Metaeconomics – An Overview
"...the first bourgeois society in northern Europe dealt in the virtues of love, prudence, and justice as much as in rye and nutmeg. So we do still, though we have become embarrassed to say so (McCloskey, 2006, p. 292).
"What is required for an ethics is, of course, a conscientious moral agent, a virtuous person. Kant himself said this. In his reflections on anthropology he praised "the man who goes to the root of things," and who looks at them "not just from his own point of view but from that of the community, " which is to say (wrote Kant), der Unpartheyische Zuschauer, which as it happens, is precisely the German translation of Adam Smith's ideal character from whom all virtues are said to flow, the impartial spectator." (McCloskey, 2006, pp. 321-322)
"How selfish so ever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it. Of this kind is pity or compassion, the emotion which we feel for the misery of others"( Smith, 1759, The Theory of Moral Sentiments, quoted in Solomon, 2007, p. 64, who adds: "Without compassion (sympathy), there would be no foundation and no motivation for ethics."
Though it may be true, therefore, that every individual, in his own breast, naturally prefers himself to all mankind, yet he dares not look mankind in the face, and avow that he acts according to this principle. He feels that in this preference they can never go along with him, … If he would act so as that the impartial spectator may enter into the principles of his conduct, which is what of all things he has the greatest desire to do, he must, upon this, as upon all other occasions, humble the arrogance of his self-love, and bring it down to something which other men can go along with (Smith, 1759/1790, loc 1714-1727).
Economics needs to be more humanistic... two core motivations are self-interest and other-interest (Tomer, 2017, p. 137, 146; also see Tomer, 2012)
Greed is out, empathy is in (DeWaal, 2009; also, see Rifkin, 2009)
I was trying to save capitalism by making it good
(Commons, 1934, cited in Whalen, 1993)
Metaeconomics (see Lynne, 2020: See the Blog for more information and order details) is a different kind of economics (and a unique kind of Metaeconomics, too: See Other Forms of Metaeconomics). Metaeconomics transcends and goes byond traditional Microeconomics by bringing ethics explicitly into the analytical machinery of economics --- explicitly considering the moral dimension represented in such ideas as commitment, norms, values and individual conscience. In effect, Adam Smith's Impartial Spectator is formally brought back into the economic framework--- by recognizing a joint, empathy- based shared Other-interest evolving in regular interplay and mutual feedback with the egoistic- based Self-interest (in "utility," profit, etc.). It also highlights the essential need for an adequate level of Self-control to balance the joint and dual interests. In effect, Humans generally want to do the right thing while also wanting to minimize pain at the same time, seeking a satisfactory level of pleasure (benefits minus costs being of concern, but conditioned by doing the right thing).
Smith spoke to tempering the drive to pleasure with doing the right thing, focusing on maximizing own-interest. Said own-interest depended upon tempering the arrogance of self(interest) love with that which the other (interest) could go along with (sentiment based ethics). Modern Behavioral and Neuroeconomics Science confirms the conjecture of moral philosopher Smith, confirming that philosophical proposition, mixed with Smith's experience, a common sense of Human psychology and how the Human brain works. Empirical science confirms that people are Humans, and not just Econs, which Smith fully understood. Metaeconomics is about Humans.
Metaeconomics goes beyond and transcends Microeconomics in seeing that Humans have evolved with the capacity for dual interest, as documented in Behavioral and Neuroeconomic (empirical) science. Metaeconomics is built on that empirical foundation. Humans have both an ego-based self-interest and an empathy-based other-interest, jointly pursued and experienced. So, Metaeconomics uses a Dual Interest Theory (see What is Dual Interest Theory? ) as the analytical engine to represent the Human.
People maximize own-interest which is composed of good balance in a joint self & other-interest. The other-interest (arising out of empathy-with, seeking that which the other can go along with, so an ethical-interest) is shared with others, yet internalized within the own-self. The empathy (and ethics)-based other-interest serves to temper the self-interest. The resulting Dual Interest Theory is still an individualistic theory, representing what is on-going within the rational mind of each person. The shared other-interest is an internalized interest, within the person, coming out of the empathy-based, empathy-oriented parts of the brain.
