the building up of capital.
There is no incentive to work long, hard or efficiently or to produce anything that people actually
find useful. This is because input is stressed and output is seen as less relevant. In other words, it is
enough to demonstrate that you "try" or "put in an effort" or "serve the community", while there is
little need to demonstrate the usefulness of your output.
By extension, this means that there is no incentive for training or for improving one's skills.
Aurovilians need to develop their own motivation for "never-ending education"; the economic
system does nothing to encourage it.
Auroville suffers from the so-called "tragedy of the commons": What belongs to everybody, nobody
takes care of. Any misuse of resources is seen as "everybody else's problem". Economists speak of
the destructive tendency to "externalize" one's costs (i.e. to let "the public" pay for them). In a
communist system all costs are already externalized.
It is believed that the incentive problem can be solved through the practice of Yoga. A group of
accomplished Karma Yogis may be able to ignore any given incentive structure and carry out their
inner adesh. Anybody who is not an accomplished yogi will — consciously and subconsciously —
base their actions on incentives.
Without prices, there is very little information on what is needed when and where, and how and
where to get it.
This also means that it is very difficult for people to respond to shortages. Even if adequate
information about such shortages somehow were available, any commercial form of cooperation
(including, for example, outsourcing) is prohibited.
There is no information even on the relative value of goods. In Pour Tous, surely there is a
difference between taking a banana and taking a motorbike, but how would you know? And how
big is the difference?
In addition to all of the problems mentioned above, all central planning groups in Auroville labor
under the additional difficulty that they lack clear mandates and authority and have no way of
enforcing any decisions.
It is said that a higher consciousness will be able to solve the calculation problem. Are we to wait
for four to eight accomplished Yogis to form a committee that perfectly administers the entire
economic activity of 50,000 imperfect people? Since there is no activity separate from the economy,
no activity could be excluded from their calculations. How could individual free will be preserved
under this system?
8. The System in Practice
Unless and until the above problems are solved, Aurovilians will continue to respond to Auroville's
economic reality in a combination of three ways: open violations of Mother's guidelines, covert
"black market" activity and hypocrisy.
The first happens when an Auroville working group, for example the Economy Group or Financial
Services, openly adopts a policy in direct contradiction to Mother's guidelines, sometimes with the
support of the community. Three examples would be: the Central Fund collecting interest on
Aurovilians' savings, a withholding tax being collected under the name of "contribution", and the
Economy Group calling for commercial activity useful to the outside.
The second consists of Aurovilians using market principles or processes in an underhanded manner.
Examples would be hiring outside labor without proper accounting or Aurovilians privately renting
out houses for which they are merely "stewards". There is also the danger of Aurovilians taking
"free" goods and then selling them outside of Auroville. In some cases, merely working outside of
Auroville and/or purchasing goods outside of Auroville for use in Auroville may be frowned upon
as not in accordance with Mother's vision. Yet, in the current economic situation these practices are
common, especially in the sense that many Aurovilians are dependent on outside sources of income
to support themselves.
The third applies to instances of the first or second category when there is also an attempt to present
one's activities as actually moving closer to Mother's guidelines. One example is the Financial
Services account system which — while reducing cash circulation — does not reduce the
circulation of money among Aurovilians; rather, it makes the circulation of money among
Aurovilians more efficient.
Not always outright hypocritical, but often very ironic are many other attempts to reintroduce
capitalism through the backdoor — often in an inefficient and convoluted way. An example is the
way the Housing Service evaluates the value of houses to be exchanged for similar houses of
similar value, checked against previous contributions etc. This may seem like the most "practical"
way of handling housing in Auroville. Very similar, but more practical and less bureaucratic, is the
system of private ownership.
To me the problems of the Auroville system, both as originally proposed by The Mother and as
implemented by Aurovilians, appear insurmountable. Therefore, I believe that one of three things
will happen: Aurovilians continue to depend on outside funds, Auroville goes bankrupt, or Auroville
adopts a market system.
According to my understanding, Auroville's goal is twofold: First, to achieve human unity. Second,
to achieve or aid in a further step in evolution. Both are believed only to be able to happen as the
result of the practice of the Integral Yoga. I believe that the practice of the Integral Yoga —
including a collective attempt to practice it — is possible in a market economy at least to the extent
it is possible in a collectivist economy. I further believe that, until Aurovilians can fundamentally
transform their economic behavior through Yoga, the disadvantages of a collectivist systems are not
inherently preferable to those of a market system.
In summary, a better economy will come about through a change of consciousness and not through
the attempt to arbitrarily impose certain patterns of economic organisation. In fact, every economy
reflects the consciousness, values and priorities of its participants — a market economy simply does
this more efficiently than any other system.