It was really a hard work to read through more than 100 posts. Many of them in this question page are very long and it took me a long time. Many strands of arguments are intertwined in a complex way. I want to confine myself in a very limited topic that is the state-of-the-art understanding of rationality and self-interest in economics and do not enter into the moral and ecological aspects of economics. This does not mean that I estimate these aspects of little importance. I am afraid my post will be excessively long. Forgive me if my argument is too abrupt. Some expressions may lack sufficient accuracy.

First of all, it is necessary to distinguish the market economy and the (mainstream) economics. Guy Jakeman (104th post) defends vehemently the market economy. Admittedly, market economy has many good points that cannot be expected in planned economy, but it does not mean that the actual economics we have is a good one. The economics we have is full of flaws and one cannot say it describes what are happening in the market economy. 

Although there are many factors which lead into the actual state of economics, one concept is particularly responsible for the present state of mainstream economics. It is the concept of rationality, which is one of Israr's main concerns. 

Rationality and self-interest are closely related in most of discussions, but as Charls A. S. Hall (21st post, referring to H. Gintis) and Francisco Javier Melendez Hernandez (80th post) suggested it, concept of rationality is now much wider than the concept of self-interest. Self-interest is a name given to the propensity of a man or woman who seeks the well-being of him- or herself without paying any consideration on the state of others. Self-interested person can be rational as well as irrational (I will give the definition of rationality soon). Other-regarding person can be rational as well as irrational. 

As I will later argue that the rationality in economics is roughly equivalent to the maximization of a utility function. All depends on what arguments you include in the function. Normally we only employ variables that determine consumer's consumption. In this case, rationality means self-interest, or more precisely all behavior that maximizes the utility function describes self-interested one.  However, it is possible to include in arguments such variables as the empathy or the state of others. Ivan Dario Hernandez (1st post) is trying to do this. Bowles in his Microeconomics (2004) is also doing this. Bowles calls this kind of utility functions social preference. When an agent acts in such a way to maximize this kind of utility function, the agent is other-regarding to some extent. 

Rationality in economics (I do not defend this concept at all, as you will see later) is logical consistency. Let a person have many states A, B, C and others that he or she can chose. Each state has its benefits and costs. The consistency stands for transitivity of binary relations of the preference: 

•    If A is preferred to B and B is preferred to C, then A is preferred to C. 

The rationality is given in a form of an axiom: 

•  For any triplet of states A, B, and C, the transitive law holds for the preference.

 If the set of all possible states (adjective "possible" is omitted here after) is finite, any rational preference can be expressed by a utility function u in such a way that 

•  A is preferred to B if and only if u(A) > u(B). 

If the set of all states is infinite and provided with a topology, then any rational preference can be expressed by a continuous utility function if the preference satisfies certain closedness conditions. (Equivalence between utility maximization and rational preference) 

Now, if a person is rational (meaning that he or she has rational or consistent preference), is it obvious that he or she chooses the state whose utility is maximal? No, by all means no!. 

Normally the economics assume this is true and some people (including Guy Jakeman in his 50th post) think this is as sure as what we can call it a postulate, upon which we can construct the whole theory of economics. 

Rationality in economics is flawed in two aspects. It implies the following two propositions: 

(1) It is always possible to build and keep consistent preference among possible states. 

(2) It is always possible to find the solution (maximal solution) that gives the maximal value of the utility function u. 

In order to show you how these two assumptions are flawed, let me cite the case of the game of chess. (1) signifies that you can estimate the game-value of any state in your turn. I will explain soon what the game-value is in an example. (2) signifies that which player will win the game is determined when the first mover is decided. 

In fact the following theorem holds: 

Theorem (Open alternative bounded-step decision game)

Let G be an open (or public information) game played alternatively by two persons and ends with one's victory within a predetermined finite number of steps. Then either the first or second player has a (sure) wining strategy. 

(See the Introduction to the classical von Neumann and Morgenstern's Theory of Games and Economic Behavior, 1944. Without appealing to von Neumann and Morgenstern, a short simple proof exists for this theorem.) 

Be careful. This theorem holds in the eyes of omnipotent and omniscient being. For a real human being this theorem is totally false. In the eyes of omniscient being, the game-value is either 0 or 1, because at any state of the game of your turn, you have a sure strategy to win or your opponent has one. (I am supposing that Chess game ends in a predetermined number of steps and with a victory of one of the two players. This is not true in reality and certain modification of the statement is necessary). The wining strategy is to follow the rule: choose always the next state with game-value 1. If you are the winning player, there is always one (and often only one) such state. 

Everybody would agree that this is impossible for Chess, Game of Go and other sufficiently complex games. I cite this example, because this is a counter-example that the assumptions (1) and (2) hold for a set of finite states. 

The assumption that propositions (1) and (2) hold can be called excessive rationality, whereas the rationality we usually use in everyday life may be called moderate rationality. These two concepts of rationality are extremely different but are not recognized as distinct concepts in economics and thought to be identical for a long time. 

The difference between excessive rationality and moderate rationality can be explained by what H.A. Simon named bounded rationality. Human being is a rational animal but not omniscient or omnipotent. Our capacity of reasoning or logical inference is limited within a certain level of rationality. Our rationality is bounded. 

Some of readers of this post may think that this story applies only to artificial cases of chess and others, but economics is free of this kind of misconception. He or she is wrong, because the same thing occurs in the common maximization problem of the utility. (Please read the first one of two papers below. You will find that the case of simple utility maximization problem with a budget constraint has the same problem.)

In a classroom, we normally assume that the number of different goods is two. One seldom considers what happens when this number N increases. Even if you use computer, the computing time to find the maximal solution may increase at the order of 2 at the power N. If you have more than one hundred items, the computing time may exceed millions of years. Of course, all depends on the program you choose and the speed of the computer. However, we have the good reason that the computing time cannot be reduced drastically. The theory of computing complexity has shown that there are many  NP-hard problems and it is conjectured that for this kind of problems there is no computer program (or algorithm) which runs in polynomial time. 

Our life is surrounded by these NP-hard problems and it is rather rare case that we get an exact solution for maximizing problems in an appropriate computing time. Therefore, utility maximization is not such a firm harmless axiom as Lall B. Ramrattan (9th post), Ana Maria Bianchi (11th post), Mario Camberos Castro (19th post), Guy Jakeman (50th and 69th posts) and Stefano Prezioso (84th post) thought it to be. On this very specific point, Paul F. Gentle (5th post), Robin Edward Jarvis (37th and 61st posts) and Mohammad Israr Khan (17th, 25th and 69th posts) are right in doubting validity of rationality formulation in economics and this may be the point when Robin Edward Jarvis (79th post) compared physicist's rationality and economist's rationality. Stefano Prezioso (84th post) and David Harold Chester (85th post) are equally confused because they do not distinguish excessive and moderate concepts of rationality although they are opposed in their discussion. (Please forgive me if I am reading wrongly). 

My comment may seem to be too negative and destructive. Yes, it is, because this is the re-starting point of a new construction of economics as a science. We should rethink of human economic behavior and reformulate it in such a way to incorporate that our rational capacity is limited. A new idea on how to formulate our behavior is presented in the second paper below. My comment is therefore positive and constructive in fact. 

There remains an important question posed by Mohammad Israr Khan (25th post) and reformulated by Charles A S Hall (26th post). The question is this: 

• Why does this excessive rationality as postulate persist in economics in the face of all criticism? 

I will try to answer this question but in a next post.

https://www.researchgate.net/publication/233943629_Economics_and_accounting_A_comparison_between_philosophical_backgrounds_of_the_two_disciplines_in_view_of_complexity_theory

https://www.researchgate.net/publication/233943458_Evolutionary_Economics_in_the_21st_Century_A_Manifesto?ev=prf_pub

Article Economics and accounting: A comparison between philosophical...

Article Evolutionary Economics in the 21st Century: A Manifesto

Hi, I have been giving some thinking on this topic of rationality and selfinterest too. You may find a file and link to my conference paper on these thoughts at the ende. In order to try to provide kind of an adequate answer to your first question in particular, I wiould shortly refer to mirror neurons and empathy. We, as human animals, count with mirror neurons as other  non-human animals do, but mental models related to hiper economic rationality such as those developed by Milton Friedman, created an unstable and evolutionary conflict for human social cohesion. In few words, we try to override our natural propensity to empathize to others through social and ideology pressure to concentrate on shareholder value and profits. Under this point of view tax collection to succesful companies that maximize  shareholder value and profits will supposedly take care of other human fellows and the environment.

For a more detailed development of this idea please read my conference paper in the file attached or in the following  link: https://www.researchgate.net/publication/283308664_Microfoundations_for_social_cohesion_in_Behavioral_Economics_good_bye_alexithymic_homo_economicus_welcome_back_social_homo_sapiens

All the best, 

Ivan Hernandez

Conference Paper Microfoundations for social cohesion in Behavioral Economics...

Dear Mohammad

Before going to economists, I suggest you look at philosophers as Jeremy Bentham, and Pierre Bourdieu. The first one has essays on utilitarism, and the last one, about whether humans can or cannot act without interest ("Is there an disinterested act?").

Also, about rationality, I suggest to look at Max Weber.

Then you can go to scholars that proposed economic regulation (Garret Hardin, "The Tradegy of the Commons", 1968), although the first view of regulation is not straigth economic.

Best regards,

In response to Hernandez, I am sure he is right about what Friedman said.  Yet I say this to Friedman, not just corporations are taxed.  In the US, corporate  taxes account for FAR less than 50 percent of tax revenues to government. And they should be taxed more.   They are not benevolent.   The wars the USA has fought in the last decade benefit  the oil companies.    Also most large USA corporations enjoy the benefits of being a monopoly or oligopoly.   Their employees  came mostly from public funded  K-12   and even our colleges all get at least some public funding.  Corporations are the welfare brats of America, not because they get public help but because they deny ever getting it. Roads are public, as are waterways and ocean travel with FREE US Navy protection.. 

 Friedman got a Nobel Prize and he should have shared that with Anna Scwartz, who was the co-author on many of his major works about monetary theory and history.  There are much greater  macreeocomics, such as Lucas , Sargent, Gordon and  Mankiw.. (Regardless of a particular school, these guys are all great)..  It is all coming out. Right now the money supply igrowth iis high in the US and velocity is very low.  Friedman thought those two variables (M AND V) always moved in the same direction.   I used to admire the guy but not as a more mature economist, I question all schools of thought.

Dear Mohammad,

Self-interest took root in economics through the works of David Hume and Adam Smith. Smith gave the moral justification of it in his "Theory of Moral Sentiments" (TMS). In the TMS he derived the theory that people that follow their self-interests meet in the market place and are regulated  by the Spectator Principle, a principle that avoid chaotic behavior. He then transformed that principle into the "Wealth of Nations" book, renaming it as the "Invisible Hand". The function of the "Invisible Hand" is to regulate the markets. One of its essential virtue is that it is an impersonal force, which does not discriminate..

Please note that the invisible hand functioned through moral sentiments and not rationality. Once preference was introduced into the literature, then it became possible to derive maximum choices by just asking people to do binary ranking of choices. One problem is that preferences are not always complete for people. Another problem is that it can be lexicographic. These type of problems weakened the research program for rational solutions.

I am thankful to all the learned responses covering across a range of variables; particularly a la Friedman and a la psychology.

Ramrattan Sir has given a very nice brief of the issue.

Agreed. However, I have a few issues unsettled. Does it mean that rationality is detached from moral sentiments, hence from invisible hand's realm? Does not it translate into rationality being away from competition i.e. a name given to the invisible and impersonal force of the market? Cannot it be extended to deduce that preference defined rationality is not a lamp post of competition. Does not,  hence, the rationality seem to loose its shine as a policy tool!

I am sorry and thankful.

Israr

Dear Mohammad and friends,

This is a very interesting topic, self-interest and rationality

Just three things as food for thoughts here with all positive intentions:

a) The idea of the rational man and sustainability

Playing with these ideas I wrote the article shared here:

Rationality, Responsibility, and Sustainability: When Can human Behavior Have a Chance To Be Sustainable?

https://www.researchgate.net/publication/281244787_Rationality_Responsibility_and_Sustainability_When_Can_human_Behavior_Have_a_Chance_To_Be_Sustainable

b) The idea of the invisible hand and current markets

The current market, the eco-economic market or green market is different than the original economy only market  so now we know that there can be more than one invisible hand in the same market

See these ideas here

 An overview of some of the policy implications of the eco‐economic development market 

https://www.researchgate.net/publication/281846534_An_overview_of_some_of_the_policy_implications_of_the_ecoeconomic_development_market_Environmental_Management_and_Health_Vol_11_No_2.a

c) The idea of self-interest and Dwarf markets

How the invisible hand can work in dwarf markets like in China and the conflict between privatization and nationalization led me to rethink the invisible state hand role in those socio-economic markets

See those ideas here:

 Nationalization as Privatization in Reverse: Understanding the Nature of the Commons to Identify a Possible Point of Optimal Nationalization.

https://www.researchgate.net/publication/281244564_Nationalization_as_Privatization_in_Reverse_Understanding_the_Nature_of_the_Commons_to_Identify_a_Possible_Point_of_Optimal_Nationalization

Wish you all a nice day;

Article Rationality, Responsibility, and Sustainability: When Can hu...

Data An overview of some of the policy implications of the eco‐ec...

Article Nationalization as Privatization in Reverse: Understanding t...

