New Age Economies

Unit 3
Unit Syllabus
Circular Economy- Concept of Circular Economy, difference between
Linear and Circular Economy, Role of Circular Economy in Sustainable
Business and Innovation. Behavioral Economics- Core Concepts of
Behavioral Economics, Nudging and Choice Architecture, Ethical
Concerns of Behavioral Economics. Economic Nationalism -Nature of
Economic Nationalism, Contemporary Cases in Economic Nationalism,
Future of Economic Integration. Sharing Economy – New Business
Models , Characteristics , Difference Between Platforms and Traditional
Business Models, Different Types of Platforms , implications on future
of work.
Concept of Circular Economy
• Circular economy is an economic system aimed at minimizing waste
and maximizing the use of resources by keeping materials in use for
as long as possible.

• It is an alternative to the traditional linear economy, which relies on a

take-make-dispose model where resources are extracted, turned into
products, and then discarded as waste.
3 Key Principles of Circular Economy
1. Designing out waste and pollution: Products are designed with the
end of their life in mind, so that they can be easily disassembled,
repaired, or recycled. This helps to reduce waste and pollution and
extend the lifespan of materials.
2. Keeping products and materials in use: Instead of being discarded,
products and materials are kept in use for as long as possible
through practices such as reuse, repair, and refurbishment.
3. Regenerating natural systems: Natural resources are conserved and
regenerated through practices such as using renewable energy
sources, reducing greenhouse gas emissions, and protecting
biodiversity.
Difference Between Circular and Linear Economy
• Resource use: In a linear economy, resources are used once and then discarded,
while in a circular economy, resources are kept in use for as long as possible
through practices such as recycling, reuse, and refurbishment.
• Waste management: In a linear economy, waste is disposed of in landfills or
incinerated, while in a circular economy, waste is minimized through practices
such as recycling, reuse, and regeneration.
• Environmental impact: A circular economy is designed to minimize the
environmental impact of economic activity, while a linear economy can have a
significant environmental impact through resource depletion, pollution, and
waste generation.
• Economic benefits: A circular economy can provide economic benefits such as
reduced costs, new revenue streams, and improved environmental and social
performance, while a linear economy can be more costly due to the high cost of
waste disposal and the depletion of finite resources.
 Role of Circular Economy in Sustainable Business
and innovation
• Resource efficiency: Circular economy principles promote the efficient use of resources by
reducing waste and keeping materials in use for longer periods. This can lead to cost
savings for businesses, as well as reduced environmental impacts.
• Innovation: The circular economy encourages innovative approaches to product design,
manufacturing, and waste management. This can lead to the development of new business
models, products, and services that are more sustainable and meet the changing needs of
customers.
• Supply chain management: Adopting circular economy principles can help businesses to
better manage their supply chains by reducing waste, improving transparency, and
increasing collaboration with suppliers and customers.
• Corporate responsibility: A circular economy can help businesses to demonstrate their
commitment to sustainability and corporate responsibility. This can improve their
reputation, attract customers, and help to retain and attract employees.
• New business opportunities: The circular economy creates new business opportunities for
companies that specialize in recycling, reuse, and refurbishment. It also promotes the
development of new technologies and innovations that support a circular economy.
Behavioural Economics
• Behavioural economics is a field of economics that studies how
psychological, social, and emotional factors affect economic decision-
making.
• It combines insights from
• Psychology
• neuroscience, and
• sociology
to understand how individuals and groups make economic choices.
 Core Concepts Of Behavioural Economics
• Limited rationality: Behavioural economists believe that humans are not always rational in
their decision-making, as traditional economic theory suggests. They may use shortcuts,
heuristics, and biases to make decisions, which can lead to suboptimal outcomes.
• Prospect theory: This theory explains how people make decisions under uncertainty. It
suggests that people are more sensitive to losses than to gains, and that they value
potential losses more than potential gains of equal value.
• Social preferences: Behavioural economics recognizes that people’s preferences are not
