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Psychology, economics and Public Polices are interconnected

Public policies are a branch of science that are connected to economical factors effecting the

population as well as having social impacts on them. A public policy is influenced by the

economical conditions as well as the social conditions that are part of the country that the policy

is made in (Straßheim & Beck, 2019). Hence comes the question of how public polices effect

economical functions of a country while at the same time have social and even personal

physiological impacts on the population. These policies are some of the key aspects of economy

that connect economics and psychology, because the effects of economical policies can be traced

through the economical infrastructure of the country to the social setting and then right down to

the individuals who are part of the country (Lemarchand, 2019). However, even though policies

affect the economy and economy affects the every person who is part of that system, where the

policy was implemented, and individual behavior forms social economical behavior. Often a

times there are events in economy that cause economical crises bring on social impacts like job

lose and poverty, which are found to have direct impacts on increase in crime rates and

homelessness for examples.

Economical systems operate on the existence of humans, and therefore humans effect economics

and economics effects human behavior (Jackson et al., 2017). Research of the past has shown

that when polices that were for the development, education and policies that increased the value

of lives were put into place, then such policies not only had a positive impact on the society and

on every individual member of the society but also on the economy (Pugh, 2017). A classic

example of such a place where historians and policy makers argue that good polices helped with

individual, social and economical developments are the time of the Aztecs. Experts argue that
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because of good governance and polices that helped the common man the Aztec empire is a

classical example of when and how polices helped with development of anthropology,

economics and positive growth of the society as a whole.

As per famous theory of McClelland he says that in studying humans and their motivations and

human desire to achieve, humans have a desire to do things better than they were done earlier.

This human desire to achieve things better has been the key driver towards economical growth.

His research concluded that since the desire to achieved and do things better than they were done

in the past has given birth to entrepreneurs, and these entrepreneurs with their new business ideas

have become a agent of change in the society. This social change also means economical growth

when business ideas are accepted and liked by the people. McClelland concluded that this is one

of the ways that individuals can effect the society, however sometimes individuals with much

less impact then that created by entrepreneurs can also have an impact on the society

(McCLELLAND, 1970). Other studies that researched on the impact of individuals on economy

also added to these research findings, where some of them discussed the issues of value systems

that are part of the social culture, and talked about how those cultural values are the greater

reason for social development and thereby effect economical change (Ayal, 1963). Some studies

on the other hand pointed out that if economical development was the only thing that policies

and policy makers focus on then it can have negative circumstances (Ayal, 1966). Whereby, high

focuses in efforts to increase economy growth gives rise to stress and thereby mental illness as

well as physical discomfort, and this can have a negative impact on economical growth

(Galbraith, 1952). Furthermore, studied also showed that it is not just public policies that

increase economical conditions of countries, but also social and cultural settings, where in a

social setting that has a lot of individual who are working towards trying to increase their
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standards of living; gives rise to more individuals who want to increase their living standards

(Galbraith, 1980).

Adding to the concepts of entrepreneurship for economical development there is a new growing

trend of open innovation. It is noted that good policies are made in a way that give room for open

innovations to grow and flourish. With growing digitalization and a constant need to develop

new technology and major market competition between the companies involved in the digital

revolution there is a to promote new business models to support innovations as well as policies

that give room to these business models to run and operate (Bogers et al., 2018). Concepts of

new emerging business models like the model of shared economy, that gives rise to platforms

like uber and airbnb, have become a major part of the economy today. These models also have

effect on individual behaviors, where before the introduction of uber for example, we could not

have imaged getting into a car with a complete stranger, these new economical models and

governmental policies that allow these models to work are giving shape and rise to new

economical growth and social acceptance (Ide et al., 2017). Innovations and allowance of

governments to support and make room for these innovations is one of the things that has a direct

impact on the economy. Where felling of safety is connected to humans, as per the Maslow’s

pyramid of needs, humans have a desire to feel safe and it is a mental statute. This safety is

connected directly to the governmental polices and the economical sustainability and economical

balance of the society that people live in, governmental polices make people feel save in uber

rides and also in a stranger’s house that we can rent for a night on airbnb. Technology and

policies have given room to businesses that are helping with the growth and development of the

economy (Miles, 2019).

