Overall Considerations in Dual Interest Theory

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Virtues are swallowed up by self-interest as rivers are lost in the sea  (attributed to  La Rochefoucauld, in Hodgson, 1999, p. 139)

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(Note: If you prefer reading a more stylized journal paper, written with the more heterodox economist in mind, here is one that is in process,  see https://971b831c-a8d9-4115-9686-7303d610774a.usrfiles.com/ugd/971b83_20b1c361b3534e25a40a4ccb4ae3f431.pdf  )

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For the motivation to continue into this post:  Dual Interest Theory (DIT) in Metaeconomics resolves both  "the Adam Smith problem (self-interest VS moral sentiments)" and "the Chicago School problem (see Liu, 2022, the problem of self-interest without ethical reflection)."  Metaeconomics resolves both problems by seeing that Adam Smith saw a joint self & other (moral sentiments driven)-interest, and, it transcends the self-interest only focus of the Chicago School by bringing ethics (shared other-interest) back into the analytical system: Metaeconomics transcends the Chicago School by seeing the joint and nonseparable character of self & other(moral and ethical)-interest, and, writ large, the joint and nonseparable character of Market & Government.  Each is essential to the other: It is not about Market VS Government, and relegating Government to just a policing role, which is the Chicago (and the Public Choice) School of Economics frame.  Said frame ensures failure in both the Market (Chicago School, market crashes predictable) and Government (Public Choice School, guaranteed political chaos).  DIT shifts the focus to the building of a  Humane (Free with Responsibility ) Capitalism & Inclusive Democracy:  It is about putting attention to the shared other-interest and not just self-interest, while focusing on finding good balance in a joint Market & Government, as Adam Smith tried to teach.

 

In addition, Dual  Interest Theory (DIT) resolves many old puzzles and paradoxes that cannot be adequately explained using Single Interest Theory (SIT, self-interest only) in mainstream Microeconomics, including why people vote, run into burning buildings to save a stranger, and, even more mundane day-to-day choices like why do people tip. SIT has to conclude no rational person would do any of said things: DIT clarifies it is rational because of the joint payoff in the domain of doing the right thing, the shared other (empathy-based ethics)-interest. For many more examples, see Lynne (2020) and the Metaeconomics Blog.  So, if intrigued, the technical details for DIT as a transcendent (over SIT) analytical system are next.

 

 

Technical Details of Dual Interest Theory

 

Technically speaking, Metaeconomics (framework and theory first proposed in Lynne, 1995, 1999; for an overview reflecting the current state of it, see Lynne, 2020, although work continues, especially in the ongoing, experimental laboratory based research program reflected in Czap et al, 2018) sees the reality of  joint, nonseparable, interdependent self&other-interest arising due to nonallocable inputs in production and supply, and nonallocable goods in consumption and demand.   So, because of the fundamental, pervasive reality of nonallocable inputs and goods, it is also fundamental to consider dual interest: The new theory that works with said reality is referred to as Dual Interest Theory (DIT). 

 

And,  as alluded to earlier, see applications of DIT to contemporary problems in the Blog here in the Metaeconomics website ( https://www.metaeconomics.info/blog ).  As the Blog demonstrates, DIT better deals with reality than does SIT because it recognizes 1) the inherent jointness within the Human brain of the ego & empathy, self & other, person & community, and 2) the inherent jointness within the Spaceship Earth system of each Human with every other Human, and with all other systems on the Spaceship. There is no such thing as independence (and externality) as presumed in SIT.

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Because of the nonallocable and jointness reality, a person can only influence the relative amount realized,  but cannot separate the outcomes and interests out for individual consideration. Such nonallocable reality is due to thermodynamics on the production side:  Every human production system is embedded within, and non-separable from, the natural system on this Spaceship Earth. Every production and supply system has the nonallocable inputs feature. Everything is internal to the Spaceship, except for Solar Energy and an occasional "space-rock" (meteorite) coming into it.

 

Nonallocability driven jointness is especially prominent for the private&public-goods and products, like private_farms&land-grant_university research, autos&public-roads, SpaceX&NASA, private&public-health, private&public-education, fishing-gear&public_lakes, private_firms&Spaceship_systems... the list is long. Also, private&public-property is inherently joint and nonseparable: The task is always to find the best balance.  DIT also then points to the essential need to see the jointness and nonseparability of markets&government, each essential to the other. The idea of minimizing one while maximizing the other has no DIT based sense.

