“We’ve all heard of the Golden Rule ‘do unto others as you would have them do unto you’—this works in economics as it does in life. If people are treated well they will work harder,” says Professor Morris Altman, who specialises in behavioural economics.
“So a Golden Rule for sustainable wealth creation is building more trusting and cooperative economic organisations.”
He cites Toyota as an example of a successful, competitive company with an employee-centred philosophy, including offering high wages, giving employees more say in the day-to-day operations of the company, offering more transparency about the company’s finances and avoiding heavy-handed monitoring of employees.
He also says in North America, department store Costco does just as well as Walmart, despite paying its workers approximately double the wages and offering better health benefits.
“The rate of return is just as good because Costco’s workers respond to being treated well by being more productive—it’s that simple.”
However, Professor Altman’s research shows that along with the success of the Golden Rule approach, it is possible for both highly self-serving as well as ‘trusting’ firms to survive in highly competitive environments. Although research indicates it is largely the trusting firms that are more productive in the long run, he believes it is not enough just to depend on the goodwill of employers to deliver a Golden Rule economy.
“As libertarian economist Friedrich Hayek argued, ‘we need institutions or circumstances that induce evil people to do good things’. This is happening increasingly in the world economy as tighter labour markets, often coupled with democratic rights, motivate employers to adopt and develop the most productive technologies and systems of management to meet the challenge of higher costs.
“It is also the case that higher environmental standards have incentivised firms to innovate as they become greener in order to remain cost competitive. The market works wonders when positioned towards the Golden Rule of wealth creation.”
Professor Altman will be delivering his inaugural professorial lecture ‘What’s love got to do with it? Behavioural economics and a Golden Rule for wealth creation and wellbeing’ on Tuesday 31 May at 6pm in the Hunter Council Chamber, Level 2, Gate 1 or 2, Kelburn Parade. RSVPs essential—phone (04) 463 6700 or email [email protected] with ‘Altman’ in the subject line.