MetaEconGaryMetaeconomics: Tempering Excessive Greed
Updated: Nov 19
(Post updated November 2022).
Instead of looking for an alternative to replace it (microeconomics), we should try to imagine an economic theory to transcend its limitations…. (Leijonhufvud 2004)
If you are ready for an alternative that transcends the limitations of single interest theory (SIT) in microeconomics, you are ready for the new dual interest theory (DIT) in metaeconomics, as presented with many applications in:
Lynne, Gary D. 2020. Metaeconomics: Tempering Excessive Greed. Palgrave Advances in Behavioral Economics, John Tomer, ed. New York: Palgrave Macmillan.
The Book focuses attention on the essential role of empathy (the sentiments, as Adam Smith called same) in achieving economic efficiency, political economic stability, and, yes, overall happiness.
Try It. You Might Like It. And, after you read it, consider joining the Project of Metaeconomics.
And, if you need more in terms of sufficient reason to try it, see the section below titled What are the Limitations of Single Interest Theory (SIT) in Microeconomics?
Also, if you want to go deep right away, into how Dual Interest Theory (DIT) works, see What is Dual Interest Theory?
Buy it, otherwise gain access at:
Palgrave Macmillan: https://www.palgrave.com/us/book/9783030506001#aboutBook
SpringerLink (if you are associated with a University, or other entity with a SpringerLink subscription, it is available for free download at): https://link.springer.com/search?query=Metaeconomics
Amazon and Amazon Kindle: https://www.amazon.com/gp/product/B08NG1H7BT?ref_=kin_pc_dp&fbclid=IwAR3IldkmSZDGmBHtWh3YKnYphAgcAqs8NsN2d7_heki2aIFN0E3bVigNB3k
On level of the discourse: The entire Book is accessible to anyone with some basic understanding of Microeconomics and other Social Sciences (the latter because Metaeconomics represents an integration). Chapters 1-5 and Chapter 8 need a bit of backgrounding in the use of indifference curves (underlying demand) and isoquants (underlying supply). Mathematical Metaeconomics is relegated to the Appendix. The remainder of the book (Chapters 6-15, including most of Chapter 8) applies Metaeconomics in addressing many contemporary economic issues: Said Chapters are easy reading, not requiring formal training. As reviewer Frantz (2022) says, it is: "... a clear and easy to read book, containing very little math but a few graphs on metaeconomics which are more complex than what you see in an intermediate microeconomics class or text. It makes use of economic theory, the psychology of humans, and related topics including neuroeconomics/neuroscience. It is often difficult to integrate two subjects, let alone three or more, but Lynne explains metaeconomics using economics and other disciplines and it seems as if it is one large discipline."
What are the limitations of Single Interest Theory (SIT) in Microeconomics?
The italics parts below represent notable quotes from substantive sources regarding the ongoing critique pointing to the limitations of Single Interest Theory (SIT) in Microeconomics The bold response points to how Dual Interest Theory (DIT) in Metaeconomics transcends said limitations.
(at the beginning of a Chapter titled Humane Liberalism is Ethical)It’s the difference between Chicago School libertarianism 1.0, fiercely opposed to any ethical reflection whatever; and Harvard-School social engineering 1.0, which is thoughtlessly attached to utilitarianism; and in opposition to both, the humane liberalism 2.0 that Adam Smith and I espouse (McCloskey 2019, p. 93). (Note: Metaeconomics provides the framework for humane liberalism 2.0, and, if the frame continues to stand-up to empirical test --- so far, it is doing well --- it holds the potential to give sufficient reason to favor that form of "ism").
The neoclassical (which uses SIT in Microeconomics) paradigm does not merely ignore the moral dimension but actively opposes its inclusion … neoclassicists belittle the role of values, or see them as but one source of “tastes” among many others. We hold that moral commitments deeply affect all behavior, economic included (Etzioni 1988, p. 12). (Note: DIT includes moral commitments through the analytical device of an empathy based shared other-interest: In effect, another set of indifference curves is added to reflect said commitments. The added set overlaps the set normally provided in SIT models, showing the two interests as joint and nonseparable at every point in the indifference space, and, in the arena of production, overlapping isoquants with one reflecting the private product and the other the public product, like corn and wildlife in a farm field).
