Economic Theory of Circumstances (ETC)

Abstract Economics, as a social science, is ultimately concerned with the conditions under which human life is lived and sustained within society. Yet much of economic analysis approaches these conditions indirectly, privileging outcomes, equilibria, or aggregates over the lived conditions from which they arise. This paper advances an Economic Theory of Circumstances (ETC), which restores the human person for its conscious, purposive, and socially embedded character, to the center of economic inquiry by treating circumstances as the foundational unit of analysis. ETC begins from the ontological premise that society is constituted by persons, and that the proper subject of economics is not the biological body but the lived condition of the body as an aware and morally responsive agent. At any point in time, the circumstances of an economic entity consist of its material and institutional conditions, together with how the agent understands and responds to those conditions. These circumstances are inherently temporal and directional, and their evolution may be characterized as decline, stagnation, or progression. The paper argues that economic behavior emerges from the interaction between an agent’s state of circumstances and the modes of action those circumstances rationally induce, particularly within exchange, the fundamental event of economic life. By conceptualizing economic change as the directional movement of circumstances over time rather than as a residual outcome of static comparisons, ETC provides a coherent framework for understanding persistence, transition, vulnerability, and advancement. In doing so, it reframes economics as a genuinely human-centered social science, capable of integrating material logic with ethical meaning and offering a circumstance-based foundation that transcends conventional economic paradigms.