Samenvatting + begrippenlijst | Societies: Facts & Challenges | UA | 2025/26

Societies: facts and challenges
Preamble: talking about policy
 Positive (descriptive) analysis addresses factual questions : how is
the reality?
 Normative (prescriptive) analysis addresses questions that involve
value judgements: how should things be?
 Distinction: rooted in work of Scottish philosopher David
Hume (1711-76)

 Correlation: statistical association between variables (they
covary), two variables move in the same direction
 Causation : change in one variable causes a change in another
variable
 *correlation does NOT imply causation!!!
o A third (cofounding) variable may have an effect on both
variables
o Reverse causality: does one cause the other or vice versa?

 Talking about policy, formulating policy recommendations and
policy advice:
o Requires good understanding of society (descriptive analysis)
 Of the causal mechanisms between the variables of
interest
o Are conditional on a normative position (which society do we
want): we may disagree on that position
 should be done with care

1. Setting the scene (a conceptual framework)
1.1. Three basic institutions
 Societies: multilevel structure
 Local (community) ex. Antwerp
 Regional ex. Flanders
 National (nation state) ex. BE
 Supranational ex. EU
 Global ex. World
 Members of society
o = Individuals that society consists of, membership
(citizenship) entails rights: T.H. Marshall, 1950
 18th century: Civil rights for individual freedom
 19th: Political rights: to participate in exercise of
political power
 20th: Social rights: to live the life of a civilized
being according to the standards prevailing in the
society
 European Pillar of Social Rights (= supranational level)

, o Ratified in 2017 by EU member countries  VERY late
that social rights are thought about on this level
o 20 social rights:
 Social protection and inclusion
 Equal opportunities and access to the labor market
 Fair working conditions
o Action plan in 2021
 Basic institutions
o Members of society =/= isolated atoms  they live,
work,.. together  they form basic (social) institutions
o 3 basic institutions (= main actors)
* macro-history (history of homo sapiens): brain larger,
jaw and teeth smaller through time
 big heads = early in human development (babies
able to be born) >< some animals born later in their
development! = can walk few hours after being born,…
(ex. horses)
 babies need care, are helpless = structure,
collaborations, institutions are necessary

1- The family ( informal, non-profit, private)
 Why formed by humans? To…
o Create new members + care after them
o Provide mutual assistance and help
o Collaborate
o Pool resources
o …
 Informal organization
2- The government ( formal, non-profit, public)
 Cognitive Revolution
o +- 70,000y ago
o Homo Sapiens develops language: new
possibilities
 Collaboration in (larger) groups
 Creation of imagined reality
(thinking ab abstract notions)
 Sharing of myths, beliefs, legends,
…
 Development of culture and
religions
 Exchange and trade
(LLM = large language model)
 The market: the members of a society
engage in exchange, on the market. Most
markets rely on sellers offering their goods or
services to buyers in exchange for money.

, o A PLACE! Not an actor, the market itself
doesn’t do anything
o Exchange = essential feature, money
isn’t
o Market itself =/= basic institution!
 Pre-historic care
o Case of Romito 2 (earliest known case of
dwarfism)
 Italy – Grotta del Romito
 Male, 17-20y old, 120cm, died 11k y
ago
 Compromised mobility, restricted
forearm extension
 Could not have conformed to
normative demands in his
community!
 Received care at diff stages of
life
 Agricultural Revolution
o +- 10k y ago
o Homo sapiens develops farming and
agriculture  staying in same place
possible!
 Larger societies can be sustained,
increases food production per m²
 Some members can do other things
besides hunting and gathering food
 Writing system developed
 Social hierarchies (and inequality)
emerge ex. slavery
 The government
o Larger societies  formal organization
required (too complex)
o The government (the “state”) = some
members given the power to rule over
others
o Functions:
 Creating + enforcing laws
 Codex of Hammurabi: Babylonian
legal text (1776 BC), now in Louvre
= one of most ancient examples of
written law text
 Collecting + spending taxes
 in Ancient Egypt = one of the
first taxations: 1/5 of crops given to
Pharaoh
3- The firm ( formal, for-profit, private)

