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Atrina Oraee

March 16th, 2021

Suffocated by “The Invisible Hand” of Economics

5 comments | 56 shares

Estimated reading time: 8 minutes

Atrina Oraee

March 16th, 2021

Suffocated by “The Invisible Hand” of Economics

5 comments | 56 shares

Estimated reading time: 8 minutes

Global warming, climate change, resource exhaustion: these are just a few of the major threats our planet is facing, right now. The researchers and policymakers who must address sustainability issues across society face a challenge so daunting that it may prove impossible to deal with. If not addressed properly, widespread environmentally harmful patterns of behaviour could result in socio-ecological collapse. If governments can utilise more realistic depictions of human behaviour, however, more effective interventions could be designed.

When it first emerged, the environmental sustainability thought was promising. This initial reassurance slowly faded away, as sustainability became overshadowed by our current capitalistic economic system.

Sustainability cannot be defined, let alone achieved, without considering human behaviour within the environmental context in which it occurs. Many environmentally harmful behaviours share the common factor of being deeply embedded in our daily activities. While pursuing personal interests, individuals freely impose negative effects on their shared physical and social environment. Accumulation of such small individual contributions results in a significant deterioration of common environmental qualities. Sustainability, therefore, is faced with a collective action dilemma: all will be better off if they choose to behave in environmentally friendly manners; nevertheless, it is individually better for each not to do so. Tackling such challenges thus requires a reconstruction of the relationship between economy and ecology as mutually interdependent dimensions.

Pursuing environmentally sustainable goals goes hand in hand with criticising free-market capitalism. 

Neoliberalism is the predominant philosophy of our current economic system. Neoliberal economists mostly believe that, left free, markets will operate with utmost efficiency and fairness. They further consider human societies as a collection of individual beings that relate to one another as each follows its own interest and encourages the maximisation of self-interest. It hardly comes as a surprise that individually profitable, while collectively harmful, behaviour is facilitated by such a free-market system, offsetting global efforts to address collective issues and common resource dilemmas such as sustainability.

According to Kuznets, in his Nobel Prize lecture: “[a] country’s economic growth may be defined as a long-term rise in capacity to supply increasingly diverse economic goods to its population […]”. So, it makes perfect economic sense that we are so prone to over-consumption, which is harmful to the environment.

Infinite economic growth is at odds with the existing scientific knowledge of finite resources and the fragile ecology on which human beings depend for survival.

From this standpoint, the main culprit is not growth per se, but the ideology of growth which according to Fournier (2008) is “a system of representation that translates everything into a reified and autonomous economic reality inhabited by self-interested consumers”.

Grow, grow and…GROW!

Surviving, let alone thriving, in capitalistic economies requires individuals to continuously pursue growth and self-development. Being well in such a context requires fluidity, change, and growth. Therefore, the economic system encourages and facilitates taking risks; seeking new opportunities, and acquiring new skills, talents, interests, and preferences.

On the other hand, and as argued by Adams et al. (2019), the influence of psychological science has not merely been to provide a descriptive account of human experience. Psychology is actively used to promote some behaviours, habits and ways of being over others. Interestingly, proponents of neoliberalism have provided generous support to perspectives of psychological science (such as the positive psychology movement, which stresses personal growth and positive affect as essential self-goals). Hegemonic perspectives of psychological science have been a primary site for the reproduction of the neoliberal growth imperative. Examples include existing theories within social psychology which consider personal growth and development to be the pinnacle of human experience, a mark of optimal well-being! Indeed, a widely used scale of psychological well-being includes the dimension of ‘personal growth’ as a defining feature, which was endorsed at the highest levels in a survey conducted by Plaut and colleagues (2009) in the United States. Similarly, the growth imperative is evident in Dweck’s rather popular growth mindset: the belief that people can (and should) cultivate and extend their individual qualities (e.g., learning and intelligence) through effort and hard work.

There is no such thing as an “absolute free market”, dummy!