In contrast, Single Interest (Self-interest only) Theory in Microeconomics sees the person as only an Econ, a person always working to maximize self-interest, which excludes ---and, as a result is actually opposed to --- ethical reflection. Single Interest Theory in Microeconomics fails to address the need to temper the excesses, as made clear in Metaeconomics: Tempering the Excessive Greed (Lynne, 2020). As did Adam Smith, Metaeconomics shifts attention to maximizing the own-interest which is composed of a joint self & other-interest. Maximizing own-interest also requires some sacrifice in both self-interest and other-interest, giving a new frame to altruism, as illustrated in the overlapping isocurves of Dual Interest Theory (What is Dual Interest Theory? ).
Microeconomics represents only the ego, while Metaeconomics sees the need for balance in ego & empathy. Balance is the only way to achieve mental stability (homeostasis) within a person, and, writ large, stability and efficiency in the larger system, as represented in the notion of economic efficiency. Metaeconomics sees the need to temper the inherent excesses of the more primal ego with empathy to achieve economic efficiency. So, Metaeconomics addresses both the material (egoistic-hedonistic-self) and the moral (empathetic-sympathetic-shared with the other), simultaneously, seeing same as joint and nonseparable. The moral (and ethical) must temper the material, which is essential to a stable (minimal political economic chaos, peace not chaos) and economically efficient system, both essential to overall happiness.
Metaeconomics also recognizes the need to directly model The Will and Self-Control/Self-Discipline reflected in symbiotically and synergistically integrating and balancing the two interests. Due to addressing commitment, and introducing said balancing, Metaeconomics proposes to fill the empty space, bridging the gap, between Microeconomics and Macroeconomics by helping improve understanding of the micro-micro (individual within the household and with the firm/organization) to macro (family, firm, group, society) transition, as well as the macro-to-micro transition. It sees the fundamental interdependence between each person, and, between each Person and Nature. All people are interdependent Travelers on Spaceship Earth. In contrast, Microeconomics sees independent Travelers, except for an occasional externality. Metaeconomics sees everything as internal: There is no such thing as an externality.
Metaeconomics also works to integrate the best ideas out of Neoclassical Economics (both Microeconomics and new Classical Macroeconomics) with that in Neoinstitutional Economics (and Keynesian Macroeconomics). The former focuses on Self-interest, while the latter recognizes the moral dimension, ethics, and the institutions which order relationships in the shared Other-interest. Metaeconomics does this integration through empirical testing: Ideas from the older traditions in economics are included only if left standing after rigorous, empirical tests. And, overall, Metaeconomics is designed to help answer the empirical question(s): What can be done to make capitalism good? To build a humane capitalism, like Adam Smith had in mind?
Metaeconomics clarifies that a humane capitalism --- one that is economically efficiency, minimizes political economic chaos (achieves peace), and produces happiness --- is only possible with good balance in self & other-interest, person & community, and, writ large, good balance in Market & Government. It is about finding good balance in a joint Free Market & Free (inclusive, representative, democracy-styled) Government, both essential to the other.
See Lynne (2020) and the Metaeconomics Blog for applications of Dual Interest Theory in Metaeconomics. Generally, Metaeconomics produces new insights into old economic puzzles and paradoxes, as well as on how to resolve many contemporary issues. For example, the age old problem of the tendency for a less than humane capitalism to produce extreme inequality in wealth is resolved through the notion of Optimal Inequality.
The following reflects thinking that evolved over a couple of decades prior to publishing Lynne (2020). As the following makes clear, Metaeconomics draws on a wide array of disciplines, and not just Economics. It is truly an interdisciplinary framework and theory, in the spirit of Consilience (Wilson, 1998).
Metaeconomics by its focus on shared Other-interest is also, then, directed at understanding and explaining what is perceived by the individual person as the on-going norms or set of shared values in the community. Said norms are believed (with the need for empirical testing) to influence individual actions and affect the relationship(s) among individuals within a firm or household, as well as among households and firms. Individuals build norm-based... hopefully moral...networks, with such networks representing how the economy is embedded in society (and how both are embedded in the natural ecosystem).
Yet, Dual Interest Theory in Metaeconomics is focused on the person in contrast to the relationships between the person and others: It looks inside the person. Metaeconomics sees a person incorporating the norms and relationships in community, and the institutions more generally, within own-self. Metaeconomics also rests on the foundations laid by Maslow's work in psychology: It sees self-actualization as a key part of what leads to the wealth of nations, interpreted as reaching an alternative, distinct plane in human development. Yet, it conditions the Maslowian idea of a hierarchical evolution to actualization with the conjecture that the move to actualization, instead, arises through resolving the continual tension and conflict between the egoistic (self-interest) and empathic (shared other-interest, internalized within own-self) tendencies, i.e. "the Me needs a We to Be", yet, recognizing, that "without a Me there is no We."