Dear Mohammad,

I think rationality in general is related to individual choices. But some think that it could be used in the sense that a person “feels” comfortable with his/her choice. Smith I think was more concerned with the feeling sentiments than with reason.

In the situation where a person says 1+1 =4, we are incline to say that the person is incorrect or irrational. But we would not say so to a person who has violated a revealed preference. Just as a child is willing to correct the 1+1 = 4 problem when the teacher points out the mistake, an agent may be willing to correct its inconsistent choice problem when it is pointed out to them. We would not call the person irrational in that case.  This happens all the time when agents get involve in instinctive behavior.

So, rational choice seems to be intermingled with agents feeling and behavior, and would validate your issues and concerns. As I write this, I feel that we may have introduced some pragmatism into the rational and sentiment paradigm. 

Dear Mohammad and colleagues,

 Both self-interest and rationality should be seen in a specific context, such as a framework or a system of values. An individual has ideas, while a group of people share an ideology. The economic behavior cannot be separated of people’s ideology. One can notice differences between Americans and Europeans, for instance. The Ford adventure in revitalizing Volvo substantiates it.

 If you are looking for definitions, you should promote the ones that suit your needs, in term of context (e. g.: time, space), objectives of your work and audience. Our colleagues suggested several sources.

Good luck.

The idea of rationality emerges from the classical notion of an economic man who pursues his own self-interest and chooses the most economic means to attain it. It combines the classical view (Adam Smith, David Hume, Stuart Mill, etc) with notions associated to the utilitarianist philosophy (basically Bentham). Nowadays rationality is seen as a pattern with which human' s actual behavior should be confronted. 

Para los economistas ortodoxos, la racionalidad es sinónimo de egoismo. 

I make this comment with all my respect and positive intentions:

We live in a different world today, we are no longer in the environment Adam Smith's pure economy model since the bruntland commission said it needed to be double fixed(make social and environmentally friendly), we are now living formally within an eco-economic system or green economy; and this means that the definition of rationality and self-interest that worked or was used in the old economy only model need to evolve.  For example, the invisible hand in the eco-economic model is a partially caring invisible hand as the environment now is an endogenous issue to the model, but in Adam Smith time it was a totally uncaring invisible hand(impersonal).

Ramiro, la definicion de racionalidad e egoismo, sea ortodoxa o no que se aplicaba al modelo economico Viejo ya no se aplica a modelos eco-economicos o a modelos de sostenibilidad que existen hoy....

For example, Under sustainability there is no room for maximization and fully uncaring or partially caring invisible hands so Adam Smith ideas such as the impersonal invisible hand no longer work..

See ideas about this in:

Maximization, partial regulation, and system dominance: Can they be drivers of true sustainability?

https://www.researchgate.net/publication/235270181_Maximization_partial_regulation_and_system_dominance_Can_they_be_drivers_of_true_sustainability

Article Maximization, partial regulation, and system dominance: Can ...

There is an important conceptual point to be made about self interest (hereafter, SI). Economists write as if self-interest were a motive, like ambition, exemplified in e.g. the desire to get ahead in one’s company, or love, or jealousy - all these can be said to be motives, to motivate a given action. Frequently economists assert that all action is motivated by self-interest. But self interest is not a motive. it is best thought of as a way of acting on one’s motives. It’s true grammatical status is adverbial. E.g., to be ambitious is not necessarlly to be self-interested. If one chooses to disregard the rights and interests of others, and pursues one’s ambition with no regard to the interests of others, than one is acting self-interestedly (note the adverbial). But 'self interest’ is grammatically a noun, suggesting that it names a thing, a motive. If we reject this, then the notion that one always acts from self-interest is without meaning. 

Good day Alan, based on your posting three things:

a) A totally uncaring person, assumes or acts like others do not exist to maximize profits, that is someone acting self-interestedly, right?....The invisible hand in the rational market acts as society and environment do not exist as they are not endogenous factors to the model;

b) A totally uncaring person, assumes or acts like others do not exist to maximize green profits, that is someone acting self-interestedly, right?....The invisible hand in the eco -economic market acts as society do not exist as it is not an endogenous factor in the model;

c) A totally caring person, assumes and acts as equal partner in the system seeking optimal profit, this is not someone not acting self-interestedly right?...The invisible hand in sustainability markets acts accordingly with the optimal interest of the system as all factors, economy, society, and environment are endogenous factors in the model.

Wish my posting is appropriate in relation to the main question.

My warm greetings to all.

Paragraph b) should have been:

b) A partially uncaring person, assumes or acts like others do not exist to maximize green profits, that is someone acting self-interestedly, right?....The invisible hand in the eco -economic market acts as society do not exist as it is not an endogenous factor in the model;

My apologies to all

Self-interest based rationality is the fundamental axiom of economic analysis. Yet, it seems that the axiom lacks any justification and  rigorous reason. 

My point is that despite the failed efficacy of these terms, they are used as behavioral guides for both the economies and individuals. 

Self interest in presumes purposeful behavior in pursuit of maximum net benefits from any economic choice. Overtime we learn to make better choices about the actual benefits realized from any specific choice as well as greater facility in negotiating the transactional complexities in exercising that choice. In effect, rational self-interest is always a work in progress, not a fait accompli.

On raionality, it is quoted for economic analysis: utility maximization of consumer and benefits maximization of entepreuner. Rationality is not refered about neither take smarter decision nor erase error made by economic agents.

Dear Mohammad, Charles and Mario.  When the bruntland commission said in 1987 the traditional economic model was not working and needed to be fixed by making it inclusiive and friendly to society and environment, that meant Adam Smith uncaring invisible had had not worked as it was socially and environmental unfriendly sicne the industrial revolution...

To fix it fully and make it socially and enviromentally friendly at the same time to meet the bruntland commission request required  and still requires a 180 degrees shift towards sustainability as only under sustainability the invisible hand is required to be socially and environmentally friendly at the same time.  

Instead of fully following the bruntlkand commission request, we are partially fixing Adam Smith's model since 1987 by making it environmentally friendlly only, what I call eco-conomic development, but others call green growth.. So the invisible hand in the green market is partially caring and the inviisible hand of Adam Smith is totally uncaring/impersonal.

We know models evolve whether we like it or not, and evolution means that if we can not see the paradigm has change we need to read and learnt from those who can see it....We know or should know at this level that paradigm shifts are not easy, but one in while they take place and we better undertand when we are not longer in a specific paradigm so the polilcy and tools we need to deal with the issues match the theory-practice consitency principle... 

We are no longer in the traditional economic market so we need to see beyond the rraditional invisible hand

Warm greeings to all

Respectfully yours;

Good day Barbara, with all my respect, the economic man you seem to refer to no longer exist we are now in the eco-economic or green growth era, we have now an eco-economic or green man at work...We can not approach green growth with pure economic thinking, we need eco-economic thinking....

Ideas on the different structures and policy requirements can be found in:

An overview of some of the policy implications of the eco‐economic development market

https://www.researchgate.net/publication/281846534_An_overview_of_some_of_the_policy_implications_of_the_ecoeconomic_development_market_Environmental_Management_and_Health_Vol_11_No_2.a

Data An overview of some of the policy implications of the eco‐ec...

The economic man that economist postulate does not necessarily exist.  Many studies carried out by, for example, Herb Gintis show that people are as likely to operate in an altruistic or vindictive manner as self interested. If they perceive others are breaking the rules of generally accepted fair play they are likely to try to punish the others even at personal loss.   That is just the tip of the iceberg in human motivations, but while self interest certainly motivates many it cannot be assumed.

Good day Charles, when I say that the economic man no longer exist I mean we are no longer today living within Adam Smith's traditional market, we are living now in a new market, the eco-economic market or green market; and the economic man has been transformed into a green economic man... New markets new rules, but we still are trying to deal right now with a new market with the same old rules. This violates the theory-practice consistency principle and that is why I wrote the article shared above.  

You may find the ideas in this other paper interesting:

Beyond traditional sustainable development: Stating specific and general sustainability theory and sustainability indices using ideal present-absent qualitative comparative conditions

https://www.researchgate.net/publication/281276522_Beyond_traditional_sustainable_development_Stating_specific_and_general_sustainability_theory_and_sustainability_indices_using_ideal_present-absent_qualitative_comparative_conditions

Wish every one a nice day!

Respecttully yours;

Article Beyond traditional sustainable development: Stating specific...

Dear Charls and Munoz

I am really puzzled. Why such a fiction that is anti-humanity is not only invented and re-invented but also enforced and re-enforced throughout the world as something more inviolable than the ten commandments taken together? Why such an axiomatic but exactly non-emulative character is taken as the basis of economic policy? Why such an overreach of Neo-Classical dogma? Is it RATIONAL to follow a non-existing as a realistic one? Economists denounce Idealism. However, they are used to follow un-realism in the name of realism! 

With regards to all.

Israr

Israr

Very good question.  In my opinion, and that of many others, as a group the conventional neoclassical economic model(s) (CNEM) are worse than useless. The many criticisms of them tend to be either: 1) that such models are mathematical fantasies rather than accurate representations of reality that lead to some kind of efficient or socially optimum results,  and 2) tools that justify or contribute to concentration of wealth and repression of people with less power.  

With respect to 1:  In 1982, Nobel Prize Winner in economics Wassily Leontief  characterized many CNEMs as being unable "to advance, in any perceptible way, a systematic understanding of the structure and the operations of a real economic system".  Hall et al. (2001) gave three reasons that people in the natural sciences could not accept the reality of the basic CNEMs: first, they violate the laws of thermodynamics, second, the boundaries are incorrect, and third, the basic tenants are presented as logical givens rather than as testable and tested hypotheses.  That paper also shows how many basic economic concepts (Solow residual, Phillips curve etc) are incorrect when analyzed  vs real biophysical/economic data.  Mirowski and others show how conventional economics, in its pursuit of legitimacy, has used moels from physics (such as for Hamiltonians) incorrectly as a basis for a credible mathematics.  Krugman (2009), writing of the failure of economists to predict the market "crash" of 2008,  has said "the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth...economists fell back in love with the old idealized vision of the economy in which rational individuals interact in perfect markets, this time gussied up with fancy equations... the central cause of the profession's failure was the search for an all-encompassing, intellectually elegant approach that also gave economists a chance to show off their mathematical prowess. (Krugman 2009).  While there are criticisms of Krugman's approach (e.g. Cochrane 2011) I believe they are not on target, and they (and Krugman) miss the importance of biophysical aspects and events (e.g. trivially the increase in the price of oil to $149 a barrel just prior to the crash in 2008).  

with respect to 2:  There are even more criticisms of the social or moral failings of the CNEM, for example the book by Piketty and the pronouncements of Pope Francis  on how capitalism (more or less equated to the CNEM) leads to inequality.

These perspectives are developed in more detail in Hall and Klitgaard (2012).  We have an association of BioPhysical Economists who share most of these views that you or others could join if you wish (contact: [email protected]). 

It is not possible for me to answer your question as to why this view of economics persists in the face of so much criticism because I do not understand that either.  I can only respond  with Krugman that the "intellectually elegant approach that also gave economists a chance to show off their mathematical prowess" is much more likely to lead to the acceptance of Journal articles and tenure in prestigious institutions.     

As for Lucio's response I agree with him that there is little that is truly sustainable out there, but I think he misses an important point.  I refer him especially to the article by Goodman and Daly which states (correctly in my opinion) that there are three "schools" of sustainability: social, economic and environmental [the latter has two components: the quality of the environment and the need for a continuing resource flow]. They make the point that sustainability by one of these approaches is often done at the expense of sustainability in another. From my perspective as someone who thinks we need to pay much more attention to energy, there is no mention at all, let alone reasonably sophisticated calculation, of the energy costs of most "sustainable" endeavors, which would be seen as not sustainable were that done (see also Hall 2015).  

W. Leontief, 1982 Science 217:104 

Hall, Charles,  2001. The need to reintegrate the natural sciences with economics. BioScience 51 (6): 663-673.

Krugman, Paul 2009.  How did economists get it so wrong.  New York Times Sept 9.

Hall, C.A.S., and K. Klitgaard. 2012. Energy and the Wealth of Nations: Understanding the Biophysical Economy. Springer, NY.

Goodland, R. and H. Daly. 1992. Environmental Sustainability: universal and non-negotiable. Ecological Applications 6: 1002-117.

Hall, Charles.  2015.  To Be or Not to Be: That Remains the Question.  (Book review of     Dodging Extinction, by Anthony Barnovsky).   BioScience 2015;

Mohammad, good day.  With respect to your comments, I alwayas try to provide what I call "postive criticism", I criticize and I provide an explanation or way out with the goal of advancing knowledge/science.

I am trying to do it from a true sustainability point of view, a view that has and links subsystem sustainbilities through market thinking, a view fhat if Adam Smith would have chosen during the indsutrial revolutionas the heart of the formal economy instead of traditional market theory may have save us the two main crisis we have today, enviromental and social extreme poverty.

Now you Mohammad, do you believe in doing develpment through markets?.

a) if not what is your suggestion for approacing develpment, how rationality and self interest would work then.  

b) if yes, what would you use instead of rationality and self-interst to bring markets alive.

My warm greetings;

Charles thank you for your comment

The way sustainability thought started was compartmentalized as many were working and are working in some time of subsystem sustainability(economic sustainability, social sustainabililty, environmental sustainaibilty, eco-economic sustainability....) without having a general theory of sustainability.  Under general theory of sustainability there is over all sustem sustainability and subsystem sustainability and all is linked so changes in subsystems can be traced to the over all sustainability system or between subsystems.