 

And, the reality of both self-interest&sentiments being operant, self-interest&other(shared)-interest arising out of mutual sentiment, and non-separable within the own-self --- the way the brain evolved and how the mind works ---  also ensures nonallocable conditions on the consumption and demand side. Paleontology points to the core of the brain as reptilian sourced, represented in such frames as "cold blooded pursuit of self-interest (sometimes accorded to Wall street)." The mammalian over-layer is represented in such frames as "nurturing children (female end of the gender continuum is especially equipped),"  "process of being  mindfully aware, and then perhaps caring for and encouraging the other." The latter is about the pursuit of the other (shared with the other, yet internalized within the own-self) - interest." 

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Underlying Behavioral and Neuroeconomics Science Sees the Dual Nature

 

Deeper core brain, likely reptilian in character (high ego,  little to no empathy)  modules drive the ego-based self-interest. Over-layer brain modules, likely mammalian (little to no ego, high empathy) drive the empathy- based (ethics-based) other interest.  The joint ego&empathy, joint self &other-interest are balanced through the over-arching control, the self-control, as the person takes self-command over resolving the tension in the I&We, person&community, self&other-interest. Balance is represented in homeostasis --- a stable, peaceful, mentally healthy person, a balanced life (and, writ large, a viable  and healthy, balanced economy embedded in a viable and balanced community). The ego &empathy, self&other-interest brain modules are joint,  interdependent, and nonseparable. The jointness shifts attention to maximizing the own-interest, which includes good balance in the dual interests, good balance in the joint self & other-interest, balance in ego & empathy, which takes mindful and substantive self-command. 

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Metaeconomics posits a better way to think of the neural basis for behavior, perhaps even better (empirical question) than in the newer Neuroeconomc thinking demonstrated in Camerer, Loewenstein and Prelac (2005).  It is substantively different, and empirically more defensible,, than traditional Microeconomics thinking which denies any role for the emotions, or for dual (and often incommensurable) motives as represented in dual interest theory. Dual interest theory in Metaeconomics continues to demonstrate empirical superiority over single interest theory in Microeconomics: It simply works better, helping make sense of most if not all paradoxes left behind with Microeconomics.  It recognizes the Neuroeconomics notion of the “theory of mind,” as well:  Empathy arises from putting oneself, in effect, into another’s mind, and trying to feel and think about what it might be like in that person’s situation (See Singer, 2009, p. 255).  It also a plausible way to address the “complex motivational structure” pointed to by Ostrom (2009), related to the resolution of the tragedy of the commons, common-pool problems which are so prominent in Spaceship systems.  The following image depicts the behavioral science, the foundation upon which Dual Interest Theory is built (See Slide 11 in the Neoliberal Blog ppt).

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The Affective is represented in two parts described as the hedonistic and sympathetic tendencies. These operate primarily at a subconscious level.  Consciousness can be described as an awareness of the two tendencies:  We become aware we can look after only self, or, can also consider others part of our own internal self by projecting ourselves into the state of being of others, as described in the idea of empathy, i.e. “stand-in-their-shoes,” with the potential the individual will then become “in sympathy with” the shared cause, the shared ethic.  Cognition, calculation and deliberation then enters to resolve the inherent conflict arising in these two passions/interests. This leads to the consideration of the two interests, and ways to fuse the inherent dichotomies across the two domains. Notice, also, the Arrows go both ways, as between the more conscious egocentric-empathetic level and more subconscious, affective hedonistic-sympathetic level.

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Importantly, through rationally considering how to best balance the two interests, there is also a potential for a higher state of value, beyond price.  In contrast to the saying that “Economists (neoclassical) know the price P of everything and the value V of nothing!” this framework proposes that metaeconomists not only know the price of some things,  but also see the value of most things. The notion of priceless makes full sense in dual interest theory.

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This trajectory also recognizes that at times one or the other of the two paths may “trump” the other, perhaps even leading to “switching” in some cases, e.g. in the purchase of a recycle good (see Kalinowski, Lynne and Johnson, 2006). Also, this model sees the feedback that is ongoing from the running-on Automatic Choice (habits, customary ways to react, behave) to Rational Choice and back: The double pointed block arrows posit that the subconscious can be influenced, just as the subconscious continually influences, in fact is essential to, rational choice. The Policy Process is largely about many individuals interacting once “shocked” into consciousness by becoming “irritated” that there is a problem!...e.g. that we are actually running low on hydrocarbons, or there is global warming, or the lake is polluted, or, the community is in some sense deteriorating.  This leads to cognitive consideration, to rational consideration and choice.  Such irritation is essential to change and action, in that most generally, there really are “walls” (thermodynamically speaking) and our business, industry, community, government leaders and agencies don’t see them, etc.  See Bromley (2006) on the role of shock and “irritation” in driving the policy process, in envisioning a new future as represented with “green” integrated into the business model, or a “green” approach to community development.

