Dual Interest Theory (DIT) Geometry

 

What is Metaeconomics?

Metaeconomics is an empathy-based, science- and humanities-grounded alternative to mainstream Microeconomics. Instead of assuming only ego-based self-interest as in Single Interest Theory (SIT) in Microeconomics, Metaeconomics uses Dual Interest Theory (DIT), which explicitly includes empathy-based shared other-interest as an internal part of human behavior.

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What is Dual Interest Theory (DIT)?

Dual Interest Theory (DIT) holds that human behavior arises from two interacting motivations: ego-based self-interest (relating to Incentive) and empathy-based shared other-interest (holding the Ethic). Economic stability depends on balancing ego and empathy, self and other(shared)-interest, incentive and ethic—rather than privileging one over the other.

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How does Dual Interest Theory (DIT) in Metaeconomics relate to Adam Smith?

Adam Smith emphasized that moral sentiments—the Ethic—must temper self-interest. Metaeconomics formalizes Smith’s insight using modern behavioral science, treating Smith’s two major works as one integrated argument: Wealth and Sentiment, Self and Other(shared)-interest, Incentive and Ethic. The Ethic is essential for tempering the Incentive, and therefore for economic efficiency and market viability.

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Writing convention?

In Metaeconomics, the symbol “&” is used deliberately to emphasize that paired terms are joint, interdependent, and nonseparable, not merely additive. Expressions such as ego & empathy, self & other(shared)-interest, wealth & sentiment, and incentive & ethic denote co-arising drivers of human behavior and economic outcomes, consistent with Dual Interest Theory (DIT). Where “and” appears, it carries this same strong meaning; the use of “&” simply makes the jointness more explicit.

 

 

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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:

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B = α + βF + γS + δL + ε

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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:

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B = α + βF + γS + δL + λFS + φFL + µFSL + ϵ

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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.   The idea of using overlapping isocurves was inspired by Ragnar Frisch, first Nobel Prize economist, who used overlapping isoquants to represent such “FS” variables in production.  So, think of a production equation for behavior B in producing products and goods with the same terms.  The "FS" type interaction suggests the DIT styled indifference curves (and isocurves generally, to include isoquants) like that illustrated in Figure 1  (also see Lynne and Czap 2013).

 

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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/isoquant 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 and isoquant curves from the domain of the sacred.  Each domain reflects a set of tastes and preferences.  And, in the case of isoquants, reflects the thermodynamic reality that production is embedded in the Spaceship Earth system, which is also sacred.

 

In the realm of indifference curves, 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, and a third to bring self-command to balance the two forces at play --- through evolution) shows us geometrically what McCloskey found in the research that produced the 7-books, and I know statistically.  We know that  F & S are not orthogonal, neither in consumption giving demand nor production giving supply. The overlapping indifference/isoquant 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.  That tamping down arises through self-command, tempering path 0G with 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 for the profane (path 0G) and to Be Lovely (path 0M) for the sacred, the latter including but going well beyond mere religious claims.  DIT clarifies it happens on path 0Z, as in striking good balance in the need to Be Loved & Be Lovely.

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Figure 1 reflects the decision process in the Market Forum. The “dashed” lines in the Sacred S space recognize not everything 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 incommensurability problem with Figure 2.

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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 in the legislative, judicial and/or executive branches of a constitutional republic. The Other Forum at a higher level may involve all three, as the best balance of the profane & sacred is worked out in democratic fashion for that republic.  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 religious and political groups. The Other Forums,  then, operate at many levels throughout the society and Nation.

 

The talk, talk, talk in the Other Forum(s) to find and evolve value O represented in Figure 2 would then feed into the Market Forum represent in Figure 1.  Many sacred path 0M trajectories in Figure 1 would arise out of the talk, talk, talk of Figure 2, one for each Other Forum with which the individual is engaged, influenced by.  Each would affect how the profane path 0G of the Market Forum in Figure 1 is eventually expressed, with the Market settling in on what is expressed on path 0Z in Figure 1, as associated with path 0Z in Figure 2. 

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So, what think?  Seems to work, correct? 

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Related Metaeconomics Concepts

This topic is part of the broader Metaeconomics framework, which uses Dual Interest Theory (DIT) to integrate ego-based self-interest and empathy-based shared other-interest in support of stable, efficient, and humane economic systems—formalizing insights anticipated by Adam Smith. For concise definitions, terminology, and links to related concepts, see the Metaeconomics FAQ hub: https://www.metaeconomics.info/faq-frequently-asked-question

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