Without such a theory Goodman and Daly saw or see separte schools where they should also be an over all school/Alma matter.

When one system growth at the expense of other "You do not have a sustainability system, but a sustained system.  That is whey all forms of sustainable development models are sustained models, not sutainability models as sustainable development is not sustainability.  Another way and clearer way to say "They make the point that sustainability by one of these approaches is often done at the expense of sustainability in another" they accept that for one school to exist they have to assume component neutrality for example for the economic school of systainability to work or be sustained society and environment do not matter/ exogenous to the system.

From my point of view the content in the statement below given current though of true sustainability is very weak:

"I refer him especially to the article by Goodman and Daly which states (correctly in my opinion) that there are three "schools" of sustainability: social, economic and environmental [the latter has two components: the quality of the environment and the need for a continuing resource flow]. They make the point that sustainability by one of these approaches is often done at the expense of sustainability in another.'

You may find the ideas in this two paper interesting as one show how those three schools should be connected in one genearl theory; and the other shows how externality assum

ptions make it difficult to see how to deal with real market crashes:

Introducing a Simple Qualitative Comparative Dichotomy Approach to State and Clarify Sustainable Development and Sustainability Related Concepts and Issues

https://www.researchgate.net/publication/281244558_Introducing_a_Simple_Qualitative_Comparative_Dichotomy_Approach_to_State_and_Clarify_Sustainable_Development_and_Sustainability_Related_Concepts_and_Issues?ev=prf_pub

Beyond Traditional Financial Market Thinking: How Would An Ideal Structure of Financial Markets Look Like If We Think Outside the Box?

https://www.researchgate.net/publication/282201673_Beyond_Traditional_Financial_Market_Thinking_How_Would_An_Ideal_Structure_of_Financial_Markets_Look_Like_If_We_Think_Outside_the_Box

My warm greetings Charles

Article Introducing a Simple Qualitative Comparative Dichotomy Appro...

Article Beyond Traditional Financial Market Thinking: How Would An I...

Mohammad,

Based on your responses to other people's answers it seems that you have a definitions of "self-interest" and "rationality" in mind. A couple of people provided the standard definitions which strike me as quite reasonable descriptions of human motivation that we encounter in everyday life to the point that they are almost banal (but an essential foundation axiom from which all other economic theory is built).

However, based on your last post I would be interested in knowing what definitions you have in mind so that I could understand what the problem is.

Regards.

Dear Charles and Lucio

I am extremely thankful for your elaborated comments. At the moment I cannot explain the exact substitutes of the conventional rationality paradigm. But the thought has really made me perplexed and anxious to look for the one. 

Hoping to get the best from you as well as from the community of economists.

With kind regards

Israr

Dear Mohammad, this will be my last comment here. and wish you good luck

Your opening question and the few comments you shared imply you have problems with the way economists use those two axiomatic concepts and their spread over the world, which promted all these replies, but you do not know yet what problems you have with them nor you have an alternative option to suggest and defend.  

As I mentioned in my previous message, there is possivite criticism/questions, if you criticiise and then provide an alternaive explanation/ to reffute something and start a possiitive dialoge/discussion; and negative criticism/questions, when people just criticise or vent problems without having an alternative idea to contribute.

I personally, never criticise the views of others unless I have something to contribute to highlight weaknesses and offer ways to move forward or if I think I have an alternative to knock it off completely. Knowing that the opposing view may exercise the right to reply back and hat way science or knowledge grows and get spread...

I hope what was shared here help you figure otu the problems with the two concepts that you may have.

Respectfully yours and greetings to all

Lucio

I read quickly your two papers, and although they seem useful from an economic perspective they miss what has been my main point about development: that money by itself has no utility unless it is backed by real biophysical resources, especially energy. [I saw no mention of energy or resources in e.g. your terminology].    I view money as a lien on energy.  Take away the money and a society can function, albeit awkwardly, through barter. Take away the energy (as in Cuba 1988) and the economy comes grinding to a halt.  Print more money than there are resources and you just get inflation.   Debt too is a lien on energy: if  there is not energy to back the promissory note then the debt cannot be paid back.   Thus I would suggest that figure 2 in the enclosed paper is the minimum diagram that accurately depict how real economies operate, and that perhaps your useful diagrams might be modified accordingly.

Such discussions might be moot if resources were indefinitely available. But by most accounts I trust (e.g. Mohr (attached ) is one such example)  there are severe constraints to the availability of e.g. fossil fuels, and in addition over time the energy required to get the next unit is increasing (i.e. the EROI, or Energy Return On Investment) is declining.  Thia implies that we cannot assume that our present economic theories and approaches will operate indefinitely into the future, and that economists must pay far more attention to the biophysical reality of the areas and conditions they model or manage.  

So despite your useful attempts at synthesis I stand by my point that we have yet to generate a truly useful model of development that takes into account all the requirements for true sustainability including social, economic, environmental and especially the necessary biophysical base.

Good day Charles, you need to read a little bit more.  Energy is a market and markets are driven by money.  Without energy an economy, especially a moder economy will crash, you are right.  But if there is energy available and you have no money to invest to buy and/or produce it, the economy will crash too.  You need to re-evaluate your thinking especially now that we need to start transitioning from the current dominant non-renewable energy based market to the future renawable energy based market and that transition will take money to invest in closing the renewable energy technology gap.... Have you noticed that the last RIO process only endorsed green growth and it did not set plans for an orderly  transition to clean markets; and also this coming global warming conference is not considering this transition yet. too.   Of course if there is a non-market solution to the energy crisis that you have in mind, let me know.

You may find these ideas interesting as it also says that there will be economic black outs, locally and gobally, sectoral or systematic if when non-renewable resources disappear or are not longer availble to all the renewable energy techonlogy gap is still so huge that you can not compensate for the loss of non-renewable energy and as you said,,,no enerny, no economy, no society, no matter how much money you have...

Respecfully yours and a greeting to all

Understanding the Road Towards the Current Dominant Non-Renewable Energy Use Based Economy: Using An Inversegram to Point Out a Step by Step Strategy Towards an Efficient Dominant Renewable Energy Use Based Economy

https://www.researchgate.net/publication/281230333_Understanding_the_Road_Towards_the_Current_Dominant_Non-Renewable_Energy_Use_Based_Economy_Using_An_Inversegram_to_Point_Out_a_Step_by_Step_Strategy_Towards_an_Efficient_Dominant_Renewable_Energy_Use_Based_Economy

Article Understanding the Road Towards the Current Dominant Non-Rene...

And Charles, I shared the previous two artilces, specially the conceptual article on sustaibable development/sustaibabiity and issues just to show you that Goodman and Dali schools of sustainability are sustainable development approaches as to work they affect other components, and this can not happen under true sutainability plus they came out outside of general sustainability theory in which all of those schools and others like eco-economic sustainability school or socie-economci sustainability school, or socio enironmental sustainbility school come under the same general umbralla. I hppe after reading this point was clear.

Charles, I think we are out the the question in Mohammad discussion, I have 7 questions and some referr to energy and sustainability perhas you can follow up or replied to me there out of respect to Mohammd space....

This is my last post here Charles

You can find my questions in the link below

https://www.researchgate.net/profile/Lucio_Munoz/questions

Dear Charles and Lucio

I am highly thankful to you and all others who made replies to my problem. I am really sorry that both of you- the most active discussants- opted out of the space to quench my thirst. 

Lucio Sir, if I do not have an answer it does not imply that I do not have an option to ask from the knowledgeable personalities like you. I had a puzzle in my mind. I wanted to share it on RG. What I derive from the replies is the lesson that these two basic axioms of economic science lack real ground to stand upon.

The thing that annoyed you is that I must have an answer to the question I did raise. 

I am just a learner. I want to learn how much bad the economic science has done and is doing to the mankind. As to the good things it has turned the man that was a social animal  into an economic animal; and the society into an economy sans society.

I wish to hear more from both of you, and from others as well.

With kind regards

Israr

Dear Mohammad,

I have just encountered your question, and read the tail-ends of Lucio's and Charles' contributions. I too am asking such questions, and have been doing so since 1975 and without immersing myself professionally in the dogmas that have developed around economic studies.  You rightly identify one very salient fact: "What I derive from the replies is the lesson that these two basic axioms of economic science lack real ground to stand upon."  This is simply because that 'real ground' you are expecting to find is in fact at such a axiomatic level as to be no more than a belief. Or to put it in more erudite terms: the concept of economic man at the root of all classical and hence dominant approaches to modern economics is that of a being which takes all decisions with rational regard to its ('his') own self-interest, or that is to say to his own greatest benefit.

This statement is no more than a dogma. It is a belief which at the time of its conception conveniently simplified the developing models that were being proposed, by people such as Adam Smith, sufficiently that they might start to make sense of what they were seeing and trying to understand in the operation of Mercantile economies, and nascent Industrial economies, of Western Europe in the 18th and 19th centuries.

Modern economists tend to be inclined to one of two approaches.  In some universities economics is taught as a branch of Applied Mathematics and Statistics. Their work tends to accept the dogmas and axioms as fact and seek to describe the world, measure and model it from the relationships within it that mathematical techniques can reveal and the proscribe policy through interpretation of those facts by a reliance upon the theoretical dogmas.  In others economics is taught as a branch of Sociology.  Their work tends to be less well funded because they are more concerned with the interactions of people in the economic sphere of their lives and in outcomes of those actions at the personal, community and national levels.  This is far more imprecise, the variability of interpretation is greater and the policy prescriptions are qualified by statistics with far higher variance such that policy makers are not comfortable adopting them for proscriptive purposes.  They tend to continually find that human behaviour might not be wholly consistent with that of 'economic man' and are often confused about this observation.  This results in a wide variety of explanatory theories being proposed in a myriad of contexts, each adding to the complexity of choice when seeking for a theoretical framework to adopt when drawing inferences from the already difficult statistical results.

Over the last 35 years the study of economics has been overwhelmingly internationalised beyond its Western European cultural roots.  This has resulted in an increasing disregard, or blindness, to the real meaning of the correct name for 'modern economics'.  It was and still is correctly entitled 'The Philosophy of Political Economy".  The phrase 'political economy' was not invented by the 18th Century thinkers as such.  They drew in turn from the writings of Aristotle 2000 years before them.  But Aristotle, in looking at life and how it should be lived, distinguished between two aspects of the question... the 'Political' and the 'Ethical', Sadly for us perhaps, his generic term encompassing the two was also to call them together 'Political'.  It is important in answering your question, Mohammad, that Aristotle learned from Plato, his teacher, and from Plato's teacher, Socrates. Also important is that although this 'tradition' of philosophy sought to ask 'how should people live?' and consequently to ask 'what is happiness?'' and 'what is goodness' in response to the answer being to the first question 'to live good and happy lives' their further conclusions were inevitably  strongly biased by the social context of ancient Greek society, the social norms embodied within it and the mutually competing and warring city-states in which they lived.

Their world was fuelled by the energy of both human and animal slaves, and also by the labours of 'free' people who although free, laboured at their trades and callings and were not necessarily acceptable to 'polite' society.  It is not therefore surprising that, in precis, their 'logical reasoning' converged upon the conclusion that one should engage in 'the virtuous pursuit of the best and most constant pleasures for oneself' whilst holding the pursuit of 'goodness' in one's own life in subordination to the good of one's city-state.  Finally, it was axiomatic to this tradition that the virtues all needed to be achieved for 'goodness' in one's life to be realised.  Thus one, at once, needed to be intelligent, beautiful, courageous, prudent, just, temperate and habitually given to doing virtuous things such that one converts one's potentialities into actualities and thereby attains 'beauty', which is in turn equated to 'good'.

As one might expect there are critiques of the logical integrity of the argument employed by them.  This has not weakened the influence that these very elitist conceptions of the 'good life' have had on Western tradition and upon the 'axiomatic' basis of modern economics right up to the present moment. 

It is clearly contrary to the universalist principle, brought to the fore by the French revolutionary thinkers, which has developed in the past 75 years in particular, into the humanitarian ethos underlying the 'human rights' based view of mankind that drives hope in the hearts of every needy individual in our present world.

It is also clear that a duality exists throughout modern economic thinking, and hence amongst its policy recommendations.  There is the Aristotlean view that only the elite can pursue virtuosity and therefore be good, happy and beautiful.  This is consistent with the, so called, neoliberal viewpoint which encourages those economic activities, institutions and policies which tend to facilitate the perpetuation and strengthening of elites. These are policies of the political Right.  And there is the humanitarian, universalist view that such 'well-being' is the right of every individual to pursue and it is the role of the 'city-state' to facilitate the transformation of those potentialities into actualities.