 

Dual Interest Theory has been thorougly tested using both mail and personal interview survey data, focus groups, and, during the last decade or so, testing in the experimental economics laboratory setting using controlled experiments.  The extensive testing is reviewed in Lynne et al. (2016) and, bringing it up to date,  in the Lynne (2020) book.  More specifically, the Null Hypothesis that the shared other-interest does not influence and give context to the pursuit of self-interest has beeen resoundly rejected dozens of times going back to the empirical testing started in the early -1990s, and which continues to the present.  The rejection of said Null also suggests the willingness of each person to sacrifice a bit of self-interest to achieve more in the way of shared other-interest, with sacrifice in both domains of the private & public -good essential to achieving economic efficiency. 

 

So, because dual interest is based in both experiential and scientific reality, both thermodynamic and brain biology based reality, every person is found to be joint and nonseparable, interdependent with other people, and each person is interdependent with Nature. The economy and every person provisioned by same is embedded in the natural system on Spaceship Earth. Each person is embedded within a Community of people and within all the other Systems/Communities, embedded with all Travelers on the Spaceship. Nothing is external, so, there are no externalities. 

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Microeconomics Sees only Self-Interest and Presumes not only Independence but also Full Self-Control

 

The contention is in direct contrast to the Microeconomics assumption (generally without empirical test, and, thus often without any basis in reality) of fully allocable inputs and allocable goods, and thus both production and consumption are separable and independent. Each person is independent of every other person, and of natural systems on Spaceship Earth. Also, there is no attention to the shared other-interest, except considering same as an externality, external to the own-self.  it is as though each person is traveling by own-self on the Spaceship, with no need to consider the implications from traveling with the other person or any other creature on the same  Spaceship. Microeconomics is a Single Interest Theory (SIT) focused only on the self-interest of each person in the system of the Spaceship. 

 

In Microeconomics, independent and separable producers and consumers (both within each category, and between producers  and consumers) act on their own without ever walking in the shoes of the other --- without empathizing --- which if they did, could move the choice process beyond ego based self-interest only. In terms of the Figures, there is only the self-interest set of isoquants for each Product, and the self-interest set of indifference curves for each Good. In Figure 1, there is only path 0G with self-interest only isocurves IG. Again, it is a SIT.  It is all about the ego-based pursuit of self-interest without regard for the empathy based pursuit of shared other-interest. In contrast, DIT sees ego&empathy, self&other-interest jointly pursued by each person.

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Microeconomics is Sometimes Patched

 

Granted, Microeconomics sometimes recognizes the need to empathize, but only after the fact, as the theory is often "patched" to consider externalities; this patch, however, is generally not the best way to handle the reality that this is really about jointness and interdependence, non-separability, such that the patch really does not represent what is actually going on. And, in fact, for such obvious joint processes as represented in the classic example from Frisch (1965), that how a sheep internally allocates grain and hay between wool and mutton, a Microeconomist using production microeconomics simply cannot address this case in a meaningful way, as Microeconomics presumes the sheep rancher can choose --- actually presumes the rancher has complete control over --- how the sheep allocates the grain and hay.  Similarly, a Microeconomist using consumption microeconomics has to deal with the purchase of a good that has recycle content (an example of consumption used later) as producing only self-interest payoff, and has no way to represent the reality that such goods also produce payoff in the domain of doing-the-right-thing, which is shared in the other-interest.   

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Self-Control becomes Key in achieving Economic Efficiency

 

Also, Metaeconomics posits that humans are inherently challenged in finding the best balance in the self&other-interest due to problems in self-discipline and self-control, especially in staying mindful about the need to temper the primal self-interest, as well as a wide array of human fallacies and shortcomings in the decision process.  Said shortcomings are documented in a wide array of research in behavioral economics, especially the economic psychology and psychological economics branches (see Tomer, 2017).  The main problem is the natural tendency to slip back to the more hedonistic, primal self-interest only path of choice, doing what we want to do, including ignoring what the systems in Spaceship Earth are doing in the background. It is often done unconsciously,  and, one may still fail even when one attempts to be mindful of the other-interest (the moral dimension, the moral community, the ethical system, the conscience, the impartial spectator, the natural system) in the background.  yet, being mindful of the other-interest (including the shared other-interest with the natural system), and tempering self-interest with it,  is essential to doing the best thing for one's own-self.