Conventional economics assumes that people are all maximizers — in fact, this statement is something of a mantra to the conventional economist … (who) assumes that only wealth maximizers are rational (Altman 2012, loc 935). (Note: DIT focuses attention on maximizing own-interest, not only self-interest which is about wealth maximizers. In own-interest, the person focuses on a balanced life, as in seeking the best balance in wealth & commitments, wealth & that which is shared with the other)
The purely economic man is indeed close to being a social moron. Economic theory
has been much preoccupied with this rational fool (Sen 1977, p. 336) … (and on social connection and influence in community) between the claims of oneself and the claims of all lie the claims of a variety of groups-for example, families, friends, local communities, peer groups, and economic and social classes (Sen 1977, p. 318) (Note: DIT clarifies that maximizing self-interest is akin to being a rational fool. To move beyond being a fool, a person must work to temper the self-interest with the claims of the other. DIT has a placeholder for the influence and claims of the other, as represented in the empathy based other-interest as well as the claims of oneself represented in the ego-based self-interest. DIT also has a place for an array of claims, with many sets of shared other-interests from family through community to the nation, and, yes, even to the shared interest in the shared systems on the Spaceship on which we travel together around the Sun).
… the key political and economic institutions of our society—political parties, corporations, and the free market—have abandoned their commitment to the common good (Reich, 2018, p.90). ... Whatever-it-takes-to-win politics disregarded what had been the unwritten rules of good government, based on equal political rights—enabling the most powerful players to extract all political gains. Whatever it takes to maximize profits rejected what had been the unwritten rules of corporate responsibility, based on obligations to all stakeholders—allowing CEOs, Wall Street, and investors to extract all financial gains. Whatever it takes to rig the economy dismissed what had been the unwritten rule that the “free market” should work for everyone—permitting the most powerful economic actors to extract almost all economic gains (Reich, 2018, pp. 90-91).” (Note: DIT clarifies that the self-interest of politicians, corporations, and the very "free" market itself must be tempered by the shared other-interest which gives content to the common good. It is about striking a good balance in the private & common good, the private & public good. It is about empathy-based ethics represented in the common good working to temper the more primal pursuit of self-interest among politicians, corporations/business and in the Market with widely shared interest in the common good).
(in commenting on the rational fools paper by Sen 1977, claiming the frame gives rise to sentimental fools) Commitment is problematic because one sometimes pursues it against one’s interest… neoclassical view reduces both commitments to interest, while the multiple-self approach separates both commitments from interest. The separation permits the confusion of sentimental fools, who enter commitments without regard to interest, with rational sentimentalists, who take interest into consideration (Khalil 1999, p. 373) [Note: DIT sees the joint and nonseparable self, so it resolves the issue raised here, with maximizing ego-based self-interest leading to being a rational fool; maximizing empathy-based other-interest leading to being a sentimental fool; and, finally, the place of happiness, peace, and, yes, economic efficiency from maximizing the balanced self & other-interest, the own-interest leading to be being a rational sentimentalist. DIT in Metaeconomics does not reduce commitments to interest, nor does it separate interests and commitments; rather DIT sees joint and nonseparable (and likely incommensurable) interests & commitments]
Economics is all about how people make choices; sociology is all about how they don’t have any choices to make (Duesenberry 1960, p. 33). [Note: DIT resolves the problem, seeing that choice by a person is about a joint I&We, person&community, individual&social. DIT integrates economics&sociology. DIT also clarifies that the rational choice form of sociology, after Coleman (1987) has the same limitations as the rational choice form of economics represented in SIT. DIT clarifies that true rational choice is only possible with good balance in the joint and nonseparable individual&social, a person being both ego (individual) and empathy (social) driven & influenced].
