In her Doughnut Economics: 7 Ways to Think Like a 21st Century Economist Brit academic Kate Raworth imagines the human world as a doughnut. If you penetrate the Ecological Ceiling or fall through the Social Foundation, here there be dragons, and you must call in and submit to the activist elite.
What we must do, she writes in "Nurture Human Nature," is attack Homo economicus, the "rational economic man... at the heart of mainstream economic theory."
You see, rational economic man is "an isolated individual -- unaffected by the choices of others" and a useful basis for modeling the economy. But in fact, as critics of economics have pointed out, we are in fact social animals:
We follow social norms, typically preferring to do what we expect others will do, and especially if filled with fear and doubt we tend to go with the crowd.
Economists have tended to think that it is prices that change peoples' behavior. But other social scientists say that "social norms and expectations of what others are doing" can be far stronger influences on behavior. Especially for WEIRD (White Educated, Industrialized, Rich and Democratic) people. For instance we act on the basis of:
availability bias -- using most accessible information
loss aversion -- strong aversion to taking losses
selective cognition -- selecting for information that fits our world view
risk bias -- underestimating chance of extreme events
The point is that "just getting the prices right" is not the whole story, especially when it comes "to relationships that we have traditionally managed with our morals." And "money" can erode "social norms."
Well, yes. And social science research has indicated that individuals can be "nudged" into socially beneficial behavior.
The challenge now is to discover how lessons from street-level success... could be scaled up to nudge and network whole cities, nations, and international negotiations with the Doughnut.
Hey, we can change Homo economicus & Co. into Homo altruisticus and Homo socialis. Under the wise and beneficial control, no doubt, of Homo educatus and Homo Sinistericus.
Of course, what Raworth is really saying is that gubmint economists, up to now, have got it all wrong. So what we need is a new generation of gubmint economists with bright shining new ideas.
But how do we do this? In "Get Savvy With Systems" Raworth attacks the old economics of treating society as a "mechanism" and instead think of it as an "organism."
See, we humans aren't used to dealing with complex systems.
Our brains evolved to cope with the near, the short term and the responsive, while expecting incremental, linear change... [not to mention] our stories, with their happily-ever-after endings.
And 150 years of economics "has reinforced our biases with mechanistic models and metaphors" with Jevons and Walras trying to make economics into the physics of economic mechanics. And the supply-and-demand curves led to general economic equilibrium theories that dominated economics all the way up to the 2008 economic crash.
It was back in 1948 that Warren Weaver pointed out that a far more useful approach was to think about "what makes an evening primrose open when it does". Instead of thinking about "the economic world as linear, mechanical and predictable" it is time to think in terms of complexity science, the problem of "organized complexity" such as the unimaginable complexity of every living thing, the way that things are interconnected in ways that produce distinct behaviors: "cells in an organism... members of a family, or banks in a financial network." You need "reinforcing feedbacks" to "make a system move, then balancing feedbacks" to "stop it from exploding or imploding."
Actually economists have known this: the problem was to do it. For Raworth the event that forced economists to get a clue was the 2008 crash. Everybody was using economic models that "in which private banks played no role at all" and they all thought we had reached "the Great Moderation." In fact, like in the classic economic bubble, where trends tend to reinforce. Until they don't. And in the process, the successful get more successful. Until they don't.
Between 1988 and 2008, the majority of countries worldwide saw rising inequality within their borders, resulting in a hollowing out of their middle classes.
Then, she writes, there is not just economic inequality but the nightmare of climate change. Fortunately John Sterman has built a computer game C-ROADS that "instantly adds up all nations' greenhouse gas reduction pledges to show their... implications for global emissions, atmospheric conentrations, temperature change, and sea-level rise." Assuming, I would say, that the experts' predictions about the effect of increasing CO2 are correct and not another South Sea Bubble.
So here we are, with the alarm bells ringing,
we have transgressed at least four planetary boundaries, billions of people still face extreme deprivation and the richest 1 percent own have of the world's financial wealth.
To avoid a fate worse than death we heed to understand
Today's economy is divisive and degenerative by default.
Tomorrow's economy must be distributive and regenerative by design.
The answer is to change the economist "from engineer to gardener." They should set up "small-scale policy experiments to test out a variety of interventions" stop the ones that don't work "and scale up the ones that do." Donella Meadows has a three-point program to make this work: "healthy hierarchy, self-organization and resilience."
Healthy hierarchy means that "nested systems serve the greater whole of which are are a part" such as liver cells in a liver.
Self-organization means not just the self-organization of the price-mechanism but the commons and the household as well. And "the state should support all three in doing so."
Resilience "emerges out of a system's ability to endure and bounce back from stress".
And economists must get ethical: "act in service to human prosperity... respect autonomy in the communities that you serve... be prudential in policymaking".
So, "we must embrace complexity and draw on its insights in order to... make [economies] distributive and regenerative by design."
Or, of course, we might figure out from all this that when you combine economists with politics you get politics, whether the economists are mechanics or gardeners. And what is needed is not better, more ethical economists, but governments that stop looting and plundering and using economics to help them do it.
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