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Further Detail on Other Pages Within the Website

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Other pages in this Website (see especially Inspired, and Metaeconomics for Dummies, not really, but you know the routine!) have gone into substantive detail on what this means, using words (also,  the book, Lynne, 2020, is an easy read). We depict this trinity --- self-interest, other-interest, and self-control --- in the figure, with the hope that a picture is worth a thousand words, like is often said. The economics trained reader will find this depiction quite familiar, as standard Microeconomics uses such isocurves in Single Interest Theory (SIT, Self-interest only). The Metaeconomic difference arises from the reality of interdependence, which is represented in at least two sets of overlapping isocurves in every consumption and production process. For the non-economics reader, just stay with it, as we will teach some basic Econ 101, really MetaEcon 101, as we briefly review how DIT works, and how it differs in substantive ways from SIT. 

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We first explore the DIT rendition of production and supply.  We then explore the DIT rendition of consumption and demand. In both cases, we illustrate the jointness in the two domains of interest with overlapping isocurves. 

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Dual Interest in Production and Supply: Joint Isoquants 

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We start with production, supply, and isoquant considerations. We focus on the inputs x1 and x2 (see Figure 1), with x2 being a bundle of inputs like seed, fuel, fertilizer and land, and x1 a bundle of conservation related inputs like conservation tillage.  These inputs are used to produce corn q1 for the Market on path 0G and to produce wildlife q2 (who also live in and around the corn fields) for general use by everyone, such as hunters, bird watchers (with these uses reflected generally by Government), using the same farmland, on path 0M (Figure 1).  Producing at the least cost, maximum profit point A in response to the feedback from the Market, i.e. maximizing (Self-interest) profits, results in supplying a large quantity of corn represented in isoquant IG3 (same amount of corn along that entire isoquant), and a very small amount of wildlife (much less payoff in the Other-interest) represented in isoquant IM1 (same amount of wildlife along that entire isoquant). In contrast, if this farm worked to maximize Wildlife, the result would be point C, with a large amount of wildlife represented in IM3, a large payoff in Other-interest,  and a very small amount of corn represented in IG1, a very small payoff in Self-interest.  There would be little to no monetary payoff at point C, in that hunting and bird watching are not generally Market goods  --- generally no one person has a private property in the wildlife --- and the Government, as representative of the common/public property owner, does not generally supply wildlife at a price.  So, what will the farmer do?

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Well, it depends upon the larger context, what signals are coming out of the Market (price P) and/or the Government (hopefully reflecting the value V in the community), as demonstrated in Figure 2, with overall preferences for these two goods represented in the value V isocurves, which are on a higher plane of interest. The possibilities frontier R0R0 in Figure 2 is derived from moving along the capital constraint curve R0R0 in Figure 1; notice how areas outside of the elliptical area defined by paths 0G and 0M ( Figure 1) are irrational, as depicted by the positive slopes on the R0R0 possibilities frontier (Figure 2).  We also now see that if the value V of wildlife is viewed as zero, then the Vo of IM = 0 line is the driving force in the balance of interests on this higher plane; this suggests point A in both Figure 1 and 2. Also, if corn is not highly valued, as in a hunting or wildlife preservation frame, then the favored  Vo of IG = 0 curve is the driving force at point C: Lots of wildlife will run in the corn fields, and little corn will be produced

 

It is also, then, economically irrational to not consider both interests in the rational zone between  the two paths 0G and 0M. Ironically, maximizing self-interest on path 0G, as Microeconomics teaches, is not economically rational (nor is maximizing other-interest on path 0M).

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In fact, Microeconomics always suggests an economically inefficient point A.   Very little wildlife would be produced, even though there is generally, when people are asked, a shared other-interest in having some wildlife traveling with the farmers and food consumers on this Spaceship Earth.  So, what do? Microeconomics pointing as it always does, implicitly, to pure capitalism --- so, everything is privately owned, there is not any public property such as in wildlife ---  would call for creating private property in the wildlife, with said owners then  negotiating with the farmer, and paying the farmer the price for having wildlife in the corn fields. In this case, we would see a Price evolving for both corn and wildlife, shifting the higher interests toward some value Vo in Figure 2, resulting in some choice like B in Figure 1.  Even more intriguingly, Microeconomics because it sees only a single interest at work, does not even have the IM set of wildlife production curves in the analytical lens, unless the resource is privately owned, even though these are joint products, inherently a common/public  property in the beginning.  Rather, a Microeconomics framing, using Single Interest Theory, rather presumes, implicitly, without empirical test (or reality) that the inputs on a farm would be completely allocable between these two processes, presuming complete independence between corn and wildlife production. 

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Metaeconomics would lead in a quite different direction, especially because it sees corn and wildlife as joint products, due to nonallocable inputs, and that another value V system may also be at work.  The natural system, in effect, causes  the two processes to be interdependent, inputs allocated within the natural system, with the farmer having very limited control, in that both products use the same spaceship earth system, simultaneously. Also, real people have value V beyond the price P expressed in Markets, and, often prefer keeping such things as wildlife as a public property.