(On the matter of the invisible hand in Neoclassical Economics in contrast to the visible hand of Neoinstitutional Economics) A multiplicity of copycat usages has developed. These include: a palsied hand, a grabbing hand, a vanishing hand, an invisible fist, a visible hand (government, corporate management), an invisible hand with a green thumb (profitable environmentalism), and tracking the invisible hand (convergence of double auctions to competitive equilibrium). The figures of speech that arise with the invisible hand and other terms are of dubious assistance in eliciting knowledge (Samuels, Johnson, and Perry 2011, pp. 148-149, using the frame of an Institutional/Neoinstitutional economist). [Note: DIT works to integrate across the self-interest represented in Neoclassical Economics (which uses SIT) and the other-interest represented in Neoinstitutional (traced back to the original Institutional) Economics which is largely atheoretical, and could benefit in using DIT. So, DIT also clarifies the role of the invisible hand of Neoclassical Economics supposedly guiding the single-minded pursuit of self-interest relative to the visible hand of Neoinstitutional Economics which brings the shared other-interest into play in tempering the self-interest. Table 2.1 in the Metaeconomics book details (a big table, 7-pages long!) the many arenas about which Neoclassical and Neoinstitutional Economics frame the economic question so differently, and suggests how DIT works to integrate across the two fields of inquiry].
In the neoclassical model (which uses SIT in Microeconomics), the firm is assumed to have perfect knowledge of alternative courses of action and to choose the alternative that maximizes its current period profit. The neoclassical firm's decision makers are obligated only to the owners, the recipients of profit. External social influences or responsibilities are not a part of this model, nor are internal relationships or ethical considerations (Tomer 2014, p. 5).[Note: DIT brings the social influences and responsibilities into the analytical system through the empathy (ethics) -based other (shared with the other, yet internalized within the own-self)-interest. The DIT in Metaeconomics frame of the firm sees a humane firm. It is a firm that goes well beyond just a responsibility to maximize shareholder value, as Milton Friedman claimed was the only responsibility. A humane firm has social responsibility-with, coming from empathy-with labor, community, consumer, and, yes, the Spaceship Earth system within which the firm is embedded. DIT has a placeholder for the shared responsibility represented in the shared other-interest, so it can be used to give an overall framework of use in designing and building a humane firm that works best for everyone)
… thinking like an (read Micro) economist undermines community (Marglin 2008). (Note: DIT brings community back into direct view within the analytical system such that it cannot be unconsciously or otherwise undermined without sufficient reason coming out of the analysis. Community is represented in the shared other-interest)
Ecological economics is a trans-disciplinary effort to link the natural and social sciences broadly, and especially ecology and economics … to develop a deeper understanding of the complex linkages between human and natural systems, and to use that understanding to develop effective policies that will lead to a world (i.e., a Spaceship Earth system) which is ecologically sustainable, with a fair distribution of resources (both between groups and generations of humans and other species) and which allocates scarce resources, including “natural” and “social” capital (Costanza 2006, pp. 199-200). (and said natural and social capital represented in the community of shared interest, a person sharing with other people and with other species requires) putting Ego ‘N Empathy as the Centerpiece of an Ecological Economics (Hayes and Lynne 2004, 2013). [Note: As Ecological Economics makes clear, the problem is the focus of SIT on a person, and framing said person as a kind of Robinson Crusoe flying alone on the Spaceship, as though the economy embeds the Spaceship system and the person is very much in control. DIT also focuses on the person, but recognizes the Ecological Economics frame which points to the person and economy embedded within the Spaceship system, not the other way around, with each person having limited control. Also, then, in DIT, nothing is external, except the energy coming from the Sun. DIT represents the reality of embeddedness (internalities, no externalities) in the construct of the shared other (shared with other humans and all other living creatures)-interest on the Spaceship. DIT also recognizes 1st and 2nd Law thermodynamics, the foundation on which Ecological Economics is built. Also, as DIT makes clear --- see the Optimal Inequality Blog --- the matter of a fair distribution among and with people and other creatures traveling together on the Spaceship must be addressed in order to achieve economic efficiency, peace with the other, and, the happiness of the Travelers which depends upon both efficiency and peace].