The extent to which a market is free cannot be objectively defined.  Rather, it should be regarded within the political context of its emergence. In other words, the government is always involved in the underlying restrictions, rules and boundaries of the seemingly free market. An absolutely free market thus doesn’t exist. The challenge, then, is not to decide whether to regulate the market or not, but it is to design successful interventions and implement the appropriate regulations for various activities.

Governments can step into the marketplace to limit available choices by presenting options whose effects are certain and well-understood by the general public.

Despite free market economists’ belief, and as demonstrated by many academics including Thaler and Sunstein (2009) and Kahneman and Tversky (2011), individuals cannot make rational economic choices since it is impossible to account for every speck of information. As many factors commonly found in the socio-ecological environment can potentially lead to what Herbert Simon calls “bounded rationality”, governments can introduce a variety of regulatory measures designed to restrict or eliminate (e.g., ban on dumping of waste) choices with unknown environmental consequences. Although powerless to impose the urgently needed transition, psychology can provide valuable insights on how to design and implement such regulations by providing more accurate descriptions of the human mind and behaviour.

If not addressed properly, current widely practised environmentally harmful patterns of behaviour can potentially result in a socio-ecological collapse.

Understanding and properly addressing a dynamic global concern such as sustainability requires a paradigm shift or drastic changes in the present economic system. By becoming an important station for neoliberalism to further practice and scientifically justify its ideology, psychology has become crippled to impose the required systematic changes. However, it can provide governments and regulatory agencies with more realistic descriptions of human behaviour with regards to the context in which they occur, thus assisting the appropriate design and implementation of various policies and interventions. Through such diversification of their toolkit, governments can channel people’s behaviour into more environmentally sustainable ways. However, to what extent governments can be trusted, and whether or not regulatory efforts need to be accompanied by corporations in order to prove effective remain open questions…


  • The views expressed in this post are of the authors and not the Department of Psychological and Behavioural Science or London School of Economics (LSE).
  • Featured image by Sam Bark via Unsplash.
  • Image of Earth by Pete Linforth via Pixabay.


Adams, G., Estrada-Villalta, S., Sullivan, D., & Markus, H. R. (2019). The Psychology of Neoliberalism and the Neoliberalism of Psychology. Journal of Social Issues, 75(1), 189–216.

Beckett, S. (1983). Worstward ho. New York: Grove Press.

Dweck, C. S. (2006). Mindset: The new psychology of success. New York, NY: Random House.

Kuznets, Simon (1971): “Modern Economic Growth: Findings and Reflections. Prize Lecture”, Lecture to the memory of Alfred Nobel, December 11, 1971.

Fournier, V. (2008). Escaping from the economy: The politics of degrowth. International Journal of Sociology and Social Policy, 28(11–12), 528–545.

Plaut, V. C., Adams, G., & Anderson, S. L. (2009). Does attractiveness buy happiness? It depends on where you’re from. Personal Relationships, 16, 619–630. 6811.2009.01242.x

Simon, H. A. (1955). A Behavioral Model of Rational Choice. The Quarterly Journal of Economics, 69(1), 99.

Simon, H. A. (1979). Rational decision making in business organizations. American Economic Review, 69(4), 493–513.

Simon, H. A. (1990). Invariants of Human Behavior. Annual Review of Psychology, 41(1), 1–20.

Smil, V., & Diamond, J. (2005). Collapse: How Societies Choose to Fail or Succeed. International Journal, 60(3), 886.

Thaler, R. H. (2000). From homo economicus to homo sapiens. Journal of Economic Perspectives, 14(1), 133–141.

Thaler, R., & Sunstein, C. (2009). Nudge: Improving Decisions About Health, Wealth, and Happiness. In Nudge: Improving Decisions about Health, Wealth, and Happiness (Vol. 47, Issue 4). Yale University Press.

About the author

Atrina Oraee

Atrina is currently studying her second Postgraduate Degree, MSc Psychology of Economic Life at LSE. For her thesis, she is using digital ethnography and real-time data to investigate how decision making is experienced by individuals in the context of their everyday life. Atrina received her Bachelor’s Degree in Economics, followed by her first Master’s in Environmental Economics. Her research interests mostly include economic psychology and decision making.

Posted In: Environment | MSc | MSc Psychology of Economic Life