 

So, with this starting point, Metaeconomics might point, empirically, to offering some government programs, payments to farmers (the value V reflected in the shared other-interest between farmers and everyone else), to provide for some wildlife habitat on their farms.  Given enough political attention to the problem (and the willingness to pay the price/taxes by hunters and bird watchers to produce the money for the farmer payment), the Government  could in effect reflect the value V of wildlife relative to the price P of corn. With payments reflecting shared value V, the farmer might shift a bit toward path 0M, perhaps moving to path 0Z, and arriving at point B.   In fact, if the  payment for wildlife habitat is high enough, reflecting the high value V hunters and bird watchers often place on using this aspect of the private property, in effect the common property in wildlife, overall profits coming from the Market price&Government payments could be identical at both points A and B.

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Another scenario also suggested as an empirical question by Metaeconomics would have the Government require, mandate wildlife production, without any financial compensation, at point B.  That is, Government as a representative of the public interest in the level of value Vo (Figure 2) might mandate that farmers move at least to point B (Figure 1).   Profit would be considerably less, with hunters and bird watchers having a "free ride" while the farmer pays all the cost. Farmers would likely not be very pleased, either, as liberty and freedom have been sacrificed for wildlife production.

 

Metaeconomics would  also, on another empirical path, suggest the farmer could be nudged to become mindful of the value Vo (Figure 2), the overall shared other(internal to the farmer, but shared with others "downstream" of the farm)-interest this farmer has in a viable, sustainable spaceship earth system.  It is possible the farmer, too, sees wildlife as part of the aesthetics, the environment in living on the farm, made better by having wildlife on the land, too, in addition to the corn. Acting on gains in the other-interest, this farmer might voluntarily move over from path 0G to path 0Z (Figure 1), sacrificing a bit of corn production on IG2 < IG3, while increasing wildlife production to IM2 > IM1. This farmer may find a more peaceful existence, a more fulfilling life, less amiss, at point B rather than point A (in both Figures 1 and 2), perhaps feeling less Phoolish (after Akerlof and Shiller, 2015): In fact, in our research experience on conservation practices (see Lynne et al., 2016, for a summary; also see Chapter 8 in Lynne, 2020, which also includes the latest research since 2016) we often found farmers disappointed that "the Market made me do it", i.e. the Market sends only price signals for corn and sends no signals about wildlife, so, to survive, point A is chosen, even though point B is preferred. Farmers are not only economically inefficient at point A, but also quite unhappy.

 

Also, as the quote at the start suggests, the virtues can be swallowed into the Self-interest, too, as in path 0M being swallowed into the new path 0Z, which now appears like a Self-interest path, albeit now a virtuous path. In effect, path 0G and 0M converge into one path 0Z --- the two sets of isoquants converge into one set --- which Frisch (1965, p. 273) referred to as complete coupling. If the two isoquants have converged, it will appear as in Microeconomic renditions, as though there is only one set of isoquants; unfortunately, it would be very misleading to in effect "hide" the Moral Dimension. 

 

Notice, too,  that in the three Metaeconomics styled analyses, wildlife are retained as a common property, with the Government bringing the value  V of wildlife into the mix, involved in the first case with payments, voluntarily accepted or not; controlling, in the second case, with the farmer not having a choice; and, with complete liberty and freedom on the part of the farmer in this third case. That is, in this last case, Government nudging (or, specific nudging by the hunters and bird watchers themselves) could bring about free choice by the farmer, or not, in producing some wildlife. Metaeconomics suggests these kinds of cases need to be examined with an empirically based approach, and pragmatism brought to bear in the end. 

 

In fact, the reality since the 1930s, here in the US, has put us into all three Metaeconomics approaches.   Government has been operating to represent the overall societal interest of value Vo, and is using tax dollars/prices paid for wildlife through taxes consumers pay, through the US Farm Service Agency, to bring about point B outcomes. We have also dabbled a bit with controls, as in conservation compliance to get crop subsidy payments, requiring point B choices. Government, through the US Natural Resource and Conservation Service and the US Cooperative Extension Service, has also engaged in encouraging farmers through technical support and educational programming to become conservation farmers. 