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Economical conditions have an impact on individual behaviors, and also have an effect on

attitudes, that show through individual’s behaviors (Key & Donovan, 2017). It is clear that

economy has an directly effect on political behaviors as well, where economical conditions effect

politics and policies (Kiewiet, 1983). Political behavior is a reflection of the behavior of the

people in the system (Lordkipanidze, 2019). This means that people’s satisfaction with economy

and society, and policies and political settings are things that effect social behavior (Vykopalová,

2014). Studies in this area show that there is a correlation between variables such as a person’s

satisfaction and their income, which is effect by their perception of justice in their economical

situation (Vykopalová, 2014). This means that people who are not doing so well economically

usually put the blame of their economical failures on the government and the policies made by

the government, on the other hand people who are doing better economically and want to

improve their economical conditions say that reasons for not being 100% satisfied is based on

their own internal efforts and their motivational levels (Strumpel, 1976). This can be further

understood by the theory of locus of control (Lefcourt, 1991; Phares, 1976).

The individual behavior of people is what forms the society and the behavior of the society has a

direct impact on the economy. One of the measures of the infrastructure of the economy and it’s

growth is the GDP (gross domestic product). The GDP is a recognized measure of the

development of the economy, it shows the effect of the societies consumptions on the economy,

it is calculated by adding all the private consumptions to the gross investments and government

investment and the government spending and adding the export minus the imports (Antolin-Diaz

et al., 2017). It is therefore a benchmark that countries try to reach in order to show that they

have developed growing economies. Just by looking at the GDP we can tell that how closely

people and economy is connecting and also how governments and polices can effect society and
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on a more macro level the people who are part of the society. The governmental expenditure

section of the GDP focuses on how much the government spend to accommodate and create a

livable environment for the people. Governmental spending can include money spend on

constructions, money spend on education etc. all of which are just for the betterment of the

society and betterment of every individual of the society. For many countries they lack of

spending on public reliefs and life nessorcities like education for example can have an impact of

the economy. As an example many counties in the Euro zone have a reduced educational budget

then is deemed fit for social well being, this reduced budget in turn means the euro zone is

lagging behind and not developing the way it should because of not spending the required

amounts on education. This low educational budget also means that there are often a times low

standards of living seen, as well as high unemployment rates etc. all of which are negative social

phenomena that effect people on an individuals level and also the economy as a whole

(Vykopalová, 2014). With the Europeans countries in order to fix these problems and to show

growth in euro by the European union there have been measures put into place, and a bench mark

project has been introduced by the European Comparison Program (ECP) that is being

overlooked by Eurostat and it closely monitored and observed in order to make sure that no

country in the European union lacks behind on education, health care and businesses have places

to develop so that unemployment rates can be brought down (EuroStat, 2008).

In conclusion it is can easily be seen that society has an direct impact on economy. And policies

can be the key markers or brokers of the system. Bad policies can give rise to social issues like

unemployment and poverty and lack of education, where as good policies can give rise to

innovation and new business ideas, as well as help in the development of the economical

condition of the country. Society is made by individuals and it is clearly indicated that society
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has an impact on economics, and at the same time is it clear the society is effected directly by the

policies, and economics is effected directly by the society. Even though there is evidence to

proof that a poor performing individuals give blame to the outside environment and complain

about the policies and government, indicating that their failure to do well and reasons of poverty

are linked to the government. However, it is also true that if the government does not have good

policies in place then there are evidence of poor economical conditions amounts individuals. All

in all governmental policies, economy, society and individuals are all closely connected to each

other, where the low performance of one of them effects the whole chain.

References

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