Possessive individualism (rational fool maximizing self-interest and undermining community)—a joint phenomenon growing out of the Enlightenment and the emergence of contemporary economics as the civic religion of modern life—is at the core of the emerging world disorder (Bromley 2019, p. 3)… (so, read Micro)Economics, it turns out, is just political ideology in disguise (Bromley 2019, p. 27)… (people) ought to behave as rational utility maximizers, and (microeconomists) will show them exactly what they must do (maximize self-interest) [Note: DIT recognizes the tendency to possessive individualism is primal, in the evolutionary sense, the reptilian core of the brain doing what that part of the brain does, as represented in the ego-based self-interest. DIT recognizes the essential need to temper the primal tendency with the empathy-based other(shared with)-interest, which in evolutionary terms, is mammalian in origin. So, rather than only recognizing the primal tendency, as in SIT, the alternative frame in DIT is not only to recognize it, but to recognize the need to temper it. Bromley also points to the need to fix the American firm, making it a humane firm, which is all about empathy based tempering of the primal profit maximizing, especially seeing labor as people, not just resources with a price P, also then seeing their humanity, their value V. And, in some ways most importantly, by making the point on the political spectrum explicit in DIT, through the analytical notion of a shared other (shared with others of same political party)-interest, DIT in Metaeconomics moves away from being an ideology like is SIT in Microeconomics. And, some will protest that SIT is an ideology, albeit quite clear that SIT is used by the neoliberalism of the Right to claim a maximal market is always best, claiming SIT based scientific evidence for same. In DIT, the best point on the political spectrum turns into an empirical question as the various possible and alternative content of the shared other(political)-interest is now put to empirical test]
(possessive individualism facilitated by liberalism, classical and otherwise, presumes a) rights-bearing individuals who could fashion and pursue for themselves their own version of the good life. Opportunities for liberty were best afforded by a limited government devoted to ‘securing rights,’ along with a free-market economic system that gave space for individual initiative and ambition (Deneen 2018, p. 1)… (it was launched) … to foster greater equity, defend a pluralist tapestry of different cultures and beliefs, protect human dignity, and, of course, expand liberty, in practice generates titanic inequality, enforces uniformity and homogeneity, fosters material and spiritual degradation, and undermines freedom. Its success can be measured by its achievement of the opposite of what we have believed it would achieve… (resulting in) our political, social, economic, and moral crisis (Deneen 2018, p. 4) (Note: DIT is well-suited to being used as the analytical system to make sense of the Deneen contention that community and religion needs to play a larger and recognized role in tempering the tendency to go to excesses in the expression of liberty and freedom. True freedom means living a more balanced life, seeing the jointness and nonseparable person & community. DIT points to the need for good balance in the private & public good. DIT gives analytical insight into how maximizing own-interest ---good balance in the self & other- interest, person & shared in community – interest --- is essential to address the litany of issues raised by Deneen, especially in pointing to addressing the titanic inequality: DIT points to finding the optimal inequality, instead, so distribution is not ignored as in SIT)
…we didn’t set our sights high enough for what the “we” could really be, and we didn’t take seriously enough the challenge of full inclusion. Therefore, the question we face today is not whether we can or should turn back the tide of history, but whether we can resurrect the earlier communitarian virtues (Read “We”) in a way that does not reverse the progress we’ve made in terms of individual liberties (Read “I”). Both values are American, and we require a balance and integration of both (Balance an integrated I&We) (Putnam and Garrett, 2020, p. 341). (Note: DIT has a placeholder for the “We” as represented in the shared other-interest. So, the rebalancing back to something more akin to what described the system in the mid-1950s, the top of the upswing Putnam and Garrett refer to, is about recognizing the joint and nonseparable I&We, self&other-interest. To fix the problem, the system needs to nudge the “We” and reduce the emphasis on the “I”. Think of the scale of justice with “I” on one tray and the “We” on the other tray, with the current situation of the “I” tray being almost on