always based solely on self-interest. Social preferences, such as fairness, reciprocity, and
altruism, can also influence economic decisions.
• Framing: The way information is presented can influence economic decision-making.
Behavioural economists study how framing, or the context in which information is
presented, can affect choices.
• Nudging: Nudging is a behavioural economics concept that involves designing policies or
interventions to influence behaviour in a positive way without limiting freedom of choice.
This approach is often used to encourage people to make healthier or more sustainable
choices.
Nudge Theory
• Nudge theory, or nudging, is a concept in behavioural economics that
suggests that subtle changes in the environment can influence people’s
behaviour and decisions without restricting their choices. Nudging involves
using small, simple interventions to steer individuals toward a particular
behaviour or decision, while still allowing them to make their own choices.
• The concept of nudging was popularized in the book “Nudge: Improving
Decisions About Health, Wealth, and Happiness” by Richard Thaler and
Cass Sunstein. The authors argue that people often make choices that are
not in their best interest because they are influenced by biases, heuristics,
and social norms. By nudging people in the right direction, policymakers
and organizations can help people make better decisions that align with
their goals and values.
Nudge Theory
• Nudges can take many forms, such as changing the default option, providing
feedback, simplifying information, or framing choices in a certain way. For
example, a cafeteria might place healthier food options at eye level or in
prominent locations to encourage healthier eating habits. Another example might
be prompting people to opt-out of a default setting, such as automatic
enrollment in a savings plan, rather than opting in.
• While nudging can be a powerful tool for promoting positive behaviour change,
there are also concerns about its ethical implications. Critics argue that nudging
can be manipulative and may infringe on individual autonomy if people are not
aware of the nudges or do not have the ability to opt-out.
• Overall, nudging has become a popular tool for policymakers and organizations
seeking to encourage positive behaviour change without imposing restrictions or
mandates. However, it is important to balance the potential benefits of nudging
with the ethical concerns it raises to ensure that nudges are used in a responsible
and transparent manner.
Choices Architecture of Behavioural Economics
• Choice architecture is a concept in behavioural economics that refers to the
way in which choices are presented to individuals, and how the design of
the choice environment can influence decision-making. Choice architecture
recognizes that the context in which decisions are made can significantly
impact the choices people make.
• The term was popularized by Richard Thaler and Cass Sunstein in their
book “Nudge: Improving Decisions About Health, Wealth, and Happiness”.
According to Thaler and Sunstein, choice architecture can be used to nudge
people toward better decisions without limiting their freedom of choice.
They argue that by understanding the psychological factors that influence
decision-making, policymakers and organizations can design choice
environments that encourage desirable outcomes.
Choice Architecture In Action
• Defaults: The default option is often the one that people stick with, even if it’s not
the best option for them. By setting defaults that align with desired outcomes,
such as automatic enrollment in a savings plan or organ donation, choice
architects can nudge people toward better decisions.
• Framing: The way a choice is presented can significantly impact the decision-
making process. By framing choices in a certain way, choice architects can
influence people’s perceptions and preferences. For example, “90% fat-free”
sounds more appealing than “10% fat”.
• Incentives: Rewards and penalties can be used to nudge people toward desired
outcomes. For example, a company might offer a financial incentive for
employees who complete a wellness program.
• Feedback: Providing feedback on choices can help individuals make better
decisions in the future. For example, providing feedback on energy consumption
can encourage people to reduce their energy usage.
Choice Architecture In Action
• While choice architecture can be a powerful tool for promoting positive
behaviour change, there are also concerns about its ethical implications.
Critics argue that choice architects may be using their influence to
manipulate behaviour, and that the potential benefits of choice
architecture may not be equally distributed among all individuals.
• Overall, choice architecture is an important concept in behavioural
economics that recognizes the importance of the context in which