Metaeconomics works at being a parsimonious theory, giving a formal analytical system to model the Me & We interdependency. It models the interplay and evolution of both the egoistic and the empathic, the ego & empathy, self & other-interest tendencies and the necessary balancing of same by The Will, in a disciplined Self-control. Once symbiotically balanced, the individual achieves a kind of "I-Thou" state after emerging as a distinct entity, a position of existence wherein one is identifying with others. Said evolution to an integrated and balanced state is also consistent with the Angyal(1941; 1965) idea that individuals seek balance and integration in autonomy (mastery, independence, ego, self-interest) and homonomy (unity, relatedness, empathy, other-interest). Said effort at integration goes on within an environment of continual outside pressure and control asserted on the individual, or heteronomy (coming out of Communities in general, and from Government representing said Communities of shared interest).
Based on Angyal (1941;1965), we might also posit that the joint pursuit of two interests oft as not goes on in a heteronomous (outside-governance, controlling, perhaps by government) environment, with both the ecosystem and the social system asserting influence and, perhaps too often, leading to excessive control over the individual. So, during the joint pursuit individuals are seeking various degrees of freedom and autonomy from outside-governance while at the same time seeking unity, homonomy with the same forces and objects; with nature and the ecosystem more generally; and with others in common causes, ideologies and theologies... conditioned by all the virtues, tempering and restraining the more primal tendency to prudence-only.
A preference for minimal outside-governance (heteronomy) is viewed on a continuum rather than as a dichotomous choice; also, heteronomy (outside-governance) needs to be held to a minimum --- nudging might be tolerated, but control is to be at least minimized if not eliminated --- operating mainly as sanctions in the background (Teddy Roosevelt's "speak softly and carry a big stick" notion, from an African proverb), lest a true integration of self&other-interest within the self, and thus within the group, is not likely to occur.
Metaeconomics sees the individual being influenced by relationships and by the claims of various communities of interest (trade associations, relationship sales among buyers and sellers, clubs and community groups, religious organizations, farm/ranch and environmental organizations as well family and friends), generally captured in the Neoinstitutional Economics notion of an institution. Such claims lead to commitments, or not: Individuals may express the will and discipline to not build these relationships, too. The degree of commitment to a particular group (and the norms represented therein) is an empirical question. The claims have influence through the vehicle of norms and networks (the social capital) that continually evolve and change. The focus is on the individual, consistent with the notion of Individualism. In research and analysis, Metaeconomics stays close to methodological individualism, although recognizing the need for a plurality of methodologies. A plurality of methodologies also better matches this pluralistic theory of human nature.
Like Microeconomics, Metaeconomics starts with a sovereign consumer who has interests, and preferences. Yet, unlike Microeconomics, Metaeconomics also sees producers with shared-interests that work to influence consumers. Metaeconomics suggests that consumers and producers generally have a common, shared Other-interest, making for a jointness in Consumers & Producers, being interdependent rather than independent as presumed (without empirical test) in Microeconomics.
In the most technical sense, we might envision both the consumer and the producer with two fields of perhaps even incommensurable utility, incommensurable interests, in the background, and represented in the egoistic and empathetic parts of the triune brain. The other part of the triune brain is the will, the self-control part or mechanism that oversees (in mentally healthy people) the tension in the egoistic and empathic parts, after conscious, rational consideration. The possibility for two fields of joint and potentially incommensurable utility (pleasure and morality), incommensurable interests more generally (no matter what units one uses), is represented in two sets of overlapping indifference curves for the consumer and two sets of overlapping isoquants for the producer (see What is Dual Interest Theory?). Working with two sets of overlapping indifference curves, and two sets of overlapping isoquants in the case of production relationships, also facilitates formal mathematical analysis on par with that in standard microeconomics (for these mathematics, see Lynne, 2006a,b).
The overlapping isocurves idea was Inspired by Etzioni (1986, 1988), Frisch (1965), and Berne who is associated with transactional analysis in psychotherapy and the humanistic/existential branch of psychology (e.g., Maslow). Azjen and Fishbein (1980) have also had an influence, especially in the Ajzen Theory of Planned Behavior wherein the individual is modeled as having attitudes (self-interest), norms (shared other-interest) and control (self-control, the will). Said field of research points to how one might measure, do quantitative measurements, of the degree to which each interest is being pursued, and the degree of control being expressed.