 

Also, we have not, historically, since the formation of the US in 1776, favored the Microeconomics approach which requires absolute, private property ownership in wildlife. So, why do we cling to Microeconomics, when we have this Metaeconomics alternative that, practically speaking, just works better in explaining what is ongoing, and suggests what to do about it, in realistic terms, based in empirical reality for what is pragmatic? It seems in reality that both farmers and consumers have viewed the value V of wildlife on a higher plane from the price P for corn, as depicted at points like B in Figure 2, and have preferred that some public/common property in wildlife works better, pragmatically speaking.  This does not mean that some private property in such products, goods like wildlife is not desirable, but it does put it into perspective. Metaeconomics  raises an empirical  question(s) about the best mix of private&public-property, the best mix of market&government, as related to the question of the best balance in corn&wildlife-production, without presuming which way is best. Lynne et al (2016) points to how balance in self&other-interest, ego&empathy, market&government has resulted in farmers adoption of soil and water conservation practices, as well as providing solid empirical support for Metaeconomics.  For the Mathematical Metaeconomics of jointness represented in overlapping isoquants, see Lynne (1988; 2006b; 2020, in the Appendix).

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Dual Interest in Consumption and Demand:  Joint Indifference Curves

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As suggested in Inspired (also see Lynne, 2020), the work by Frisch (1965) stirred the imagination about how jointness in production arising from the reality of nonallocable inputs could also perhaps exist in consumption as arising from the real possibility of nonallocable goods.  Lynne (1995) demonstrates, for the first time (and fully developed in Kalinowski, Lynne, and Johnson, 2006), how this might work, with two sets of overlapping indifference curves.  The set of indifference curves IG representing the self-interest are shown as overlapping with the set of indifference curves IM representing the other(shared with others, and internalized within the own-self)-interest (Figure 1).  The set IG evolves out of the egoistic-hedonistic tendency in humans.  The set IM evolves out of the empathy-sympathy-sentiments and perhaps even compassion tendency in humans. Also, the set IM, then, reflects the moral dimension, the moral community arising out of the larger ethical system. Also, in terms of attaching these ideas to the notion of an ethical system, the virtues, the set IG represents the virtue of prudence; the set IM represents especially the virtue of temperance, but also includes the other virtues represented in courage, justice, faith, hope and love. The set IM, then, evolves out of a continually evolving moral community reflecting these virtues, which also evolve in content over time. Empathy is the starting point:  The moral community embedded within an empathy based ethical system is the outcome.

 

The notion of set IM also means there could be many sets IM, many different sets of other-interest, more than one community, competing for  individual attention and consideration.  There could easily be dozens of set IM indifference curves in this space, e.g. the sets associated with immediate family, extended family, work associates, club memberships, religious affiliations, political party, state, nation, all travelers on spaceship Earth, to list a few.  Dual Interest Theory --- self&other-interest jointly intertwined in the own-interest --- sees the individual charged with rationally considering how to respond to each such set while seeking balance on some path 0Z.

 

Just like in microeconomics with only set IG, metaeconomics also posits that individuals maximize their own-interest. This theory is still about the individual seeking their outcomes for themselves, not for others, just as in microeconomics. The difference is the own-interest now involves not only self-interest represented in set IG but also the interest one shares with others as reflected in set IM.  This set IM is still entirely within the own-self, internal to the individual.  This has nothing to do with other-regarding preferences, or interdependent utility, notions that have been offered as "fixes" to the microeconomics focus on only IG. The own-interest is just now broadened to reflect both tendencies in human nature; like Angyal (1941; 1965) pointed out,  humans have the tendency to want autonomy (i.e. ego driven self-interest) and homonomy (i.e. empathy driven other-interest, connectivity with something outside the self-interest).  Angyal also adds that we often face heteronomy, too, when outside control is asserted (especially arising when self-discipline, self-command fails, like in releasing way too much greenhouse gas, burn to much carbon fuel, which damages the Spaceship), working  to limit our freedom and liberty to choose our own balance in autonomy&homonomy, self&other-interest. 

 

To help understand the workings of two sets of joint indifference curves, for purposes of understanding how maximizing self&other-interest --- a broader version of own-interest --- might work, think of a good q1  having recycle content and good q2 as being produced only from new resources (this case was examined in Kalinowski, Lynne, and Johnson, 2006, and highlighted again in Lynne, 2020).  Each good gives payoff in both the domain of self-interest IG and other-interest IM.  For example, at the Microeconomics based solution to this choice, given income level R0R0, the consumer maximizes self-interest only at point A (Figure 1). This is usually best achieved without buying much in the way of recycle content goods,  due to p1/p2 being relatively lower;  at point A, the consumer enjoys level IG3 of payoff in the self-interest, but also receiving some payoff in the other-interest represented by IM1.   