decisions are made. By designing choice environments that encourage
desirable outcomes, policymakers and organizations can help people make
better decisions without limiting their freedom of choice. However, it is
important to ensure that the use of choice architecture is transparent and
ethically responsible.
Economic Nationalism
• Economic nationalism is a political and economic ideology that
prioritizes the interests of the nation-state over international trade
and globalization. It emphasizes the use of protectionist policies to
promote domestic industries and reduce reliance on foreign goods
and services.
• The nature of economic nationalism varies depending on the country
and the political context. Some proponents of economic nationalism
argue that it is necessary to protect domestic industries from foreign
competition, preserve jobs, and promote economic growth. Others
see it as a means to maintain political power or cultural identity.
Economic Nationalism Examples
• Tariffs and trade barriers: These policies are designed to protect
domestic industries by making foreign goods more expensive, making
them less competitive.
• Subsidies: Government subsidies are provided to domestic industries
to reduce costs and improve competitiveness.
• Buy domestic campaigns: Encouraging consumers to buy products
made domestically, such as “Made in India” campaigns, can promote
domestic industries and reduce reliance on foreign goods.
• Currency manipulation: Governments can manipulate their currency
to make exports cheaper and imports more expensive, boosting
domestic industry and reducing imports.
 Contemporary cases in Economic Nationalism
• United States: The Trump administration implemented a range of protectionist policies, including
tariffs on imports from China, Europe, and other countries, in an effort to reduce trade deficits and
protect domestic industries. The “America First” agenda also included efforts to bring jobs back to
the US and reduce reliance on foreign goods.
• United Kingdom: Following the Brexit vote, the UK government has emphasized the importance of
“making Britain a global leader in free trade” while also seeking to protect domestic industries. The
UK has been negotiating new trade deals with countries around the world, including the US and
China.
• India: The Indian government has pursued a policy of “self-reliance” and reduced reliance on
foreign imports, particularly from China. India has implemented a range of tariffs and other trade
barriers to protect domestic industries, including electronics and textiles.
• China: The Chinese government has pursued a policy of “Made in China 2025,” which aims to make
China a global leader in advanced manufacturing and reduce reliance on foreign technology. China
has implemented a range of policies to promote domestic industries, including subsidies and
preferential treatment for domestic companies.
• Brazil: The Brazilian government has implemented a range of protectionist policies, including tariffs
on imports of steel and other goods, in an effort to protect domestic industries and reduce reliance
on foreign goods.
 Future of Economic Integration: Trends
• Digital trade: The growth of digital technologies and e-commerce is likely to create new
opportunities for economic integration, as businesses can sell goods and services online without
traditional trade barriers. However, digital trade also raises concerns about privacy, security, and
intellectual property.
• Regional trade agreements: Many countries are likely to continue pursuing regional trade
agreements, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership
(CPTPP), as a way to reduce trade barriers and promote economic growth. However, the future of
multilateral trade agreements such as the World Trade Organization (WTO) remains uncertain.
• Climate change and sustainability: As concerns about climate change and sustainability continue to
grow, economic integration may increasingly focus on promoting green technologies and
sustainable practices. This could involve trade policies that encourage the adoption of sustainable
practices and the development of green industries.
• Geopolitical tensions: Rising tensions between major global powers such as the US, China, and
Russia could lead to greater economic fragmentation and a more regionalized approach to
economic integration.
• Consumer preferences: As consumers become more conscious of issues such as sustainability, fair
labor practices, and social responsibility, there may be increased pressure on businesses to adopt
responsible and ethical practices. This could lead to changes in supply chains and trade patterns as
companies seek to meet consumer demand.
Sharing Economy: New Business Model
• The sharing economy is a new business model that involves the
sharing of resources, such as property, goods, and services, among a
group of individuals.