the floor. By putting effort into building the “We”. Build Back Better comes to mind as one attempt to do so, something akin to the New Deal, as well as labor unions, and, more attention to community in general at that time, all of which led to the balance in the mid-1950s. So, DIT does not see any particular reason to claim that somehow, like in SIT, that minimal government and maximal market is somehow always the best. Rather, in DIT, the balance in what is framed as a joint and nonseparable market & government is an empirical question. It is about applying a volitional pragmatism in the search for sufficient reason, using framing from Bromley (2006), to go with a particular and best balance in market & government. DIT reframes Government as a viable partner with the Market, not as something that intervenes, interferes, and distorts as is claimed in SIT used in Microeconomics)
Political parties are the central institutions of democracy. They clarify and structure alternatives. They make politics accessible to the masses. And they channel and organize political ambition. The only form of modern mass democracy that has worked is party democracy. We need strong, healthy parties for democracy to work well. We just need more than two (Drutman 2020, p. 6) ... most obvious point is that parties and elected officials do what’s in their perceived self-interest (Drutman 2020, p. 243)... (and because of self-interest only) the current two-party system is a doom-loop disaster that can’t right itself (Drutman 2020, p. 205) ... In multiparty democracies with proportional electoral systems, parties ... understand that governing requires a multiparty coalition, and what they can achieve will depend on the coalition that forms (Drutman 2020, p. 214). (Note: DIT confirms that the Drutman proposal of multi-political parties would likely work far better than the two-party system because it would nudge empathy-based building of the shared other(with other now smaller parties)-interest. DIT points to an empathy politics, with empathy-based shared other-interest in coalitions working to temper the ego-based self-interest inherent in a two-party system)
It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. (Smith 1776/1789, loc 239-251)… 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). (Note: DIT works well in representing the Adam Smith contention, in that the impartial spectator holding the conscience is represented in the empathy/sentiments based other-interest and the arrogance of self-love is represented in the ego-based self-interest. The notion that which other men can go along with is captured in the shared other-interest. In DIT, that empathy/sentiments based shared other-interest (worked out at the station of the impartial spectator) works to temper the tendency to act on the arrogance of self-love, only, to temper the self-interest. It is about seeking to maximize the own-interest made possible with said tempering, as Adam Smith tried to teach, and modern SIT in Microeconomics does not recognize. It is likely Adam Smith would be most pleased with DIT, and not so much with SIT)
So, overall, why DIT in a Metaeconomics? Well, while benevolence does not produce meat, beer, and bread and does not make for happy consumers --- self-interest does not do it, either. What produces it? What brings about happy, peaceful (no political economic chaos) systems, and, yes, economic efficiency in the production (supply) and consumption (demand) of meat, beer, and bread? Single Interest Theory (SIT) in Microeconomics has a limited ability to explain it. DIT easily explains it.
Dual Interest Theory (DIT) in Metaeconomics transcends the limitations of Single Interest Theory (SIT, self-interest only) in Microeconomics without replacing it. It works to supplement SIT, giving even more power to the analytical system used by economists, as represented in SIT & DIT jointly applied. Also, the DIT based null hypothesis of no influence from the shared other-interest leaves SIT intact if the null is not rejected. Rejecting the null (and, all testing of DIT so far has so rejected it) points to DIT. Yet, even when rejected, SIT is still underlying within DIT, and working to explain the self-interest part of DIT.
So, try it, you might like it!
And, if still not convinced, wanting more details, see other Web pages at this site, including What is Dual Interest Theory? There is also a Mathematical Metaeconomics, using familiar approaches to that in Mathematical Microeconomics (see the Appendix in Lynne 2020).
For Endorsements of the Book, see: https://tinyurl.com/yse8bw63
For Reviews of the Book, see Lester (2021) and Frantz (2022)
Try it, you might like it! It is about finding Balance in the Dual Interest of Ego&Empathy, I&We, Person&Community, Self&Other-interest, Market&Government --- with each side of the "&" essential to the other.
