Part 2 - Chapter 6
A general theory of economies and organisations
This chapter opens by setting out the goal of stimulating thinking on economic pluralism through a new general theory of economics.
What didn't you see this coming?
Referring to the Queen of England's question to economists in 2008, the authors argue that neoclassical economics 'fails to accurately and reliably describe much of what actually happens in our economy' (p. 143).
Calling for a new general theory of economics, with greater predictive power, based on new hypotheses that are empirically tested.
[Editor's note: this seems to contradict the claims of previous chapters regarding the narrative basis of reality and the inter-subjectivity of existence. There is an instant (dramatic) shift to a Popperian philosophy with falsifiable predictions, and empirical data to test predictions. However, let's see where the argument goes.]
Decisions: rational or irrational?
In an interesting opening, the authors argue that there can be multiple rational views, even if the views themselves are different. It follows that 'irrational' is not the opposite of 'rational' because it depends on frames of reference for sense-making. Feelings are acknowledged - it is rationale to avoid dark places if you fear the dark (irrespective of actual dangers), if only to reduce your fear.
Neurobiology is introduced. Feelings are framed as responses to decisions that fit (or do not fit) a frame of reference. Positive feelings come from a good fit between sense-making frameworks and decisions taken. A decision is a process of feeling, not thinking.
Thinking and feeling: a complementary pair
The authors argue that to work with others, we need to consider both their thinking and their feeling as a complimentary pair. Feelings change thinking (and vice versa). On this basis, they set out an argument that...
All decisions are rational
The first proposition of a new General Theory of Economics is that 'all decisions are rational' (p. 147), given a particular frame of reference, internal reality, our immediate context and available options. Irrationality, therefore, becomes a judgement from another frame of reference, from another context, another place/time, using different thinking-feeling processes. Connecting with others decisions means connecting your decision frame of reference with someone else's.
Thermodynamics economics
Setting out the underpinning foundations of thermodynamics, the authors argue the everything happens because of the 'free energy' in the environment. Without this, nothing happens.
Ergodicity
Our economy is not ergodic, but most of the discipline of economics assumes it is. Ergocity is about patterns of behaviour (if 1,000 take a bet, would it be the same or different to one person betting a 1,000 times?). If ergocity is high, there is no different - if low, outcomes are different. Using an example of a coin toss (where - at face value - wealth would increase, but in actuality would decrease) the authors argue that no General Theory of Economics can assume ergodicity - it has to account for the expectations of individuals (and groups) based on their past history (and sense-making narratives).
Non-equilibrium: great shifts in culture, energy, communication
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