A Prosocial Economic System Is Necessary and Possible

Societal grand challenges have taken a toll on humanity, which finds itself at a crossroads. The concentration of wealth and economic inequality, the dominance of Big Tech firms, the loss of privacy and free choice, and the overconsumption and abuse of natural resources have been reinforced by globalization. Regulation, legislation, international treaties, and government and corporate policies have fallen short of offering sufficient remedies. In his recent book, The Cooperative Economy: A Solution to Societal Grand Challenges (Routledge), Dovev Lavie (Bocconi University Department of Management and Technology) identifies the root cause of these problems and offers a bold solution: a new economic system, free from the design flaws that have contributed to these societal grand challenges. The proposed cooperative economy is an ethical community-driven exchange system that relies on collective action to promote societal values while accounting for resource constrains. Unlike the modern economic system that is predominantly driven by opportunistic behavior, the cooperative economy moves away from a materialistic orientation and follows a more balanced perspective that leverages prosocial behavior. The book explains how this new system adopts design principles that promote self-sufficiency of communities, sustainability and entrepreneurship while limiting overconsumption and excessive profit making. The book describes how the system serves the interests of consumers, vendors, and employees while preventing the accumulation of power by the platform owner who operates this system. Bocconi Knowledge, courtesy of the author and the publisher, publishes an excerpt from the book.

"The dominant doctrine has suggested that the primary social responsibility of firms is to increase profits and maximize shareholder value...These firms have grown, expanded, and conquered traditional industries with their emerging technologies, innovative business models, and dominant platform ecosystems, honing this effective and efficient economic machine to perfection. Firms such as Google, Amazon, Meta, Apple, Netflix, Uber, and Airbnb have become household names, and many consumers cannot imagine their lives without them. By leveraging their network externalities and winner-takes-all positions in their respective domains, such leading firms have left little room for contenders...The "Big Tech" congressional antitrust hearings by the US House Judiciary Antitrust Subcommittee, and investigations of worldwide practices by regulators and agencies such as the Justice Department and the Federal Trade Commission, have scrutinized the anticompetitive practices of Amazon, Apple, Meta, and Google, paying increasing attention to the negative implications of their dominance in such domains as e-commerce, social media, app stores, and online search...The above concerns supplement complaints about firms exploiting natural resources and harming environmental sustainability. Overall, these concerns suggest that the established economic system that has guided corporate and consumer behaviors may suffer from some flaws. Certain firms have thrived and prospered, but the question is: at what societal cost?...Corporate greed and wealth concentration have continued to accelerate during the Covid-19 pandemic, when one would have expected greater solidarity with humankind. Economic inequality and social divide have become more pervasive at a time that calls for compassion and mutual aid. For example, according to Oxfam, in the first six months of 2020 an estimated 400 million jobs were lost and 500 million people became impoverished. Not surprisingly, vulnerable communities such as minorities and immigrants suffered the most. In contrast, the 32 most profitable firms in the world increased their profits by $109 billion relative to their average annual figures in the previous four years. While 94 percent of these firms' profits were distributed to their wealthy shareholders, less than 0.5 percent of their profits were donated to address the ramifications of the Covid-19 pandemic. It seems, then, that firms' contributions to society have mostly benefited themselves.

Where have we been going wrong? Before attempting to answer this question and offer a remedy, let us delve deeper and gain a better understanding of some of the faults of the current economic system and their roots. Note that my purpose here is neither to offer a balanced perspective that acknowledges the many merits of the economic system nor relate every disaster to a faulty design of that system. Rather, I wish to highlight some well-known challenges that can be ascribed, at least in part, to the principles of economic exchange and to the industrious pursuit of value creation and capture. These challenges include wealth concentration and economic inequality, the grip of ecosystem platform owners, loss of privacy and private choice, overconsumption and abuse of natural resources, and some drawbacks of globalization that reinforce the former caveats."