 

Metaeconomics suggests, however, that many consumers would not be happy at point A, having not paid attention to their conscience, their impartial spectator as Adam Smith describes it.  That is, other value V on a higher plane is at work, as depicted by Vo in Figure 2.  That is, moving along R0R0 in Figure 1, we can generate the R0R0 consumption possibilities frontier R0R0 in Figure 2. The impartial spectator within the consumer, the conscience concerned with  recycling, would be represented by the value Vo isocurve, which suggests that not only p1/p2 (and the absolute prices of both) is relevant to the choice. Indeed, using the Adam Smith notion, after having being in the state of the impartial spectator (basically empathizing with the need to recycle), the consumer chooses instead to move to point B (in both Figures 1 and 2).  A bit of self-interest is sacrificed, as is the other-interest (as it is not maximized, either), now enjoying IG2 and IM2.  In effect, Metaeconomics points to maximizing the joint self&other-interest, the broadend own-interest, while sacrificing a bit of each interest (new meaning of altruism, which is now more than just sacrifice in self-interest) at point B.  Substantively more good q1 with recycle content is  purchased, even though the p1/p2 ratio (and absolute levels of each of p1 and p2) suggests buying very little to none. This kind of choice was empirically documented in Kalinowski, Lynne, and Johnson (2006, see especially Table 1; also see Chapter 4 in Lynne, 2020), with this tendency increasing as consumers identified more fully with the shared (with others) interest in recycling. For the Mathematical Metaeconomics of jointness represented in overlapping indifference curves see Lynne (2006a). 

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Intriguingly, it is also possible, as the quote at the beginning suggests, that the virtues represented on path 0M could be "swallowed" by the new, more virtuous self-interest on path 0Z.  In effect, as a person works to do the right thing, set IG and set IM converge into a new set, lying completely on top of each other.  It would appear, like in Microeconomics, that the consumer has just one set of indifference curves.  It would be very misleading, however, as the underlying Moral Dimension, the underlying empathy-based ethical system, that moved the old (ego-based) self-interest to the new set of indifference curves associated with path 0Z would be hidden from view.  In effect, the Moral Dimension, and the Community that would produce it, would be hidden in the analytical system.  Hiding the Moral Dimension which represents the larger Ethical System, leads to the rightful claim that Microeconomics is at best Amoral. 

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On Dual Interest Theory and Smith (1759/1790, 1776/1789)

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Dual Interest Theory (DIT) is based in the notion of internal tension goes at least back to Plato, and the metaphor of the stallion (ego) and the mare (empathy) pulling the chariot, with the driver in the cart trying to be in control, in self-control (Adam Smith framed it as the problem of self-command) over the internal tension. In terms of economics, the problem of internal tension is especially  prominent in the work of the best known of the original economists, the "Father of Economics" Adam Smith (1759/1790; 1776/1789). Smith saw the tension ---  ego based self-interest in On the Nature and the Causes of the Wealth of Nations and empathy based other (shared with the other)- interest in The Theory of Moral Sentiments.  The empathy (sentiments) needed to temper the ego, in self-control over resolving the matter, which achieved peace (of mind), happiness, and, yes, economic efficiency. 

 

Intriguingly, the Smith concern with the tension is now confirmed in modern empirical science from modern psychology, neuroscience, neuroeconomics, and behavioral economics : Humans have two tendencies in their evolutionary nature.  The dual tendency is referred to in Metaeconomics as the tendency to self-interest (Smith, 1776/1789) and the tendency to other(shared with others, but internalized to own-self)-interest (Smith, 1759/1790), with self-interest (the arrogance of self-love as Smith referred to it) more primal. Smith worked hard to make the point of the shared other-interest (as Smith referred to it, that which the other could go along with, so, ethics, sentiments based) tempering the more primal self-interest (the arrogance of self-love as Smith referred to it). Smith, in effect, suggested a Dual Interest Theory (DIT), which is not at the core of Metaeconomics.

 

In fact, while Smith was quite concerned that the  point be understood,  he did not succeed.  Modern mainstream Microeconomics which claims lineage back to Adam Smiths has largely ignored said duality, forming a Single Interest Theory (SIT) of self-interest only, which is at the core Microeconomics. Smith labored on The Theory  of Moral Sentiments book until death (while not doing much with the Wealth of Nations book after it was first published in 1776) with the 1790 version published posthumously. It is also important to recognize The Theory of Moral Sentiments book was first published in 1759, almost 20 years before the Wealth of Nations book.  Unfortunately, modern microeconomics does not reflect the important role the moral sentiment --- the empathy driven, ethics based shared interest, the ethical reflection on economic choice --- was to play in the making (not taking, but making) of wealth. 

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As Adam Smith said, in the On the Nature and the Causes of  the Wealth of Nations book, wherein it is made clear how  making wealth is driven by self-interest (actually by self-love and self-arrogance), focusing here on the Causes:

 

…man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is for their own advantage to do for him what he requires of them.  Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. 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. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages (Smith 1776/1789, loc 239-251).