,  The Great Enrichment (Industrial
revolution) early 19th century
o Homo sapiens invents steam engine
 Economies of scale: increase of
productivity
 Putting out system  factory
system
 Urbanization: migration towards
large cities (firms are here)
 Paid for amount of hours worked:
change in relation and meaning of
work
o Deep transformation of societies
 Economic growth: measuring
o GDP: Gross Domestic Product = metric of
a society’s total economic output /
metric of the market value of all the
final goods and services produced
and sold (not resold) in a specific time
period by country
o GDP per capita = GDP of a society/total
number of inhabitants of that society
 The firm
o Economies of scale  firms: use
production means (capital and labour) to
produce goods
o Laborers = paid by hour worked
o Labour conditions for employees worsen,
uncertain living conditions, inequality
and poverty increase
 the “social question”
o Commodification of human labour:
people = producers of labour
 Commodification = the
transformation of things (goods,
services, labour) into
commodities that are sold on the
market
 Marxist notion
 After industrial revolution:
individuals need to sell their labour
to stay out of poverty, they face
(labour) market dependency
 Social norm = that you work, not
really a choice anymore
 Three basic institutions and the market
o Firms need production means to produce goods

, o Families own production means and want to consume
goods
o Room for exchanges on the market
 Market for goods, labour or capital
o Government regulates exchange and enforces contracts
 Free self-regulating market = market without regulation by
the government
o Ex. Russia in 1990s (Washington Consensus), Bitcoin
 A fourth basic institution? (can be argued)
o Voluntary associations, non-profit organizations,
charities form the civil society  important source of
social innovation (but not our focus)
o = Formal, non-profit, private



1.2. The basic structure of a society
= Describes how tasks, rights and duties, and advantages of
social cooperation are divided between the members of the
society and the basic institutions
 Dividing advantages of social cooperation requires a
“theory of justice”
 Different societies = different basic structures
 A central fault line: ownership and allocation of the
production means

1- Capitalism
 Private ownership of production means
 Allocation of production means by free exchanges on
the market (you decide what the price is of what you
own)
 Adam Smith’s invisible hand
 Own interest = important! Ex. A baker doesn’t bake for
benefit of others
2- Marxism/socialism
 Collective ownership of production means
 Allocation of production means by centralized planning
(government decides prices,…)
 “From each according to his ability, to each according to
his needs”
3- Welfare state
 Socialism and capitalism as extreme (utopian) basic
structures on the ideological left-right scale (intermediate
positions are possible!)
 Opposing views to decide allocation

, Through this state, the government of a society
intervenes in the play of market forces to improve the
welfare of its members
 = the set of policies in which the government
intervenes, power of government is used in four
directions:
o Correct market failures and provide public services
o Cover social risks
o Reduce inequalities
o Mitigate poverty
 Welfare state…
o As pragmatic alternative to pure capitalism:
there’s no deep theory, just reacting to what’s
happening
 Most welfare states started from capitalism
o Are omnipresent
o In different forms (influenced by Marxism and
corporatism)
 Size:
o Some countries spend up to 30% of GDP on social
spending
 Average 19% (OECD 2015)
o Big diversity between countries!
o Ex. graphs on slides 65-…
o * Remark! Social expenditure as measure of size of
the welfare state: it captures two aspects:
 The generosity of the welfare state (how
much does each beneficiary get?)
 The needs in a society (how many
beneficiaries are there in a country)

 Different conceptions of the welfare state
1- Welfare for the poor Ex. food stamps, OCMW
2- + taxation and redistribution Ex. personal income tax
3- + social insurance Ex. sociale zekerheid, NHS
4- + socio-economic policies by the government Ex.
role of government in shaping markets

 Welfare state and the market: interpretation
o Structural interpretation of the welfare state as
a response to societal problems created by
unregulated (free) market capitalism
 Welfare state as a damage-limiting, problem-
solving device
 Critiques:

,  From progressives (left): ameliorative
approach, but no radical cure is offered
to underlying problems
 From conservatives (right): too
generous & expensive, demoralizes
recipients
 Welfare state and power
o Alternative interpretation from power resource
theory
 the welfare state is a product of interest
conflicts, class struggle and class alliances
 welfare state as result of working-class
power achieved through organization by
labour unions or left parties

4- Corporatism (between 1 and 2)
 Deliberation and cooperation between the
institutional representatives of capitalists (who deliver
capital) and laborers (who deliver labour)
o Employers and employees
 Allocation of production means by deliberation and
market (what are the terms in which we are exchanging
labour?)
o Government: player / playmaker of deliberation
 Inspired by guilds
 Ex. social dialogue (BE)  why we have many strikes