It is not hard to see how, in much of our modern experience, the 'democratisation' of the concept of an individual's right to expect to pursue 'goodness' has led to a conflict between actual economic policies, which by definition are enacted by the elite, and the rhetoric as to their supposed goals and aims being that of facilitating a universal well-being.  This duality appears to be at its most visible in those most 'democratised' nations.  Not surprising, again, since the Aristotlean philosophy of 'beautiful is best and therefore both good and right' needs no disguise in nations where there is no democratic veneer.   In those nations where the elite do labour under the yoke of democracy they do so because either, historically they have 'recovered' from a fully democratic 'revolution' through their control of wealth and therefore of real power but are unable otherwise, once the 'genie' of democracy was out of the bottle so to speak, to maintain the public order and economic 'cooperation' that provides the work required to preserves, maintain and expand their wealth and therefore their opportunity of actualising their own goodness and happiness.  Others, seeing the possibility of revolution over democratic demands, took the Machiavellian prescription and pre-emptively gave with the one-hand, on their won terms, whilst maintaining as best they could the institutions, practices, appointments and policies upon which elite position rely and through which they are sustained.  This has been so successful across Europe that the political Left have been unable to conceive of themselves in any other role except that of trying to identify modus vivendi within the modern economic context that does any more than just redistribute wealth, as income, away from the locii of power and wealth to which it accrues instead of seeking the REAL axiomatic basis of human economic behaviours and building a more realistic, and hopefully, more just 'economic philosophy of man' than can be achieved from either  the assumption of 'rational, self-interest' of 'economic man' or from the romantic illusion of the basic nobility of man towards man that is embedded in the philosophy of Marx and nearly all 'socialist' derivatives on the political Left.

Does that answer your question in any useful way?  It is towards the construction of that realistic 'economic philosophy of man' that I am working and hopefully in due time it will create the social paradigm that is capable of delivering hope and its developing actualisation as an ever an developing and improving experience of lifetimes of well-being for all individuals into the future.  And for mankind an assured expectation of survival, physical evolution through adaptation to a necessarily changing Earth and eventually of the dispersion of our Humanity beyond it.

Lucio

I am well aware of the economic principles that you refer me to.   It is they which I am unhappy with.  You were trained as an economist, me as a natural scientist.  Perhaps we can never agree.   I shall leave it at that and wish you well. 

Agreed Charles, have a wonderful day.

Respectfully yours;

Lucio

Dear Mohammad and Robin, good day.  A short comment.

a) About you Mohammad, it was not my intention to make you feel bad for asking the question you asked, asking questions is always good especially when you would like learn something new.  

However asking a question in a  way that it seems you have a different view means that when you received the views of others in pro or in con of the items under discussion you need to provide your view too...Now we know you do not have a clear view to offer as an alternative to those two concepts, axiomatic or not, to ease your concerns which is is fine... But by this time given my conributions which are clearly neither close to the traditional economic man that you talk about and I have eveb stressed he is now dead because we are living in a different development paradigm....Is the green growth model based on the same axioms as the old economic man?...I can tell no the anser to this is NO, but those implementing the green growth paradigm do not know as they do not have a theory of green growth as Adam Smith had as they have just partially fixed the traditional marke to make it environmentally friendly... So you need to shift your question about invisible hand and rationality toward the eco-economic model or green growth as if I can repeat again the economic man is dead together with its axioms....

b) About you Robin, if the economic man is dead, what happen to your thinking. Are you going to refocus it towards the green economic man?.  Some people like living in the past, others think they are living in the past because they are not able to  realized that there has been a paradigm shift, and other people continue living in the past knowing that there has been a paradigm shift just because they like it.  I like looking at the future and looking at the past at the same time to see how I can play with the past to make sure there is a more sustainable future....

c) As food for thoughts related to the need to look beyond the traditional economic man and into the future I shared this with you:

Complex and Man-made Markets: Are We Currently Approaching Sustainability in a Backward and More Chaotic Way in Terms of Economic Thinking?

https://www.researchgate.net/publication/281277199_Complex_and_Man-made_Markets_Are_We_Currently_Approaching_Sustainability_in_a_Backward_and_More_Chaotic_Way_in_Terms_of_Economic_Thinking

What If Markets Have Always Been Distorted? Would It Then Be a Good Fix to Add Fair Trade Margins to Correct Distorted Agricultural Market Prices?.

https://www.researchgate.net/publication/281244562_What_If_Markets_Have_Always_Been_Distorted_Would_It_Then_Be_a_Good_Fix_to_Add_Fair_Trade_Margins_to_Correct_Distorted_Agricultural_Market_Prices

My warm greetings to all

Article Complex and Man-made Markets: Are We Currently Approaching S...

Article What If Markets Have Always Been Distorted? Would It Then Be...

Dear All

I must be thankful to the participants, especially for their forbearance in teaching me how to learn from a diverse audience. 

Sir Charles and Sir Lucio

It is not a matter of taking sides with this or that viewpoint. Rather, what I intend to do is to have a honest understanding of a phenomenon. I think that economic science has been taking sides with the rich and dominant classes. While doing so, it has become a tool of the institutionalization of the ethos of the ruling ones. 

It is not the Right or the Left that is at stakes. It is the society and the mankind which are at loss from partial and self-interested analyses.

With kind regards

Israr

Sir Robin Edward Jarvis

Your words of wisdom come like the sea waves with morning breeze on their way to quench the thirsty shores.  I do not have any words other than those fully endorsing what you have written in your so elaborated an answer.

Please, let me learn more from your wisdom.

With sincere regards

Israr

Dear Lucio,

I am very encouraged by you response. We are clearly working from the same page... that of the present, whilst looking both backward and forward so as to more accurately chart the chart.  I am of the same opinion as yourself regarding the lack theoretical basis to the policy demands of the green movement. I have in fact been in a very recent dialogue with the UK Green Party on this score as well as with the Greenpeace NGO, and debated Jonathon Porritt at UEA in 2014 on just this matter.

You were accurate in noticing that I had not stated where i stood with regard to replacing the classical model of 'economic man'.  That is because I have abandoned him. My starting point is that of a broader, evidenced-based behavioural reality that takes account of who people really behave, and how they actually interact with and are affected by the operations of 'institutions', such as markets for instance.  This replaces the stochastic time series view of economic modelling with a more temporally longitudinal process oriented analysis... and result sin rather more philosophical style discussion rather than a reliance upon statistics and econometrics.  From this basis I then look at how institutions might be engineered so that universally experienced sustainable, resilient and durable lifetime experiences of well-being might be maintained in future in the face of ever changing environmental and technological circumstances.  having, of course, already defined my view of what constitutes well-being to an ordinary mortal such as you, I or anyone in the contexts - cultural, historical, economic and metaphysical - that we each find ourselves living through.

When I have established how this might need to look, which includes imbuing that vision with the capability of maintaining a self-conscious awareness of the the fact that the it must itself be constantly re-evaluating itself and dynamically adapting to maintain sustainability while keeping a tight focus on the stated goals for a diverse,  resilient and ubiquitous experiences of well-being.

I might explain that after my econometrics studies (as a branch of behavioural sciences at UEA) I became a professional ICT System Engineer.  My approach is very much one discovering and considering the real problem statement, rather than the symptoms that the 'customer' perceives as the problem. I am then able to develop a theoretical 'solution design' from observation and analysis, before creating the 'project plan' which will implement the necessary transition from the systems and processes of today into those required by the future.

It is ambitious, but in the light of the severity of the problems that are presenting themselves across the world it seems to me the only reasonably sure way to move ourselves into something better.  I am 35 years into the task and am now seeing quite clearly what future societies might look like.  How to get there is the biggest headache.  In theory that might be seen as straightforward, even if rapid, evolution. the big problem however is that it involves a complete revamp of the actual economic basis upon which current systems of power and wealth are built.  This is something which can be expected to be very vigorously resisted through pressure on any institution that supports such an endeavour and relies upon public or privately subscribed funding. Hence I am working entirely independently of 'structures.

I hope that takes you some way to understanding why I assisted Mohammad with the long response that I provided.

Very best regards,

Robin

Dear Mohammad,

Thank you for your kind words!!  I have been waiting 35 years to hear such appreciation of what started as the idealism of a young graduate in 1975.  It has been, and remains a long journey to complete.  As Lucio 'says', there is no question of going Left or Right,  What is needed is a non-dogmatic evidence-based view of reality and honest and unselfish approaches arrived at without pursing covert goals that feed one's own self-interest.  If that statement is in any way irrational then I can only conclude that I am the living proof of the failure of the classical models to address reality!

In due course I shall place some unpublished papers on this site.  For the moment I am 'keeping my powder dry'.  There are many people who are heavily invested into the current paradigm.  They would be happy to 'nip in the bud' an existential threats to their 'happiness'!

Warm greetings... and thanks!

Robin

Dear Mohammad, I agree with you that the economic man thinking has been a pro-rich institutional tool, and that was one of the main reasons Adam Smith came out with a fully irresponsible invisible hand....to institutionalize the industrial revolution and spread its wealth creation power at high speed believing perhaps that such an approach would not lead to the extreme problems we have today, poverty and environmental degradation.  Because now we now the approach was wrong, we are partially fixing it and make it environmentally friendly = green economic development.

Soon I will share a paper in RESEARCGATE where these issues are central to point out the future after green economic development, that of sustainability; and highlight the weaknesses mentioned in the discussion from a sustainability point of view.

Wish a nice day to all

Robin, good day.  You should look at the situation from a sustainability point of view as I do and you can easily see the weaknesses of the traditional economic man and of the green economic man... that is going to be clear to readers in simple terms in my next article pondering why Adam Smith did not set sustainability markets as the heart of economic markets in his time...

I share these ideas soon

good day

Dear Sirs Robin and Lucio

To start with the words of Robin Sir '... a long journey to complete' is the route the human civilization has come forward and hopes to move forward. There has always been a consistent fight between the forces of self-interest and those of the collective/social interest. Lots of people have had laid down their precious lives for the purpose. But the weapons in the arsenals of the self-interest are so cunning that they usually overshadow the virtues of an absolute humanitarianism. When a tyrant kills a man for his own amusement, he does not only kills him. He kills him with all the brutality he can command, like a wolf playing with the spirits of its kill. But, for our economic fraternity ascribing to the conventional wisdom, he is a rational agent just because he increases/maximizes his utility (of the kill) this way! Does this kind of an economics has any thing to say to the ISIS fanatics in the Arab world or to the RSS bigots in India who are rampantly dehumanizing the society. An economics, I think, must have something to correct the anti-humanitarian behavior of the economic agents. 

Sirs

You are living in a part of the world that is called and is of course a developed one on several counts. I do live in that part of the Globe that is desperate enough to achieve the levels of prosperity comparable to your societies. You are, and for all good reason, worried about the sustainability dimensions of the developmental processes as well as the outcomes thereof.

Here, in my part of the world, what the World Bank dictates and the national governments obey is worth contemplation. What remains there for the governments to do when they have privatized the health services and education like basic needs, in a country of poor folks who can not afford the bread, leave apart the branded medicines and schooling, at market rates? So the governments are busy with creating the 'business confidence' by means of corporate subsidization and an officially mandated transfer of natural resources (the land and forests) from the poor historical users to the corporate sector. They boast of reaching at higher rates of growth. It is not for petty things that the most prominent discourse in India's political economy nowadays is on an 'enclosure' (I mean the pre-industrial and industrial era enclosures of manorial lands in your part of the world) style land acquisition by means of the Eminent Domain whereby the historical folks are even being denied of the right to protest the same at any appropriate forum like the judicial or political fronts. This is self-interest and the rationality of the 'dominant' policy makers.

Sir Lucio, when the countries like India run after high growth rates and let loose the corporate and capital sovereignty they damage the sustainability on every count. Neither the social sustainability nor the economic one. Environment is a tragedy; justice a fiction, then. 

I could not but recall the 'Fable of the Bees' composed by Bernard Mandeville, in 1714, a full 62 years before Adam Smith. I would salute your passions with reproducing just one couplet from his fable:

"That, tho' at fair play, never will own

Before the losers what they've won."

With kind regards and best wishes

Israr

Dear Mohammad, I can see now the angle you look at retionality and self-interest and the case of excesses.  Remember the freer the invisible hand the more irresponsible it will go, remember the 2008 financial crisis....  The way the model (that is the economic man at work you described in your posting) is designed/ simplified to work it is just like that...to Max the Max.... So it is working well......  But that history of irresponsible behaviour is giving us today the chance to do better in the future, that is the shift to the eco-economy or green economy has been possible...

My grandma used to say that life is beautiful no matter how difficult the situaion is in which you are in and just because someone is selfish does not mean you have to be too... So I think, call me a dreamer, the way development is going that we are creating the critical conditons that will be needed in the future for real change, then a move towards a fully responsible invisible hand would not be a hard sell...

I am sure some one will be happy if you give up hope..... I thrive on hope....

Have a nice day

Israr, in your last comment it seems that you are making a strawman of what Economics is. Paraphrasing Murray Rothbard, Economics does NOT make value judgements about the ends people strive to attain. A person's "ends" can be "egoistic" or they may be "altruistic". They may be "refined" or "vulgar". They may emphasize the enjoyment of "material goods" and comforts or they may stress an ascetic or austere life.

Economics does not care about the content and its laws apply regardless of the nature of these ends. The fields of psychology and ethics attempt to deal with the content of people ends; they ask why does someone choose such and such ends; or what ends should people value? Economics deal with any given ends and the formal implications of the fact that people have ends and that they employ means to attain them.

And back to the original question, Yes Economics is based on "rationality" but it certainly does not assume some sort of omniscience. "Rationality" in economics is simply that people act with a purpose in mind and consequently that it is consistent with reason and guided by one's will and intellect. Indeed the term "rational action" is pleonastic. People simply act. Action is purposeful behaviour directed toward the attainment of ends in some future period which will involve the fulfilment of wants otherwise remaining unsatisfied.

Action involves the expectation of a less imperfectly satisfied state as a result of action.

This is what rationality in economics means. Any notion that someone's actions are "irrational" is to actually place an external value judgement on that action. It is to say "I would not do what that person did" but it does not mean that the original action was "irrational".

