Toward a Theory of Economic Self Reliance ESR

1. Toward a Theory of Economic Self Reliance (ESR) Paul Godfrey Marriott School of Management Brigham Young University Sept 03

3. 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

4. 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.

5. What ESR isn�t 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

6. 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)

7. 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

8. 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

9. 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

10. Serious Impairment No reserve assets No risk management or insurance Obsolete skills Profligate living

11. Economic Vulnerability

12. Economic Self Reliance

13. 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

14. Example: The Micro�s 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

15. 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

16. Why should companies care?

17. 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

18. 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 model�s strengths?