1.3. Social contract
 = a hypothetical contract between the citizens of the
society which describes its basic structure
 Founding fathers:
o Hobbes: has a state authority over an individual? 
state can’t tell you what to do
o Locke: is property legitimate?  government =
protector of property rights
o Rousseau: sovereignty should be in the hands of the
people  in line with general will
 Social contract with overlapping generations
o Social contracts are negotiated and re-negotiated by
“real people” from overlapping generations
o Renegotiations:
 Normal times: piecemeal adjustments
 Turning point: deep revision
o Practical negotiations may lead to policy reforms
 Parametric policy reform: change parameters of
the existing policy system, keeping overall
structure the same

,  Structural policy reform: structure of existing
policy system also changes

2. When markets fail
 Why not leave everything to free exchange (families – firms) on a
self-regulating market?
 Why do we need a government that modifies market forces?
 Why do we need a welfare state?
o Arguments based on efficiency (lecture 2 & 3)
o Arguments based on justice (lecture 4 & 5)

2.1. Invisible hand
 The libertarian ideal of a self-regulating market
o Libertarianism = political philosophy that takes individual
freedom as a central value + argues that government
intervention is (morally) wrong
 freedom so important that they want a world without
government
VS
o Liberalism = political philosophy that takes individual
freedom as a central value + argues that governments are a
tool to ensure their liberties (for all)

 Social political dimension (two polar cases!)
o Libertarianism (see )
VS
o Authoritarianism = political philosophy that takes
order and stability as central values and justifying
restrictions on individual freedoms




o Right-libertarian thinkers (yellow)
 Nozick: the ‘nightwatchman’ state: a state with a
self-regulating free market – government only
provides the public good “safety”
 Hayek: the pursuit of social justice (equality) will
destroy liberty

,  Philosophical underpinnings of “Chicago school”
economics
 Mont Pelerin society
 Recent wave of libertarian ideas in politics (nov
2023): Javier Milei (prime minister of Argentina)
elected world’s first self-identified libertarian head
of state
o Problem for social-economic scientist: imagining a
counterfactual society?  chemists/… can do
experiments (what’ll happen when this changes…) - we
can’t
 Really complex world, too much to think about:
we build a model of a society that allows the
study of a counterfactual society
 We start from a benchmark model: simplified
model
 Here, we make 6 assumptions :
1- Individuals are rational
2- Individuals have perfect information
3- Markets are perfectly competitive
4- Markets are complete
5- There are no public goods
6- There are no externalities
 The invisible hand
o First welfare Theorem: in the benchmark model,
free exchange on a self-regulating market leads to a
Pareto efficient outcome
 = Adam Smith’s invisible hand
 Allocation is Pareto efficient when it is
IMpossibile to make a Pareto improvement
 After a Pareto improvement someone is
better off and nobody is worse off
 Result of Pareto efficiency = wasteless!!
 Pareto efficiency says NOTHING about
justice, it’s just about efficiency (outcome
can be unjust!)
 Free exchange leads to Pareto
improvement bc if both parties involved
would not benefit from it, they wouldn’t
exchange

 When the conditions of the benchmark model
are fulfilled, the self-regulating market is Pareto
efficient

2.2. Market failures

,  The benchmark model is not very realistic, there are market
failures in reality  a reason why we need a welfare state
o Our situation: welfare state = set of all socio-economic
policies

 Assumptions in the benchmark model:
1- Rational individuals
 Rational for other people = “smart”
 Rational for economist = “consistent”
o Psychology and behavioral
economics:
 Real individuals are not always
rational - E.g. Framing (choice
depends on how it is presented)
 Real individuals suffer from
bounded will-power – promising
yourself to do something but
postponing when it’s time to do so
(procrastination)
 Nudging:
 Framing: choice depends on
how it is presented
 A nudge = particular way to
present the choice that alters
people’s behaviour in a
predictable way without
restricting options
 Government Role 1. Nudge decision making
 Nudging individuals by thinking carefully about
the framing of decisions (choice architecture)
 Raising ethical questions: “Libertarian
paternalism“
 Libertarian : you chose yourself – all the
options are possible
 Paternalism : parents telling you what to
do – the choice architecture matters

2- Individuals have perfect information (about price
and quality)
 Prices and quality often unclear (quality: second-
hand, hiring an employee, buying bio-
products…)
 Government role 2. Improve information
 Regulating information on products
(requirements on packaging...)
 EU important role