Further, to say that someone is "self-interested" is simply saying that people will care more about themselves and about close loved ones, friends and other relationships than they care about strangers or people more distant in their lives. It does not mean "selfish".

From the "simple" axiom of human action it is possible to build the entire edifice of economics including the Law of Marginal Utility, the Laws of Supply and Demand, Say's Law, Crusoe theory, Price theory, Capital formation, Utility and costs, Interest rates, the Law of Returns and so on. Hence, Economics will tell you the consequences of trying to interfere in markets by price fixing, taxation, socialisation of property etc but it is not making a value judgement per se.

Good day Guy, I think Mohammad is concerned about how rationality and self-interest is applied, not the theory, and you may argued that economic do not tell people to act excessively...but they do because doing so may be justify by economic goal of maximization.... Economic does not choose/make value judgements you are right, people do.  But if the goal is maximization, what do you think Adam Smith would have chosen, or what would you choose, egoistic or altruiistic behaviour? So to maximize economics only leaves one choice, egoistic behaviour, otherwise you are not maximizing...Economic does not make value judgements, but leaves you only one choice,,,,fully irresponsable self interest to perfectly meet the goal of maximization...

Would not you agree?

Wish you all a wonderful day.

On your second post Guy, the best way to avoid the issues around rationality/irrationality you mention is to look at rationality from the responsibility point of view, fully irresponsible individual, partiially irresponsible individiual, and fully responsible individual.... The economic man is a fully irresponsible individual as its invisible hand is so... The green economic man is partially irresponsible individual as it cares about the environment, but not society as invisible hand is so....The sustainability man is a fully responsible individual as it is socially and enviromentally responsible at the same time as its invisible hand is so...

About your comment below:

"Hence, Economics will tell you the consequences of trying to interfere in markets by price fixing, taxation, socialisation of property etc but it is not making a value judgement per se."

a) economics tells you the economic consequences of intervention, not the social and environmental consequences as they are exogenous issues to the economic model;

b) as indicated in the previous contribution, it does not makes a value judgment but leaves market participants with only one choice, egoistic action, so the maximization goal is achieved;

c) Do you thing that statemet would apply as it is to the current eco-economy or green economy?

Have a good day Guy and wish all had a nice  weekend as me

Hi Lucio, thanks for your thoughts.I wish their was a quote feature on RG but hopefully the below makes sense.

"So to maximize economics only leaves one choice, egoistic behaviour, otherwise you are not maximizing...Economic does not make value judgements, but leaves you only one choice,,,,fully irresponsable self interest to perfectly meet the goal of maximization...

Would not you agree?"

No, I would not agree as you are imposing a very slim view about what it is that people are "maximizing" to end up at the point of "fully irresponsible self interest". People have many wants and they are acting in ways that they expect will improve their overall situation not just a particular part of their current existence. Further, most people's expectations also include the expectation that they (or someone they care about) have a future to contend with. 

As a small example, the majority of people know that there is value in building social capital and having trust among strangers and therefore they naturally act in ways that help build this. Most people plan actions not just for immediate gratification, but also for future gratification. A farmer planting seed today in the expectation of a greater amount of seed in the future is a classic example, but small everyday examples are shown by people being more likely to act civilly and peacefully with the same work colleagues if they expect to be working next to them next month compared to if they expect not to be.

Indeed, the greater amount of capital someone has invested in a particular activity or the greater amount of time it takes to transition to something different, the more forward looking and sociable and less selfish I think people are. The social institutions and general conditions in society also have a big influence on how "egoistic" or "altruistic" (both concepts which I am not a fan of) people seem to be.

I'll add some more in my next post.

Lucio, w.r.t. the 2nd of your posts:

"a) economics tells you the economic consequences of intervention, not the social and environmental consequences as they are exogenous issues to the economic model;

b) as indicated in the previous contribution, it does not makes a value judgment but leaves market participants with only one choice, egoistic action, so the maximization goal is achieved;

c) Do you thing that statemet would apply as it is to the current eco-economy or green economy?"

I think another key aspect that is being overlooked is Law. Essentially Economic laws and insights are based on people cooperating peacefully for mutual benefit. More specifically, it also implicitly assumes that there are property rights. People who act with force or violence to gratify one of their wants is therefore a matter that is in the realm of Law rather than in the realm of Economics (although some economic thinking can be applied to the problem with some insight).

Now, from your point (a), are the environmental consequences exogenous to economics? Overall, I don't think so. I would say that in general humanity is acting in the interests of humanity and any environmental resources that are non-scarce (ie not priced and not owned) may therefore become collateral damage. Is this a bad thing? Well that's a value judgement and the answer is simply "How much are you willing to pay?" If you think the collateral damage is worse than benefit derived from the activity then there is automatically a case for assigning property rights to that part of the environment and consequently a market. If you cannot afford the price by yourself, then convince enough other people to join you to pay for it collectively. This approach has been happening in many places including in my home country of Australia. (All too often however, special interest groups have sought to use the power of the Government to impose their preferences upon every one else's.)

Similarly, I would argue for any "social consequences". The Friendly Societies of the 1800's and early 1900's along with the social service or other clubs like Rotary, Lions, APEX and the Freemasons were and still are great examples of people devoting their scarce resources toward addressing various social consequences of the socio-political structure of society.

Good day Guy, thank you for your comments.

On the first comment, I am not narrowing anything, I was just pointing out what the expectation is to fullfill Adam Smith model...The choices are altruistic bahavior or egoistec behavior and the goal is to maximize, do you think Adam Smith had altruistic behaviour behind his "impersonal force"/invisible hand in mind?. I do not think so...hence, to max the max you need totally irrsposible self interest....See the green economy needs parially responsible self interest...which show a partial fix to Adam Smith model...Still green growht goal is maximization but now it can not max to the max as it is enviromentally accountable/responsible...

Have a nice day Guy

On your second comment Guy.

Adam Smith traditional market can be stated in simple terms as follows:

a) the traditional market model

T = aBc   where T = Traditional market

                             a = passive society, exogenous factor

                             B = Active economy, endogenous factor

                             c = passive environment, exogenous factor

See here only the economy matters so maximizing T = maximiazin B as  a = c = 1 = they do not matter as they are exogenous factors to the system = total externality neutrality assumption.

Hence

T = B

b) since the only thing you can see is the economy(B), what will a rational decision maker chose to do to maximize the model? to be egoistic or altrustic.  See being egoistic, even excessively egoistic, is consitent with the model as it is then working at its best...as being altrusitic is not consistent with the maximization goal...

The problem is that you can not see the social and enviromental impacts that comes with that maximizing decision....and we know those impacts can be expressed in terms of poverty and environmental degradation.... And because of this in 1987 the bruntland commission said it needed to be fixed...So the economic man of Adam Smith as we know it no longer exist, now there is a green economic man...

Correcting Adam Smith model to reflect enviromental concerns leads to the eco-economic model or green economy model, which as the following form:

G = aBC,   where G = the eco-economic model

                               a = society passive, exogenous factor

                               B = Active economy, endogenous factor

                               C = environment, endogenous factor

So G is a different market than the traditional market, the economy is enviromentally friendly and the environment is economy friendly., but most people still treat in terms of thinking and policy action this new model as if it is still the old model

I think I will leave it here and let others to express their views.

Have a nice day Guy.

"I was just pointing out what the expectation is to fullfill Adam Smith model...The choices are altruistic bahavior or egoistec behavior and the goal is to maximize, do you think Adam Smith had altruistic behaviour behind his "impersonal force"/invisible hand in mind?. I do not think so...hence, to max the max you need totally irrsposible self interest"

Yes, the Laissez-faire economics of Adam Smith has the fundamental unit as being individuals who act according to their nature. This therefore fits the standard definition of "egoistic behaviour". (Aside: I have serious doubts about whether individuals have "altruistic behaviour" and find the dichotomy unhelpful and potentially creating more misunderstandings than it solves.)

Next you say that the "goal is to maximize". Maximise what exactly? As per my earlier post, people act with the expectation that their state of being (or welfare) will be better after the action than before. People also have limited means and information to achieve this and so they therefore have value scales/rankings and act to achieve what they hope will improve their state of being the most - hence, people act in ways that they expect will "maximise their welfare". They will also experience the opportunity cost of not acting on one of the other possibilities. (They may also experience regret if the outcome is not as they expected.)

These are some of the self-evident logical truths that emerge from the foundational axiom of economics. But as far as I can see none of them lead to a value-laden judgement like "to max the max you need totally irresponsible self-interest". What is "irresponsible"? It is like calling someone else's action "irrational". It is an externally imposed value judgement based on your experiences and ideas.

One of the main insights of Smith was that it is not just "self-interest" that achieves the wonders of the market economy - it is "mutual self-interest". Every transaction has two parties. I can choose to offer "poor" quality goods charged at "excessive" prices but, in a free market, no buyer is forced to accept them. It is in the buyers interest to have "high" quality goods offered at "cheap" prices. Smith's economics shows how self-interest is actually redirected toward serving our fellow men. It harnesses a natural "egoistic" desire of individuals and uses it for the benefit of others.

Quoting Ludwig von Mises: "In the market economy, the only way for more gifted individuals to take advantage of their superior abilities is to serve the masses of their fellow men. Profits go to those that satisfy the most urgent wants of the consumer not yet met in the most useful and cheapest way."

Lucio,

In terms of your T and G models, I don't really see a difference. In the (T) Traditional model you are simply saying that there are certain means of production that are unowned and unpriced and you potentially have effects like the popularly referred to Tragedy of the Commons whilst in the (G) Eco-economic model you are bringing them into the market economy by allocating ownership and possibly pricing. If (T) is regarded as bad and (G) as good, then fundamentally I see this as simply an issue about insufficient property rights in (T).

This is a good point to add in the extra deductive truth from economics - namely, people have imperfect information and learn from their actions. Mistakes happen and always will. The trick is to have institutions and legal systems that can adapt to the new information. No-one expected many of the environmental damages that unfortunately happened in the pursuit of improving the welfare of millions of people over the past couple of centuries. Some of these damages are easily avoidable with hindsight and good institutions and legal systems recognise the potential property right damages from repeating the same or similar actions and seek to prevent them occurring in the future. Many are still unavoidable outcomes that are priced into the cost of providing goods and services that are far more valuable than the damage.

Regards,

Guy

Good day Guy,

a) since on the first response we agree on the nature of Adam Smith invisible hand, that is the only I wanted to make as it is related to the question of rationalily and self-interest associated with the economic man.  So I will leave this here to keep it simple.

b) Because I know that using alruistic/egoistic or rational/irrational brings more confusion in academic discourse than clarity, I use responsibility/irresponsability instead to describe the impersonal role of invisible hands, including Adam Smith's one.  Then you can talk about irresponsable invisible hand/capitalism for example.

With all positive intentions, I think you may find the following article interestings as food for thoughts where I talk about responsible self-interest/capitalism:

An overview of some of the policy implications of the eco‐economic development market

https://www.researchgate.net/publication/281846534_An_overview_of_some_of_the_policy_implications_of_the_ecoeconomic_development_market_Environmental_Management_and_Health_Vol_11_No_2.a

Have a nice day.

Data An overview of some of the policy implications of the eco‐ec...

Good day Guy, with respect to your comment about T and G

a) my goal was to show you in simple terms that in T = the traditional market is by designed socially and environmental unfriendly that is why total externality neutrality is there to get rid of the complexities that would be added to the model if social issues and environmental issues were endogenous issues;

b) to point out that we live in a different world right now, the G world, we are no longer in the T world as it was fixed to make it environmenally friendly so T no longer exist.

c) to show in simple terms that G is by designed not socially friendly due to its social externality neutrality and the reason why sociaty issues are not endogenous issues to the G model,

I am working a paper that I will share in Researchgate soon, where these ideas will be better presented, for the moment, I will end my participation here to avoid going in circles...

Have a wonderul day Guy and greetings to all

Dear All,

 Your debating has been interesting and has the potential to become convergent. If you can reach that point I suspect that many people will benefit, far beyond this locus. In the hope of adding some useful and hopefully objective insights, I will therefore inject what I have understood from my position on 'the sidelines'.

 Overall it has become increasingly clear that Guy, and I suspect many others in his 'school of thought', would like Economics to be a 'pure science' in which axiomatic foundational truths are established and from which, through subsequent observation and through the strict application of inferential logic, further self-evident truths can be derived. In this way he expects that a growing body of increasingly useful knowledge will be built, much of which can be then be made accessible to those people engaged in the praxis of business, government and the judiciary through an increasing body of apparently 'axiomatic' Laws and Principles. To facilitate this utility he would prefer that this 'body of knowledge' can legitimately claim to be the consequence of an objective view of human economic activities, devoid of all value judgements.

 To achieve this, and in the spirit of 'pure science', these results and insights should therefore limit themselves to accurate observation and to the rigorous determination of 'what is' with the purpose of predicting 'what will, or might, be'. Guy sees Economics as a Positive discipline. To achieve this goal it is therefore important to be disciplined and rigorous in deliberately disregarding any factors and considerations which cannot be accurately observed, usefully measured and represented within 'the model'. Any factors which have been 'exogenous' and can no longer be kept that way must therefore be transformed so that they can be treated as 'endogenous'. The discipline requires that this can only be done in those ways which are consistent with the approaches and methods responsible for the structure of the accepted, foundational model.