• It has gained popularity in recent years due to the rise of digital

platforms that enable people to easily share and exchange resources.
 Characteristics Of The Sharing Economy
• Peer-to-peer sharing: In the sharing economy, individuals share resources directly with each other,
rather than through traditional businesses or intermediaries. This allows for greater efficiency and
flexibility, as people can share resources as needed, without the constraints of traditional business
models.
• Technology-driven: The sharing economy is enabled by digital platforms, such as Airbnb, Uber, and
TaskRabbit, which provide the infrastructure for people to share and exchange resources. These
platforms use technology to match supply and demand, and to facilitate transactions and
communication between users.
• Decentralized ownership: In the sharing economy, ownership of resources is distributed among a
group of individuals, rather than being concentrated in the hands of a few large corporations. This
can promote greater competition, innovation, and diversity in the market.
• Lower costs: By sharing resources, individuals can reduce their costs and increase their access to
goods and services. For example, Airbnb allows people to rent out spare rooms or properties,
providing affordable accommodation options for travelers. Similarly, car-sharing services such as
Zipcar enable people to access cars without the high costs of ownership.
• Environmental benefits: The sharing economy can also have environmental benefits, by reducing
waste and promoting more sustainable use of resources. By sharing resources, people can reduce the
need for new production and consumption, and can extend the lifespan of existing resources.
Difference between Platform and Traditional Business Model

• A traditional business model involves creating a product or service and selling it

to customers. The company controls the production process, and the customers
have little involvement in the creation of the product or service.

• In contrast, a platform business model brings together producers and consumers,

enabling them to interact and transact with each other.
 Difference between Platform and Traditional Business Model
• Value creation: In a traditional business model, the company creates value by manufacturing a
product or delivering a service. In a platform business model, the company creates value by
facilitating interactions between producers and consumers.
• Customer involvement: In a traditional business model, customers have little involvement in the
production process. In a platform business model, customers are actively involved in creating value,
either by producing or consuming.
• Network effects: A platform business model is characterized by network effects, which means that
the value of the platform increases as more producers and consumers join. In a traditional business
model, the value of the product or service does not necessarily increase as more customers use it.
• Revenue model: In a traditional business model, revenue is generated through the sale of products
or services. In a platform business model, revenue is generated through various means, such as
transaction fees, advertising, or subscription fees.
• Scalability: A platform business model is often more scalable than a traditional business model, as
it can reach a large number of users with minimal incremental costs.
• Risk: Platform businesses face unique risks, such as the risk of disintermediation, where producers
and consumers bypass the platform and interact directly with each other. Traditional businesses
may face risks related to production and distribution, such as inventory management or supply
chain disruptions.
Types of Platforms
• Transaction Platforms: These platforms facilitate the exchange of goods or
services between buyers and sellers. Examples include online marketplaces like
Amazon and Etsy, and ride-sharing services like Uber and Lyft.
• Innovation Platforms: These platforms allow developers and other innovators to
create and test new ideas. Examples include developer platforms like Apple’s iOS
or Google’s Android, and crowd-sourcing platforms like Kickstarter or Indiegogo.
• Social Platforms: These platforms enable people to connect and interact with
each other, sharing information and experiences. Examples include social media
platforms like Facebook and Twitter, and communication platforms like Slack and
Zoom.
• Content Platforms: These platforms provide access to various types of content,
such as music, videos, or news. Examples include streaming services like Netflix
and Spotify, and news platforms like the New York Times or BBC.
Implications on future of Work
• Platforms have disrupted traditional models of employment, creating new
opportunities for freelancers, gig workers, and independent contractors. They
have also led to increased competition for jobs, as workers can now connect with
potential employers from anywhere in the world.
• Platforms have also raised questions about labor rights and protections. Gig
workers may not be entitled to benefits like healthcare or paid time off, and may
not have access to the same legal protections as traditional employees. As
platforms continue to evolve, it will be important for policymakers to address
these issues and ensure that workers are treated fairly and have access to basic
rights and protections.
• Overall, platforms are likely to continue to play a significant role in the future of
work, creating new opportunities and challenges for workers and businesses
alike. It will be important for workers to adapt to these changes and develop new
skills and competencies in order to remain competitive in the global marketplace.