References
Altman, Morris. 2012. Behavioral Economics For Dummies. Ontario: John Wiley, Kindle Edition.
Bromley, D. W. 2006. Sufficient Reason: Volitional Pragmatism and the Meaning of Economic Institutions. Princeton, New Jersey: Princeton University Press.
Bromley, Daniel W. 2019. Possessive Individualism: A Crisis of Capitalism. New York: Oxford University Press.
Coleman, James S. 1987. "Psychological Structure and Social Structure in Economic Models." In Rational Choice: The Contrast Between Economics and Psychology, edited by R. M. and Reder Hogart, M. W. Chicago, IL: The University of Chicago Press.
Costanza, Robert. 2006. Ecological Economics is Post-Autistic. Chapter 23 in Real-World Economics: A Post-Autistic Reader, Edward Fullbrook, ed. New York: Anthem Press, pp. 199-203
Deneen, Patrick J. 2018. Why Liberalism Failed. New Haven: Yale University Press.
Drutman, Lee. 2020. Breaking the Two-Party Doom Loop:The Case for Multiparty Democracy in America. Kindle ed. New York: Oxford University Press.
Duesenberry, James. 1960. "Comment on An Economic Analysis of Fertility." In Demographic and Economic Change in Developed Countries, edited by Universities-National Bureau Committee for Economic Research. Princeton, New Jersey: Princeton University Press.
Etzioni, Amitai. 1988. The Moral Dimension: Toward a New Economics. New York: Free Press.
Hayes, William M. and Gary D. Lynne. 2004. "Towards a Centerpiece for Ecological Economics." Ecological Economics 49, 3: 287 – 301.
Hayes, W. M. and G. D. Lynne. 2013. "The Evolution of Ego and Empathy: Progress in Forming the Centerpiece for Ecological Economic Theory." In Building a Green Economy: Perspectives from Ecological Economics, Robert B. Richardson, ed. East Lansing: Michigan State University Press, pp. 107-118.
Khalil, Elias A. 1999. "Sentimental Fools: A Critique of Amartya Sen's Notion of Commitment." Journal of Economic Behavior and Organization 40: 373-386.
Leijonhufvud, Axel. 2004. "The Trento Summer School: Adaptive Economic Dynamics " In Economics Lab: An Intensive Course in Experimental Economics, edited by Daniel Friedman and Alessandra Casser. New York: Routledge, pp. 5-11.
Lynne, Gary D. 2020. Metaeconomics: Tempering Excessive Greed. Palgrave Advances in Behavioral Economics, John Tomer, Ed. New York: Palgrave Macmillan.
Marglin, Stephen A. 2008. The Dismal Science: How Thinking Like an Economist Undermines Community. Cambridge, Massachusetts: Harvard University Press.
McCloskey, Diedre N. 2019. Why Liberalism Works: How True Liberal Values Produce a Freer, More Equal, Prosperous World for All. New York: Yale University Press.
Putnam, Robert D. and Shaylyn Romney Garrett. 2020. The Upswing: How America Came Together a Century Ago and How We Can Do It Again. New York: Simon and Schuster.
Reich, Robert B. 2018. The Common Good. New York: Knopf Doubleday Publishing Group, Kindle Ed.
Samuels, Warren J., Marianne Johnson, and William H. Perry. 2011. Erasing the Invisible Hand: Essays on an Elusive Misused Concept in Economics. New York: Cambridge University Press. Kindle Edition.
Sen, Amartya K. 1977. "Rational Fools: A Critique of the Behavioral Foundations of Economic Theory." Philosophy and Public Affairs 6 (4): 317-344.
Smith, Adam. (1759/1790). The Theory of Moral Sentiments. Indianapolis: Liberty Fund, Inc. digireads.com
Smith, Adam. 1776/1789. An Inquiry into the Nature and the Causes of the Wealth of Nations htttp://www.feedbooks.com.
Tomer, John. 2014. The Human Firm: A Socio-Economic Analysis of Its Behavior in a New Economic Age. Routledge Advances in Social Economics. New York: Routledge, Kindle ed.