1724. What in economics and economies needs to change?

Provocation # 53

There is a  broad understanding that much has to change, some with economics, some with economies. What has to change? Amazing how undeveloped that conversation is. The tendency in economics is to think through one or two variables at a time: tax, interest rates, bank regulation, production and consumption. But these hardly add up to the system which needs to change (by system i don’t mean some platonic idea, but the ensemble of opportunistic innovations adapted slowly over a long period of time).

The current system as postulated in economics is (these are a crude suggestive approximation. You can each add your own – but probably not subtract any)

rational isolated individuals
the firm
the market System. (monopolizing, hardly free in Smith’s sense)
big data
trade balance
efficiency (for what? we could speak of the efficiency of distribution)

But these, instead of leading us to a good outcome for society (the well being of society is the chief product of an economy) leads to devastating inequality, the likelihood of war, climate destruction and the deep corruption of politics.

The real system is

siloed education (fragmented, career oriented, not system management or citizenship
income and wealth distribution
private property
influence of wealth
interest (lower for the richer)
democracy – republic – tyranny: the mix
increasing segmentation of society
legal system

And because these are systems, change in one part requires change in most of the others.

How do we get from dealing with the first set of the present time to dealing with the second set where soon we need to be? It looks like for any one or several in the first list to get to the second, a number of things have to change relatively simultaneously. How do we do that? The well-being of society is the main output if an economy.

Change is hard. Most people actually want to hold on. “Habit is the great flywheel of society,” wrote William James in Principles of Psychology. An example of system change from ancient Greece: which evolved from the hunter’s kill to the sacrifice to the market. Ritual elements were brought along while change was occurring.

“That (privileged status of religious institutions) status allowed the distinctive institutions of the sanctuary to become the dominant institutions of the polis: sacrifice, feasting, and dedication constituted a nexus of practices that led to prescriptions on ritual behavior, which in turn served as a model for law giving.” From Mcinerney Cattle of the Sun.

Our modern conglomerate of rules and beliefs needs to change, but we are not, so it seems, system thinkers. Fragmentation is normal, leaving us locked in silos in universitys and business. Bureaucratic efficiency can be social dysfunction. What is being made efficient? The efficient production of things is not the efficiency of developing good and healthy people or a meaningful culture that can think systemically about itself.

The consumer with a basic approach to self optimization is not a good system citizen. This will be hard to change.

Aristotle recognized as much:

“For the law has no power to compel obedience beside the force of cus
tom, and custom only grows up in long lapse of time, so that lightly to
change from the existing laws to other new laws is to weaken the power
of the law. Again, even if alteration of the laws is proper, are all the
laws to be open to alteration, and in every form of constitution, or not?”
(Aristotle, Pol. 2.1269

What do we need to change that will make a change significant enough to make a significant change? A change adequate to the problems we face?

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