 I hope I have not done too much violence to this position. I am also aware that have not touched on all the issues that were raised. Some may appear lower down in this response. But, as an exercise in 'pure science', for me, it is at this point things started falling apart.

 Upon little more than the value judgement that, despite the deliberate and active simplification of human nature which was undertaken so as to make the resulting set of behaviours amenable to model building, the resulting logically derived 'axiomatic foundational principles of economics' which are then represented as the 'ultimate truth' regarding human economic behaviour are then employed to dictate economic behavioural policy actions which are explicitly designed to change and align the targeted exogenous factor into something which is recognisable in terms of the model so that it in turn can be included in the model. This despite the fact that the 'it' you then include will therefore, by definition, no longer be what 'it' was that you were trying to accommodate in the first place!! It will be an already modified behaviour and will therefore have pre-empted the policy uses of the model itself. This is not academic rigor at work. Of much greater concern it would appear to be an opportunity, that has now already been taken, for exercising politically and economically self-serving sleight of hand.

 Circular argument of this kind is characteristic of belief systems. Belief systems are established upon an irrefutable axiomatic foundational principle by which what is 'good' can be identified. Against this model the factual events and properties of the world may then be legitimately judged. Where you find real facts and properties that are different you then 'authoritatively' demand their conformance with what is legitimate. Thus the spherical world must be seen as flat.

 Lucio appears to fully appreciate that the study of any aspect of human behaviour is, at its very core, always going to be a Normative discipline. Economic behaviour is no exception and also, very scientifically, that no truth capable of discernment by a human mind can be held to be absolute. However useful it may be.

A Normative study of economics involves the wallets and power of the same group of individuals who contribute the resources which, by and large, feed the economic, business, political and judicial researchers conducting these four indivisible aspects of human behaviour. This 'relationship of power' cannot ever be allowed to hold any part of the 'knowledge' that is acquired nor of the policies which it advocates as being axiomatically foundational. If this were to be so the the study of economics would no longer be an academic discipline. Although it might be represented by 'disciplined and 'fearful' academics. Who would, no doubt, see themselves as acting rationally and with self-interest. The instinct for self-preservation being what it is.

Israr. Does this last paragraph touch on what I see as being at the root of your main concerns about the supposed 'integrity' of some venerable 'institutions' of economic thought?

 Along this path one might also see that, over the past 50 or 60 years, the academic and political and commercial legitimation of the validity of the simplified model of economic man has causes the evolution of two generations of unfortunate 'modern' world individuals who have been taught to largely conform to this model and to increasingly justify they actions and points of view towards each other through the same 'theoretical lens'.

This process has occurred in the same way that 'environmental capital' is now being called upon to conform to the only those tools (.. 'models' et al) that are preferred by those more politically favoured individuals that are engaged in their study. Tools which are supposed to be aiding in their objective task of seeking to understand and accommodate the resource. Are we in the process of changing what 'environmental capital' is to suit the model? Just because to do otherwise might change the relationships of power and wealth amongst us?

 Is there a belief in the goal of sustained human development and evolution being necessitated by the preservation and strengthening of the existing relationships of economic power that lie at the heart of our social structures which is actually the axiomatic foundational principle upon which 'modern economics' is based.

 I think so. I think Israr is right to suspect that 'modern economics' is founded upon inappropriate axiomatic principles. It is also likely that, in its logical development of policy recommendations, it has and will continue, if unchanged, to deliver intellectually illegitimate validation to all 'rationally self-interested' businessmen and politicians. Unchallenged.

 At a later stage, I might like to tackle Guy's assumptions of the neutrality of the 'free market' upon which so many of his deductions depend. This is another of the several 'axiomatic foundational principles' of the modern economics which has no basis in either human sociology of individual players nor in the real world of temporarily linear production and marketing processes, whether agricultural or industrial.

 Have a good day!

 Robin

Thanks for your attempt Robin. It is a good idea and a good attempt even if I think my position is not being properly represented. I will try to respond in the next day or two.

Dear Robin, thanks for your comment.  Paradigm evolution is not easy and takes time so my approch to improving the future situation by looking at the past and the present, and find simple ways to show where and why correction is needed  in our past and current thinking; and how paradigm evolultion should be expected to proceed/different paths.... When I wrote in 2000 about the structure of eco-economic development and pointed out that we were already moving out or leaving the old paradigm to a new paradigm and everybody, academics and polititians, were acting like living in the past....Then in 2012 the eco-economic model I highlighted became formally the green economy model, but see...there is a theory of how the economic man came to exist, axiomatic or not, but there is not an independent theory of green economics developed by those who formalize the model in Rio plus 20/2012, just the fixed economic man now a green aconomic man....,Also since 1987 there was not a general theory of sustainability, therefore we saw the coming of compenent system sustainability schools(economic sustainability, social sustainability, environmental sustainability.....) that in reality can be shown to be specific sustainable development models that need to be sustained to exist...and need to be fixed if they want to achieve the true sustainability level.

As we seem to be converging at least in genearl terms, at this stage that is good enough for me to polinize ideas:

I am sharing here below with all of you just a food for thoughts the title and draft abstract of the article I am about to complete to be shared and published soon to continue a positive exchange of ideas...It is consistent with the views you described in your posting Robin...:

Have nice day and greetings to all

-----------------

Did Adam Smith Missed the Chance to State the Goal and Structure of Sustainability Markets in His Time? If Yes, Which Could Be Some of the Possible Reasons Behind That?

By

Lucio Muñoz

* Independent Qualitative Comparative Researcher / Consultant, Vancouver, BC, Canada Email: [email protected]

Abstract

            At the time of Adam Smith the structure of reality in which the formal economy came to exist had the structure of a complex sustainability market, where there is full inclusion and no externality neutrality.  If the prevailing economic view at that time would have been proactive in terms of envisioning markets with social and environmentally caring invisible hands then probably Adam Smith would have used that complex sustainability structure to state then the goal, form and relevant aspects of sustainability markets and make them the heart of the formal economy. These fully inclusive markets would have brought us threw a slow, but optimal growth path.

            However, the dominant view during the industrial revolution period appears to have been that there were no social limits nor environmental limits to economic growth; and that may be the reason why Adam Smith went to state at that time the goal, structure and relevant aspects of the traditional market ruled by a fully uncaring invisible hand as the soul of the formal economy.  These markets have brought us since the industrial revolution to now through a fast bare growth path.

            Adam Smith’s traditional market model went without any formal academic challenge since the industrial revolution to 1987 when the Bruntland Commission pointed out: a) that it was not working given the increasingly worse and worse poverty and environmental conditions that have come with it; and b) that it needed to be fixed immediately by making it socially and environmentally friendly.  And that meant that we needed a caring invisible hand after all in the market since the industrial revolution and hence we need to fix Adam Smith economy only model now.  Recently even Pope Francis has called for environmental and social justice in our modeling.  The above raises the questions, Did Adam Smith missed the chance to state the goal and structure of sustainability markets in his time? If yes, which could be some of the possible reasons behind that?

-------------------

Dear Lucio, I am inclined to agree with you. Nearly all of academic work is heavily influenced by the 'Zeitgeist' of the moments in which they are accomplished and also by the contemporary perceptions of what the problems to be solved actually are.  Pre-emptive attention to unexpected consequences is a very rare thing!

I think it may be time to extract some passages that I have recently written around the problem of markets.  I would say in advance that the conclusion of what I have written does not provide grounds for attaching any adjectives such as sustainability to a market if what is understood by it is a 'fixed' market of generally the traditional style.  I do hope however that it may point the way towards markets which are sustainable.  This is for the moment sufficient, for 'sustainability' per se can only come about through structural changes of the broadest kind at the social and institutional levels.  And that is the thesis of my work which I hope will demonstrate and illustrate what will be required both to maintain sustainability but also the more terrifying consideration of how it is we might be able to achieve it in the first place!

Best regards,  Robin

Sir Robin

The discussion, with respect to the validity of the axiomatic fundamentals/assumptions of economic science, has been far more interactive, informative, and constructive. It indicates towards the flaw in the basic approach of economics and the gap between economic theory and reality.

It has, more than anything else, provided an opportunity to meet the intellectuals like you.

Sir, I wish the discussion continues a little more and towards maturity so that it can be helpful in the formulation of alternate hypotheses.

With kind regards.

Dear Lucio and all the participants

I am highly thankful to all the participants on RG who bestowed on the discussion the valuable pours of their high intellectual wisdom. 

I am particularly thankful for Sir Robin, Sir Lucio,  Sir Charle Hall, Sir Ramrattan, Sir Guy Jakeman and all others.

I request all the valuable participants to bring the debate towards maturity, especially with respect to the original content of the question. Please do help me.

With sincere regards

Israr

In as much as I could understand, the textbook style, economic rationality is a construct that ordains a self-interested behaviour. The self-interest, in turn, is maximised by a supposed rational actor by (a) being consistent in choice and (b) irrevocably preferring more to less. Isn't it! 

The economics science, thus, has designed, created, and eulogised a rational agent (who is the only and the only one worth imitation) as the one who is consistently aspiring for more, in comparison to less, and who is autonomous of her social being. This is a supposed 'positive' prescription of the 'positive' economics, a la the Classicists, the Marginalists, the Chicago-ists or the Cambridge-ists. Or a la the Washington Consensus. 

But, on the other hand, the 'analytical-positivism' proclaimed-ly implies being non-judgemental and non-suggestive of any behavioural patterns. It takes 'what is' without sermonising over 'what it ought to be', as I could understand from its claims. 

Quite contradictorily to the claim of 'positivism', the conventional self-interest and rationality paradigm, however, prescriptively suggests two behavioural ideals to its adherent and would be adherents i.e. be consistent and be consistent in having more ... of it! Also, consistently having more of self-interested rationality.

I, for all my humble efforts and weaknesses as well, could not make a difference between such kind of a 'positive' claims rooted in 'exact prescriptions based on a value system' of a particular 'fortune runners' of a particular tribe called economists.This is a bankrupt logic. It is both a circular and a heavily loaded one.

Perhaps, the same is the best example of the economists consistently following their own self-interest of having more of such nonsense.

I am concerned because the very economic discourses have got a historical privilege to dominate the world of policy making- nationally and internationally. The world is dancing to the tunes of this type of a 'prescripted' positive-ness.

With kind regard to all.

Israr  

Good day Mahammad, I said many time the same things that you just said without offending anybody....to move on...that is sustainability.

Have a nice day.

First, apologies to Robin for not yet responding to his posts.

Second, to Israr, with respect to this comment:

"In as much as I could understand, the textbook style, economic rationality is a construct that ordains a self-interested behaviour. The self-interest, in turn, is maximised by a supposed rational actor by (a) being consistent in choice and (b) irrevocably preferring more to less. Isn't it!

The economics science, thus, has designed, created, and eulogised a rational agent (who is the only and the only one worth imitation) as the one who is consistently aspiring for more, in comparison to less, and who is autonomous of her social being."

(Assuming that I am interpreting correctly) No. If this was true then people would never go on diets or be happy to live in monasteries or hermit-style lives. What is being "maximised" is a person's feelings of the satisfaction with their general condition and the a priori expectations of how it can be improved through purposeful action. Or, in other words, they are maximising their expected "Utility" or "Welfare". Whether someone's welfare improves by buying yet another pair of shoes, buying a significantly better quality of shoe, buying a "unique" shoe or even eschewing accumulating shoes altogether and opting for a single pair of thongs or bare feet is up to the individual.

Economics as a discipline does not really care what makes people happy and does not profess that "more is better". However, in applying the learning and relating to everyday people it is generally true that most people think that less scarcity (particularly of food, clothing, shelter, health care, education and leisure) is substantially better than more scarcity. Consequently the narratives from economists are typically about "more" is better (because let's face it, malnutrition, living in variable climates without clothing or shelter and morbidity and dying from preventable causes really, really suck). But question any economist further and they will readily admit that once people have overcome basic scarcity of necessities then "more" typically also means "better quality" or "better suited to my individual requirements".

Edit: And Economics certainly doesn't assume people are autonomous social beings. Indeed, once you get beyond very basic Crusoe economics it is all about people living in a society with the efficiencies that arise from division of labour and specialisation through comparative advantage. Admittedly however, it generally does not flesh out the aspects that help societies function and with many (most?) economists preferring to leave that side of things to other social sciences, but that's why Adam Smith coupled his economics with the Theory of Moral Sentiments (just as I couple mine with a range of ethical principles).

This problem of defining self-interest cuts two ways. The need to compete successfully causes a price reduction in produce whilst the need to make a profit (above the production costs), that is greed, causes the price to rise, particularly when competition is restricted by monopolist trends. Henry George proposed 2 axioms to apply:

"Man seeks to satisfy his desires with the least exertion".

"Man's desires are unlimited".

David, two things: what type of man and we are now in a different market

a) what type of man is the key there.  Those two sentences would lead you to different answers if you indicate if you are talking about a responsible man/irresponsible man assuming both are rational beings displaying different types of self-interest.

Adam Smith apparently had in mind a responsible man probably when he said....paraphrasing...."even raw sefl-interest would be a friend, not an enemy of society welfare under free man and free markets he said and lead to balancing of supply and demand, no to chaos if harnessed properly"....Then it looks like an irresponsible man took over the responsible man in practice invalidating Adam Smith expectation through time...

b) We are in  new market, the eco-economic market now, the economy only market is a thing of the past now: those two sentences would need to be adjusted to fix the green economic man's world...

