Toward a Theory of Economic Self Reliance ESR

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Toward a Theory of Economic Self Reliance (ESR)

• Paul Godfrey
• Marriott School of Management
• Brigham Young University
• Sept 03

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Two men I know
Which one is better off today?
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Why a theory of ESR?

• ESR is the object of study for the CESR
• ESR becomes the dependent variable in our own
  research
• A working definition of ESR allows us to do
  meta-analytic work on disparate literatures
• Facilitate and redirect practice toward ESR

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What ESR is

• Economic self reliance is the ability of an
  entity to sustain economic well-being.
• Entities may be individuals, families,
  communities, states, regions, or nations
• Economic self reliance is an intermediate end
• ESR facilitates entities pursuing their vision of
  the good in life.

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What ESR isnt

• Emotional Self Reliance
• Social Self Reliance
• Spiritual Self Reliance
• These all may affect or be affected by economic
  self reliance, but represent distinct constructs
  and areas of inquiry

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What are the elements or ESR?

• An entity that is self reliant has the ability to
  
• garner the surplus resources that create well
  being
• structure economic life to be (relatively)
  invulnerable to economic shock
• Self Reliance f (surplus generation, economic
  vulnerability)

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Economic Surplus

• Surplus economic resources in excess of
  subsistence
• Those who live at or below subsistence levels
  cannot be self reliant
• They have no way to structure resources to become
  (relatively) invulnerable
• Surplus represents the necessary condition for
  ESR
• Some disabilities and other conditions make
  entities incapable of generating surplus and
  hence cannot be self-reliant

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Economic Vulnerability

• Economic vulnerability The expectation that a
  negative economic shock will seriously impair
  economic sustained well being.
• A joint probability
• The probability that a negative economic shock
  will occur
• The probability that such a shock will seriously
  impair economic well being
• Degree of vulnerability represents the sufficient
  condition for ESR

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Economic Shock

• War
• Government Change (privatization/
  nationalization)
• Economic Cyclicality (e.g., currency, interest)
• Unemployment
• Natural Disaster
• Divorce or family restructuring
• Death
• Serious Illness or Disability

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Serious Impairment

• No reserve assets
• No risk management or insurance
• Obsolete skills
• Profligate living

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Economic Vulnerability
Economic Vulnerability
Probability of serious impact
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Economic Self Reliance
Degree of Economic Vulnerability
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Example Education

• Education creates specialized assets
• Specialized assets are more valuable in trade
• Education increases ability to generate surplus
• Education provides protection against economic
  shocks
• Certain types of education may improve resource
  management skills

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Example The Micros

• Micro finance
• Improves ability to generate and capture surplus
• Reduces risk of economic shock through business
  ownership
• Micro enterprise
• Similar to Micro finance
• Also teaches principles of resource management,
  thus reduces likelihood of serious impairment

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ESR The Value Added

• A way to categorize research and practice
• Which axis is in play?
• Poverty reduction focuses on surplus possession
  or generation
• Which element of economic vulnerability is being
  addressed?
• Budgeting focuses on reducing potential
  impairment
• By mapping studies and fields onto the quadrant,
  meta-analytic work can be done
• Helpful in thinking about research and
  practitioner partnerships

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Why should companies care?
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Areas for Corporate Involvement

• Philanthropic and civic activities
• Redirect toward ESR generating organizations
• Realize long term implications of creating
  dependence
• Internal Policies
• Provide employees with resource management
  education and skills
• Conduct business affairs to minimize likelihood
  of shock
• External policies
• Products that enhance (rather than degrade) ESR
• Negotiating stances with governments,
  communities, and suppliers that enhance ESR

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Key questions

• What constructs exist to measure self reliance in
  other disciplines?
• Are we reinventing the wheel?
• Where is the model weak?
• What are the models strengths?