Dual Interest Theory (DIT) Geometry
Setting the stage here for making claims about the geometry of DIT, the observation and claim by Deirdre McCloskey from the 2022 book, Beyond Positivism, Behaviorism… quoted in the Review of the McCloskey 7-books (Cargo Cult … Toward a Humanomics with a Theory ), referring to SIT (Single Interest Theory in Microeconomics) is:
“I get the price (N: read SIT) theory: that people are moved by price and property, the variables of prudence, price, profit—or, as I have called Max U’s motivations, the Profane. But the point here is that people are also moved by the S variables of speech, stories, shame, the Sacred, and by the use of the monopoly of coercion by the state, the legal rules of the game and the dance in the courts of law, the L variables. Most behavior, B, is explained by F (McCloskey uses Profane P, changed to Profane F here, because DIT formulations use P for price P) and S and L, together, metaphorically speaking:
​
B = α + βF + γS + δL + ε
​
The equation is not wishy-washy or feminine or unprincipled or unscientific. The S and L variables are the conditions under which the F variables work, and the F variables modify the effects of the S and L variables… Of course… The institution is the S, the process of the F, the legal limits L. Or sometimes the other ways around. Anyway, often, all. … You can get as technical as you want about it. For example, econometrically speaking, if the F and S and L variables are not orthogonal, which is to say if they are not entirely independent—or alternatively if there is reason to believe that a combined variable such as FS has its own influence—then an estimate of the coefficients that ignore S (or FS or FL) will give biased results.”
Yes. So, the Behavioral Equation might look like this instead:
My (with students and colleagues) 3-4 decades of empirical testing (lots of surveys, focus groups, and experimental economics laboratory using controlled experiments) confirms the key role of interactions like FS (and FL, and FSL). So, while we were finding robust statistical evidence of FS, we had no way to represent it within SIT, which led --- inspired by Ragnar Frisch, first Nobel Prize economist, and his overlapping isoquants to represent such “FS” variables in production --- to draw the DIT styled indifference (and isocurves generally, to include isoquants) this way:
So, what think? We need the FS interaction term in the equation. We know it belongs there. We know that omitting it produces biased results. The overlapping indifference curves represent the claim of FS (and FL, FSL). The overlap of the indifference (and isoquant) curves from the domain of the profane overlap with the indifference curves from the domain of the sacred. Each domain reflects a set of tastes and preferences. The overlap in said tastes and preferences (our brains wired that way --- two domains, one for the ego-based profane the other for the empathy-based sacred --- through evolution) shows us geometrically what McCloskey found in the research that produced the 7-books, and I know statistically — that F & S are not orthogonal. The overlapping indifference curve figure is the equation drawn in the language of economic geometry.
SIT in mainstream (Micro)economics focuses all the attention on path 0G, the path of max U or max Profit. DIT in Metaeconomics adds the insight that reasoned people tamp down the excesses of path 0G by considering what the other can go along with as represented on path 0M. The result is: While the Econ favors path 0G, the Human chooses path 0Z … and is a lot happier for it. As Adam Smith described it, a Human wants to Be Loved (path 0G) and to Be Lovely (path 0M). DIT clarifies it happens on path 0Z, as in striking good balance in the need to Be Loved & Be Lovely.
​
Figure 1 reflects the decision process in the Market Forum. The “dashed” lines in the Sacred S space recognize not ever thing can be quantified, and even if it can be quantified, it may be priceless, as in having non-money value rather than money value. So, DIT addresses that problem with Figure 2.
​
​
The possibility frontier V curves come from moving line a resource/budget line in Figure 1. The value O curves come out of the talk, talk, talk of the Other Forum, like a legislative body in the realm of politics. That Other Forum could also be many other types of organizations from the family, extended family, friends, organizations of all kinds from bowling leagues to church groups. The Other Forums could, then, operate at many levels throughout the society and Nation.
​
So, what think? Seems to work, correct?