Cummulative poverty and environmental externalities led the bruntland commission in 1987 to say that traditional market thinking was wrong and we needed to make the economic man socially and environmentally friendly and inclusive....that is one way of saying we need to transform the socially and environmentally irresponsible invisible hand into a responsible one as the responsible man Adam Smith had in mind in theory quickly became an irresponsible man in practice in the economy only model.... And here we are now dealing with critical environmental and social issues at the global level and local level!...

Have a nice day David and greetings to all.

 Sir Guy Jakeman

Your good comments are welcome!

However, are the people living in 'monasteries' and 'hermit-style lives' the units of study of economics? Are they the explicable and imitable economic agents? As much as the other 'rational one' consistently pursuing more to less?

With apologies and thanks

Israr

Adding to the general flow and Guy's comments and especially his Edit:

What we call economics today has not always been so,  nor is it monolithic at all today.  Adam Smith was professor of moral philosophy. He wrote two books, the familiar “Wealth of nations” and the less familiar “Theory of moral sentiments” which he may have favored.  Although of course he liked the idea of “the invisible hand" he also believed (as do I) that it had serious limitations.  According to Herbert Stein, Smith "was not pure or doctrinaire about this idea. He viewed government intervention in the market with great skepticism...yet he was prepared to accept or propose qualifications to that policy in the specific cases where he judged that their net effect would be beneficial and would not undermine the basically free character of the system”.

What seems to particularly motivate many free market economists  is the concept developed by Vilfredo Pareto that if the free market is allowed to play out unimpeded then each purchase by a consumer, acting in his or her perceived subjective self interest, will send a signal to the economy as a whole to replace that what was purchased. Optimal Pareto efficiency would occur when the collective actions of all purchasers would cause all economic resources (natural resources, labor, factories, investments etc) to be shifted to generate a maximum human satisfaction or well-being. This is a very appealing idea to many economists, politicians and others.  

But many problems come in, as many have indicated, with “market distortions” (e.g. true costs not internalized in the price, such as uncompensated pollution or depletion).   This was “resolved” in 1939 by Nicholas Kaldor and John Hicks, with the “Kaldor–Hicks” addendum to the Pareto approach.  This states that those who gained could compensate (at least hypothetically) those who lost, usually with money.  This idea was quickly accepted, although it was less commonly actually used.  But what it did was to allow economists to view their craft as objective, and not requiring any attention to subjective issues of e.g. who should win or lose and by how much.  Also it did not take into account the impact of the rich or powerful to influence the market by large vs small purchasers (or political contributions), or also the powerful impact of advertising, which effectively destroys any illusion that consumers are making purely subjective decisions.

My point is that the perspective of economics that runs through this discussion seems to assume that the dominant neoclassical market orientation (with or without various “corrections”) is somehow economic truth.  In actuality there have been, and remain, many (or perhaps no) economic truths through history.  My recommendation to Israr and others is to use your own judgement and common sense, as well as a comprehensive if informal systems approach, including BioPhysical analysis, to supplement conventional economic analyses and then assess each situation where a decision is needed.  After all, even Adam Smith thought common sense of the average intelligent person to be at least equal to the opinions of the most learned.

These ideas are developed more fully in:

Hall, C.A.S. Quantifying sustainable development: The future of tropical Economies. Academic Press, San Diego.

LeClerc, G. and C.A.S. Hall. (eds) Making World Development Work: Scientific alternatives to neoclassical economic theory.  University of New Mexico Press, Albuquerque. 2007.

Hall, C.A.S., and K. Klitgaard. 2012. Energy and the Wealth of Nations: Understanding the Biophysical Economy. Springer, NY.

Hi Israr,

W.r.t. "However, are the people living in 'monasteries' and 'hermit-style lives' the units of study of economics? Are they the explicable and imitable economic agents? As much as the other 'rational one' consistently pursuing more to less?"

Yes. They are explicable economic agents the same as anyone else. As per the earlier definitions I provided, they are just as rational as anyone else.

I apologise for the following side track, but based on some of the other comments I feel the need to ensure that everybody is working with the same definition of economics. (I like Steven Kates' take on the matter, so I will draw the following mostly from his text.)

Definition of Economics

Adam Smith stated the definition in the very title of his first great work: An Inquiry into The Nature and the Causes of the Wealth of Nations. Economics is about the study of what it takes to provide material well-being not just to a society but to the individual actors within that society. It can be thought of as an abstract science in which the subject matter is looked at without any means or intention of becoming involved in changing how it performs.

However, an understanding of how an economy works is the start of a process toward making our economic (and consequently socio-political) arrangements work to out own benefit to a greater extent.

To a large extent economics is a study of human behaviour and the relationship between ends and scarce means that have alternative uses. However, it is about all aspects of how economies work with the focus on how they bring food to our tables and put shelter above our heads.

Social Conditions

There are also many aspects of what make an economy succeed that are not themselves intrinsically economic in nature. The surrounding moral, ethical and institutional environment is crucial. You cannot make a community prosperous where the population does not regularly act in a moral or ethical way. If the members of a community cannot trust each other or its government, a lasting prosperity will never be achieved.

Rule of Law

Among the most important aspects of the social arrangements is the rule of law. It is as important a component in the creation of a successful economy as one can possibly find. The fundamental point is that economies will never be productive if the legal system does not protect the incomes and the property of those who produce a nation's wealth. Laws must protect commercial activity, enforce contracts and ensure fair dealing between those who buy and those who sell. In short, it is a protection against fraud, force or violence against another person or their property.

Honesty and Character

The character of a population also makes an all-important difference to its economic success. An exchange economy only works where those who engage in production and trade are personally honest in their dealings with others. If agreements can only be enforced through courts of law then an economy will not work.

In making this point however, it is important not to push this to an extreme. Dishonesty exists everywhere. No economic system can rid itself of individuals who will seek to rob or defraud others. It is important for the success of an economy to identify and cull such dishonesty from normal activities. Where dishonest practices become the norm, especially where dishonest and corrupt governments practices are common, no economy can expect to succeed. Corruption regularly drains away the successful welfare improvements derived from a successful business.

Property Rights

As important as the rule of law are the rights to property. Who owns what, and what those who own are allowed to do with the property they have, are major questions. Only where ownership is recognised, and the full weight of the legal system is designed to maintain the security of the owners of property, will an economic environment be created in which prosperity can be achieved and maintained.

Sir Guy Jakeman

Thanks a lot ... Sir. 

'Yes. They are explicable economic agents the same as anyone else. As per the earlier definitions I provided, they are just as rational as anyone else.'

Sir, I do agree with you, however, with a minute disagreement. Your 'hermits' are rational and self-interested economic agents. For a market supplying their needs they are, of course. But they are not those who prefer more to less and remain consistent in accumulating more starting from a status of less. Hermits, by definition, tend to prefer less to more. Are they economically rational, then?

Moreover, are they, in the eyes of the economists and policy-makers, both imitable as well as trustable with the task of economic policy making? The economic policy, on the other hand, serves and follows those who consistently and positively prefer more to less. Monasteries are not the ideals of any development agenda.

Sir, in a textbook style we can assume the hermits and mystics as rational. But in reality they are anti-thesis to the conventional economic rationality and self-interest. How, then, will you incorporate them into full-time economic agents? Economics is never ever built around them, anyway. 

Sir, the social conditions, the rule of law, honesty and culture, and property rights are the extraneous social and institutional variables. These given factors might influence the individual behavior like a monastery affects its members' conduct, but these are not the variables endogenous to individual self-interest and rationality. They are not the part and parcel of the axiomatic idealism eulogising and aspiring to formulate the ever 'ideal' economic agent. Rather, these variables belittle the axiomatic value of the axiom of self-interested rationality that is most fundamental and dear to all economic analyses.

Sir, I must be pardoned for anything said in contravention and for any wrongs.

With kind regards

Israr

Póngase a considerar que la proposición de Adam Smith según la cual el egoismo producia el bienestar general, es equivocada porque de la suma de comportamientos individuales no se puede llegar a la conformación social. Toda la economía convencional está constituida sobre malos fundamentos epistemológicos y no da cuenta de la realidad. El equilibrio general es metafísico y requiere un dictador para que el intercambio se de. ¿Cómo confiar en una teoría así'

For the convenience of all.. I have run Ramiro's contribution through a translator programme.  Please correct the obvious semantic errors that this has produced.. However the basic meaning is clear.. Thank you Ramiro, and my apologies..  You seem to have said....

"Please consider that the proposition of Adam Smith that selfishness produced overall well-being is wrong because the sum of individual behaviours not it can be to the social formation. All the conventional economy consists of bad epistemological foundations and does not account for reality. General equilibrium is metaphysical and a dictator required that the Exchange is from. How trusting a theory so ' How do the economists define self-interest and rationality? -"

Kind Regards,

Robin

Correct answer is:

se to consider the proposition of Adam Smith as selfishness which produced the general welfare, it is wrong because of the sum of individual behaviors can reach the social conformation. All conventional economics is made on bad epistemological and does not account for reality. The overall balance is metaphysical and requires a dictator for the exchange of. How to trust a theory '

an hour ago

How do the economists define rationality and self-interest? - ResearchGate. Available from:https://www.researchgate.net/post/How_do_the_economists_define_self-interest_and_rationality#view=5651e84a64e9b25c1c8b4586 [accessed November 22, 2015].

Our debate is now clearly moving from the hypothetical realms into those of reality.  One of the basic questions being debated here is as old as debate itself, especially as it has been in those areas where the conclusions have, when "irresponsibly" applied, the power to harm and kill.

Can anybody who engages in debate, the conclusions of which we each of us know may well be used by "irrational" people, have the legitimate right to claim "objective immunity"? Can we absolve ourselves as "responsible" individuals from any bad consequences that may arise from the supposed misuse of our conclusions?   Or from the "morally blind" application of our insights and logical, mathematical or computational skills?   Is it the general or the soldier who has been told to pull the trigger who should pay the price when a "rule of law" is not followed?

What is moral position of the economist who developed the maximising monopolistically-aimed marketing strategy or the mathematician skilled in applying game theory that validates strategic under-production decisions to influence the achievement of maximisation of nett profits through cyclical shortages and glut?  Are they "morally immune" because they merely developed the theory or applied the techniques that suggested the policies that caused the war or the starvation or the suffering that the politician's and businessman's adoption of that work ultimately lead to?  Are the politicians' and businessmen "morally immune" because they were just following the 'best available advice'?  Are they immune because it was "other" politicians and businessmen were the ones who paid for that work to be done which they now base their actions upon?

Is Guy right?  Are practitioner's of all aspects of economics, and of business forecasting and modelling, immune from the moral consequences of what they do?  Just as politicians' and businessmen claim the same immunity from the consequences of 'mistakenly' applying the abstractions and supposed validations that the metaphysical models and virtual monetary institutions that they themselves, as a professional 'class', have been responsible for bringing into existence, by funding the economists and mathematicians, and by which our dominant societies seek to dominate others who do not adhere to the same metaphysical systems of belief be they individuals within their own domestic political domain or entire populations within sovereign foreign lands? 

Are they "morally immune" when they claim that the non-belief of foreigners in their own economic metaphysics and their refusal to take such  actions as are prescribed and expected of them by those who hold those beliefs leads them to declaring those foreign governments to be a threat to their own national security and therefore a legitimate target for a "moral war"?  Are they any different, in kind, from many less eminent societies who seek to impose their metaphysics upon others?  Today, or in the millennia past?    I think not.

"No man is an island unto himself".  This is as true in life and it must be also true in developing the theories that seek to explain what actually happens in our economic relationships.  Charles is correct.  Political Economy is inherently a study of systems of relationship.    Economists may choose to define themselves as concerned only with reducing observation of the world around us to the simplistic constructs required by mathematical modelling.  They may then apply statistical manipulations and inferential logic to time-series of data organised to be amenable to the precepts of the models hypothesised to be valid. 

And then they will test those models for 'predictive power'.  Is this to test the model of 'what was' at the the time the data was collected so that they can know that their understanding is improving?  It would be consistent with the picture of the 'disinterested economic observer'.

The problem comes where the economist's model, having been shown to be capable of calculating a series of economic measurements through a short period of previous history, is then imbued with 'predictive power' regarding future events.  This 'status' derives from the observation that because the theory behind the model describes a direction between model parts of 'cause and effect' then the model's success in calculating past effects from past causes proves the existence of the claimed relationship.  This then becomes the basis for policy recommendations in the future despite the obvious fact that nearly everything that was held to be outside the model in the past, because it was measured to be insignificant at that time or because no data was available or because it was happily co-correlated to something which was included, is a nominee for being a probable candidate for inclusion in the model during the period over which the policy will operate.  None of which will not be considered.

The economist has designed what will be for some their 'atomic bomb'.  The policy maker and politician will decide where and when to apply it.   The army of businessmen and bureaucrats will deliver the 'parcel'.   The economists will measure the devastation and nobody, because they are not acting in a systemic capacity' but as "responsible, rational and self-interested' individuals all will be 'morally immune'.

Because 'what ought to be' is not a question that 'rational' objective man concern themselves with.  That is the job of who?  The 'irrational' philosophers of  political economy that have taken the trouble to first examine and develop their own 'Theory of Moral Precept'?

In terms of the favoured economic paradigms it is seen as irrational behaviour to be concerned with what ought to be and that it is 'rational' to merely observe and blindly seek to propagate what those who can make the most noise and wield the most economic power deem to be what ought to be.   This is the 'Evidence Based' approach to economic development and technological progress  It sees itself as 'rational'.   To first consider through bothering with the deep matters of the human condition that arise when considering theories of moral precepts before getting on with prescribing policy in 'the important matters of high-finance, big business and of state'  is seen as irrational behaviour by this evidenced-based economics!