Metaeconomics also draws on Khalil (1990), with the concept of a distinct entity arising as a result of standing in a new station, in the spirit of Adam Smith's station of the impartial spectator. An early paper by Frankfurt on the will being that which distinguishes humans from other animals has also had an influence. Sen (1977) points to the need to model opportunities and not just constraints, and the need to go beyond the self-interest by recognizing the claims of others, have also been influential. Frank (2004) pointing to commitment ties nicely with the shared other-interest being expressed through a disciplined self-control, affecting expression of self-interest.
The Angyal (1965) holistic theory of personality fits nicely with most if not all of this other work, and, in many ways, sets the foundation on which the rest of it can be integrated. The integration of such widely disparate ideas may well be justified by contemporary research in neuroscience (see Cory, 1999; 2000; MacLean, 1990; Levine, 2006; Wilson, 2006)). As alluded to earlier, Metaeconomics also reflects the spirit of E.O. Wilson's hope for one theory of human behavior, as in Consilience (Wilson, 1998), rather than literally dozens of such theories, which is the current state especially of economic and social science.
Metaeconomics sees the norms and shared values, the shared other-interest, as often unconsciously embedded in the Invisible Hand. The hand jointly --- subtly, in the background of the conscious --- guides the individual and the market(s) within which said individual participates. Metaeconomics also shifts attention to the positive freedoms (opportunities) in balance with the negative freedoms (constraints), drawing on Sen (1977, 1987). It sees the challenge for this distinct chooser as one of being in self-command (expressing will, being disciplined) and emerging as a distinct entity who reflects the individual pursuing a joint self-interest and other(shared)-interest, within self.
In effect, metaeconomics expands rational choice by building the will and control over self to symbiotically integrate and balance the egoistic and the empathic, leading to an economics that posits (relative) prices having moral content, and the moral dimension driven in part by relative prices. So, metaeconomics proposes to nudge the invisible into conscious consideration in the visible. It also sees, however, how the ego influences the empathy, and thus how (relative) prices drive the moral dimension, a kind of symbiotic and potentially synergistic feedback being at work.
Prices and costs become subjective rather than objective measures of value, due to each such price or cost being affected by the empathic (essentially the emotional, values-based) tendency, and the individual paying attention to/ being influenced by norms, while still having the freedom of/ command over the choice(s). Yet, relative prices are also shown to drive the symbiotic balance between the self-interest and shared other-interest: The material/pleasure and the moral/symbolic dimension are inextricably intertwined.
We move away from the moralist perspective that values are always exogenously given, to the perspective that sometimes the moral dimension is driven by relative prices. We propose to subject the moral dimension to benefit-cost calculation not unlike that in the material dimension, albeit still recognizing that sometimes a metaphysical moral dimension needs to trump the self-interest (also, however, the self-interest needs to sometimes trump the moral dimension/ other(shared)-interest). These forces are in constant tension consistent with neuroscience findings on how the human brain is configured and programmed (see Cory, 1999).
It is through consciously considering new institutions, and the ethical system, shared other-interest in the invisible (hand), which now is now nudged into the visible, that the "magic" of market efficiency can emerge. The policy process in a representative democracy based market economy is largely about making the invisible --- the unconscious, generally represented in the shared other-interest --- visible. Metaeconomics sees leaving the economy to the invisible hand only when the process and outcomes are both good (ethical, reflecting the moral dimension).
It follows that when there are deviations from what is good, individuals become "irritated" ---which is what drives institutional change in the policy process (after Bromley, 2006; for reviews, see Lynne, 2007; 2009). New policies (and institutions more generally) need to be consciously considered, developed, evolved, and implemented. Metaeconomics also suggests, like McCloskey (2006), the need to go beyond the Prudence-Only, Max U (maximum profit, maximum utility) perspective on individual economic behavior, to see the complexity that is actual human nature, seeing the need for integration of Prudence-Only with Justice and Temperance, along with Courage, with all conditioned by Love, Hope and Faith.
Yet, with all said claims, we also recognize that much of what is Metaeconomics represents a mere integration of well-known ideas and constructs in economics and other social sciences. We do not claim much that is uniquely new, as noted in Speculation: Lester (1995, p. 161) points out regarding the similar need for a new theorist to assimilate and integrate the many personality theories in psychology, into one new theory "...such a task requires the services of someone in marketing because the ideas will not be new ones but merely old ones presented in new packaging." In many ways, Metaeconomics is only new packaging containing mainly well-known ideas, albeit we believe the integration of the items, and thus the package itself is unique.
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See an item list of this Overview at: List of Features