 

Said quote has formed the basis for modern (Micro)economics, with the claim Smith only saw self-interest (even though Smith rather speaks to own-interest), the only face of Adam Smith.  And, as a result, it appears Adam Smith is so focused on making wealth in a kind of free to choose environment, ignoring the admonitions of  the Moral Sentiments book, the other face, so, “das Adam Smith problem.”  Yet, notice how Adam Smith clarifies what is meant by own-interest in The Theory of Moral Sentiments which has had little to no impact on modern Microeconomics evidenced by relying on Single Interest Theory,  focusing here on the fundamental need to Humble, and otherwise, Temper the Causes:  

 

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).

 

So, it is clear the ego based self-interest to make wealth, driven by the arrogance of self-love, had to be tempered. And, with what?  Well, it is made clear the sentiments --- empathy based ethics, mutual sentiment going every direction, the moral and ethical dimension --- had to temper, bring the self-interest down to “something which (the other) can go along with.” It was found at the station of the impartial spectator, as the person reflected on the self and the other, at least that was the starting point. It seems the other forums of community and government were also, implicitly,  part of the empathy based effort to form the shared other-interest.

 

Overall, it is what the other can go along with which ensures the person can maximize the own-interest. Adam Smith was not opposed to ethical reflection. And, Adam Smith had one face, a face with joint (yet tension laden) self & other-interest, and the need for self-command over same,  underlying it.

 

Another set of evidence on said front:  As Smith (1759/1790) also said it (quotations cited  in Roberts, 2014, p. 40), 

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What so great happiness as to be beloved, and to know that we deserve to be beloved? What so great misery as to be hated, and know we deserve to be hated?

 

Man naturally desires, not only to be loved, but to be lovely 

 

Using the Metaeconomics way of thinking about the matter, first, to be beloved, one must avoid maximizing self-interest only on path 0G. Yet, pursuing wealth on path 0G was a good way to be beloved: Witness modern awe with the rich, wealth, and power. Second, path 0M is all about the need to be lovely, i.e. having empathized on the shared other-interest path 0M. Discern what the other can go along with.  Third, this is all resolved --- peace, contentment and happiness, as well as economic efficiency, all emerge --- on path 0Z, where one not only is be loved but deserving to be be loved, after tempering the self-interest with what the other would also agree would be essential to be lovely.

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Notion of Altruism Now Broadened 

 

Also notice that path 0Z --- the path of peace, economic efficiency, and overall happiness) --- points to the essential need for a bit of sacrifice in the payoff in both domains of interest.  Altruism is dual sacrifice, and, sacrifice in both domains is essential to peace and economic efficiency, and the resulting happiness. As the title of the Roberts (2014) book would have it, "How Adam Smith Can Change Your Life: An Unexpected Guide to Human Nature and Happiness", the guide is to temper the self-interest with doing the right thing, and moving onto path 0Z, and, it takes sacrifice.  It is ironic that maximizing own-interest requires a bit of sacrifice in both self&other-interest. It is about tempering the excesses (reason for the title of Lynne, 2020, Metaeconomics:  Tempering the Excessive ... )  in both domains of interest. 

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Resolve the Old Debate about Incommensurability

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We can also address the matter of commensurability, and the real possibility that the dual interests are incommensurable, in the old debate about "pushpins and poetry."  Microeconomics based in Neoclassical Economics, which in turn rests in Utilitarian Philosophy, sees the material world (pushpins) no different from the less tangible world (poetry), and thus an individual can simply do the tradeoff along some possibility frontier R0R0, arriving at whatever point A, B or C that emerges from the tradeoff analysis.  If we put goods q1 and q2 on the axes, the tradeoff is strictly decided in the market by the p1/p2 ratio; in the Utilitarian view, the problem is solved, which also leads to claiming that Price is Value, and Value is Price, with everything completely commensurable. 

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Other philosophies see this quite differently, seeing generally a hierarchy of incommensurable value, with value V (poetry)  not on the same plane as  price P (pushpins).  In fact, higher order value V might work to in effect override the price P evolved in Markets (the Market Forum), with the value V coming out of higher order, Other Forums, in community, and, at a larger scale, like that represented in the US Administrative, Legislative and Judicial branches of Government.  In this kind of philosophy, value V in the Other Forums works to temper and condition the price P in the Market. We might suppose, too, that Price in the Market Forum could influence the Value in the Other Forum(s), but price P and value V would not be commensurable, measurable on the same terms.

 

For more discussion of said matters, as well as the resolution of many other puzzles and paradoxes left behind by SIT, see Lynne (2020).

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Mathematical Metaeconomics

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Also, while the figures are useful, some may prefer the formal Mathematical Metaeconomics. For  the mathematics, see Lynne, 2006a,b  (and the Appendix in Lynne, 2020). 

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References

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