To misuse the title of Dick Taverne's book...  it is "The March of UnReason" which presents itself as reason, by individuals claiming the moral immunity ascribed for mathematical convenience to the hypothetical construct of 'economic man' and of all of his descendants to the present moment which is responsible for much of this debate in answer to Israr's question.

One cannot aggregate the atomic to understand accurately the conglomerate.  One can do it.  One can believe the aggregated model to be accurate.  But one can only do this to the extent of your blindness to your own ignorance regarding the axiomatic validity of the fundamental nature of your concept of an atom.  The Newtonian mechanical model is inaccurate because his axiomatic basis concerning the nature of matter was incomplete.  It helped him to model the world better than it had been before him.   The Quantum Mechanical model is inaccurate for the same reasons.  The classical sub-atomic particles it was based upon were incomplete.  It is however better at building models than were Newton's.  This model of matter is now extended to include a 'full' set of sub-atomic particles each of which has been confirmed.  What has that led 'rational' men to believe?  It has convinced them that the model they have is incomplete. 

But importantly, key to this new more accurate level of understanding of any of these particles and of the matter they are a part of, is the dynamic system of relationships that these infinitely small particles have with one another and upon which each depends.  It is as if existence itself is not defined by an aggregation of axiomatically fundamental particles but by a dynamically flowing and changing system of interactions and transformations between them of the energies of which they themselves are composed.

Is it any surprise therefore that a majority of the people here, in this instance of this old debate, see an analogous web of interactions being required to model and explain our own interactions with one another and with the cosmos?  And is it surprising that this necessarily begs an answer to the question "what ought to be the consequences for us of our actions, economic or otherwise, and for the wider cosmos with which are own collection of sub-atomic particles are constantly interacting and mingling?"

Compare the physicist’s 'rational man' approach to that of today's mathematical economist who claims rationality for his approach of observation and theoretical inference based on an ego-centric model which itself is based on the philosophy of individualism bred amongst Georgian era UK philosophers of the time.. It is quite reminiscent of the devotion to accepted dogma displayed by the Catholic Church in their reaction to Bruno and Copernicus at the start of the European Enlightenment. An awakening which came so long after that of our Asian counterparts. As it would seem this one will also be!

My apologies for any ruffled feathers.  I would prefer it if practices labelled by some as Economics but which are in fact the mathematical handling of data for purposes of government and business planning of near-term economic activities were always referred to as "Business Economics, Planning and Accounting".  Matters concerned with the long-term policy directives emanating from asking ethically based questions concerned with 'what ought to be" and from the working out of how those goals might be met through appropriate system and legal changes should be always referred to as "Political Economy" and within that perhaps "The Philosophy of...", "The Anthropology of..." and "The Sociology of..." but I believe as does Charles, and I think David, that you cannot divide the study of man into compartments.  We and the cosmos are ultimately parts of a single system, each sub-system has facets none of which can be considered in isolation.  And like Israr has wisely indicated no man is justified in believing that it can ultimately cause anything but misdirection of our conclusions to systematically exclude the resolution of all relevant ethical matters from any field of study that mankind finds of value.

Best Regards,

Robin

T

Dear Israr: There used to be a time when self interest was concerned only with egotistical utility function, nowadays, the utility function of most people contains elements of nonegotistical character like concern for the earth, poor people in LDC's, climate change, aliens, and other topics, due perhaps to the analysis of Globalization and its intended and un-intended  consequences, performed by Profr Stiglitz and other authors, and the awareness of possible life beyond this planet and this brings a change being made, that has effects on rationality and introduces the idea to evalue religios thoughts and misticism and since there, it happens an opening of the mind into more conciousness; and thanks for your words of encouragement,

 truly 

francisco j melendez

Ramiro, Robin, francisco, guy.... Keep it mind we may have now a house of cards about to crumble.... If modern economic thinking has been based on the thinking of Adam Smith and everybody after him has built a floor on top of this or the other's floors... If Adam Smith's traditonal market can be refuted by observation or experiment, then anything build on the top of him can fall down....Everything....including arrow imposibillity theorem... Think about it....

Ramiro Adam Smith expected even raw self-interest to be harnessed properly in free man and free markets to make sure it was a friend of social wellbing....he said nothing about environmental welbeing from free markets....keep that in mind....apparently that was a very naive assumption of Adam Smith as the poverty and environmetntal degradation that has resutling from those free markets since the industrial revolution to now is a clear observation that refutes the model,  Remember, Karl Popper riminded us that theores can be destroyed by observation or experiment.......,

In 1987 in "our common future" the bruntland commission was nice enough not to say directly that "the economic man" was dead and it was formally refuting Adam Smith's traditional market, they just called for fixing it fully because it was not working in social and environmental terms...today it is fixed partially, now the economic man is a green economic man....,.but the green ecocnomic man has basically the same weakness ot the economic man just different clothes...

Francisco...if you use a hybrid person half egoistic and have altruistic as an economic agen...Do you think that is what Adam Smith had in mind?.... How something like that affect Arrow's impossibiolity theorem.....I personally think we should be opened to outside the box thinking and perhaps look for brand new ideas on how to make the foundations of modern economics strong again...

Greetings to all....

Dear Participants

I am of the considered opinion that the contemplation on the problems as raised here is going very fruitfully. It is turning into a serious debate. We are, with a warm welcome, anticipating more participants, like Sir Francisco.

Sir Robins' contributions have added the most sincere dimensions to the discussion. He is very right to exclaim:  

'It is as if existence itself is not defined by an aggregation of axiomatically fundamental particles but by a dynamically flowing and changing system of interactions and transformations between them of the energies of which they themselves are composed.'

Sir Lucio's consistency is remarkable.

With regards

Israr

Dear Israr,  You are right to focus on that one sentence of mine as being key to the next stage in this discussion.  I wrote it deliberately for us to consider this....  For what purpose did Adam Smith invent an agent?  The answer is simple "For the purpose of being the idealised actor in the idealised process of economic exchange which he wished to explain."  What was that process that he wished to explain?  The answer is again simple "The formal explanation of how the mechanism of freely operating markets facilitates the specialisation of labour such that skills and resource access are optimised towards maximum aggregate production of goods in a closed economy."  What has this simple concept been used for by his 'would-be' successors? I leave the answer to each of you.  Hint:  It bears little resemblance to the purpose for which it was invented.

Thus Spake Zarathustra..(with apologies for paraphrasing..) 

                                           "Behold we are the destroyers of worlds"

Robin

Hi Mohammad,

This is my answer to your query. I hope this helps.

Each individual behaves rationally because he/she seeks to maximise his/her own utility.  It is assumed they have the same utility function, whereas in practice they do not. However, the main point I want to make is that the individuals’ behavior cannot be considered as a guide for the whole society when making political decisions because the society is made of individuals with different preferences.  As macro-economy isn’t simply the sum of micro-economic behaviors, policy actions for the whole community should consider all the conditionings, arising mainly from the institutional matrix of the society, that is the totality of those formal and social rules, which find their feet into the values of a community. (see, among others, North)

In this sense, I think that economic policies should point to boost the institutional matrix’s adaptability so that it becomes more respondent to the changes of the economic system.

Srefano's point about not being able to state the aim of all of the society, is not valid if and when one make suitable assumptions and definitions of a general kind.

This should be done so that each kind of function (rather than the kind of person, who has more than one type of economic activity) is the basis. First list all the kinds of functions or activities. (I make it a total of only 19 double flows of money in return for goods etc.), then take the aggregate of each of these kinds of activities and assign each of them between pairs of the chosen role-playing entities (of which I need only 6).

By modelling the social system in this way, a lot of simplification is possible and the objections of Stefano no longer are significant. This is the basis for constructing my model of our social system in Wikimedia, commons macroeconomics, DiagFuncMacroSyst.pdf 

Dear David, Stefano, Robin,  ... I will leave it here, just knowing that there seems to be a general agreement to leave behind Adam Smith's model and move forward is fine with me....

My RG score has fallen from 5.90 to 5.67 I assume because some one out there can not advance contrary ideas as mine.... RESEARCHGATE LET YOU KNOW WHEN PEOPLE UPVOTE YOU, BUT THEY DO NOT LET YOU KNOW WHO IS DOWNVOTING YOU, which in my oppinion works against independent researchers as me and in favor of those who want to keep the status quo but have weak academic arguments to defend the status quo....

I am here to share ideas for fun, I write for personal satistaction, so scores do not matter to me, but I can read them... A score that goes down when sharing new ideas shows people may not be ready for new ideas, and that is fine with me...But I do not like having academic discussions with the UNDERGROUND as then your right to respond is voilated...

Have a nice day everybody... And wish you success with your ideas

Respectfully yours;

 Francisco Javier Meléndez Hernández: "Dear Israr: There used to be a time when self interest was concerned only with egotistical utility function"

I doubt this is true. Do you have any evidence for this assertion?

 Lucio Munoz: "Ramiro, Robin, francisco, guy.... Keep it mind we may have now a house of cards about to crumble.... If modern economic thinking has been based on the thinking of Adam Smith and everybody after him has built a floor on top of this or the other's floors... If Adam Smith's traditonal market can be refuted by observation or experiment, then anything build on the top of him can fall down....Everything....including arrow imposibillity theorem... Think about it...."

I have not seen any actual refutation of the basic concepts/axioms underlying Economics anywhere in this thread. Since I explained what "rationality" means in economics in my post at the end of page 5, no-one, as far as I can see, has actually had any problem with it. Similarly, with the notion of self-interest (which, as has been explained, is not selfishness). Hence, I fail to see any house of cards.

This is not to say that there aren't "house of cards" schools of thought within the overall discipline of economics. Two notable ones that come to mind are Keynesian macroeconomics and the MMT'ers. But these are house of cards because they have been built on an assumption that is contradictory to the basic axioms and laws of classical economics.

Similarly, the whole school of mathematical economics is a deliberate simplification with the hope of gaining some insights by testing and/or applying the qualitative laws of economics to observations. Any mathematical economist worth their salt should always be testing their results against the qualitative theoretical foundation. Sometimes this highlights additional nuances in the theory but more often it shows that the model used is incomplete or simply wrong.

Lucio Munoz: "RESEARCHGATE LET YOU KNOW WHEN PEOPLE UPVOTE YOU, BUT THEY DO NOT LET YOU KNOW WHO IS DOWNVOTING YOU"

I agree totally. I dislike the anonymous downvote feature greatly and would discourage anyone from using it except in very rare circumstances. It is a real shame that you experienced this.

Dear Stefano Prezioso and David Chester

You are welcome. I am thankful to you for writing your posts.

Respected Lucio Sir,

I am shocked to hear from you that you have been losing RG scores with downvotes. I find myself responsible for that in the capacity of the question-raiser and feel sorry. As a matter of principle, I do never downvote any response.

But, Sir Lucio, in this very act, assuming your responses to be the cause of RG downvote, we can perceive how much and in how many ways the otherwise undefendable model could be defended.

'Lucio Munoz: "RESEARCHGATE LET YOU KNOW WHEN PEOPLE UPVOTE YOU, BUT THEY DO NOT LET YOU KNOW WHO IS DOWNVOTING YOU"

Guy: I agree totally. I dislike the anonymous downvote feature greatly and would discourage anyone from using it except in very rare circumstances. It is a real shame that you experienced this.'

I do not only very strongly agree with both of you but also humbly do request the RG authorities to do away with such a lobbying and spying tool of academic sacrilege.

We are here discussing the issue not for personal egos but for a greater cause- academic and humanitarian.

With apologies

Israr 

Dear Dr. Israr

you have really talked about very basic concepts of life and that has either be ignored, least discussed or misinterpreted. I am expressing my views about the present discussion with the help of following words;

Tujhe payar karna nahi aata, Mujhe payar ke siwa kuchh nahi aata

Do hi tariqen hain dunya me jine ke, ek tujhe nahi aata, ek mujhe nahi aata.

the first line refers to self interest which stresses that it talks about an individuals/personal benefits and always try too see all human activities from the view of personal gain/loss irrespective to its effect on others/society. the second line explains about the rationally which is over and above the personal gain. it is the right act that may not be in favour/against of someone but it always favours the society and common man and most importantly obey the rule of law/land. adoption of this is expected to bring peace and prosperity in the society.

Guy Jakeman is about the only one (above) who has skipped the innuendo and mentions what is significant in our work of understanding how our society works. He mentions the need for taking the correct axioms (and I hope he does not mean assumptions which are less fixed by their nature). So to return to the original subject of this interesting discussion, we should take as self-evident truth, the two axioms that Henry George first claimed in his seminal book "Progress and Poverty" of 1879. These are:

1. Man seeks to satisfy his desires with the least amount of exertion.

2. Man's desires are unlimited.

(I apologize on his behalf for not including women, but they are similar in this aspect.) These two contrary axioms set the style of all macroeconomics, as being the combination of two opposites--a concept which initially is difficult to envisage and is part of the reason for there being so much confusion in the thinking about our subject.

Dear David,  I note your use of the phrasing "our work of understanding how our society works".  I think that the concern being expressed by Israr is that, by accepting the evolving concept of 'economic man' and his attributes as being the fundamentally valid starting point for understanding human economic behaviour throughout the world that we seek to understand, we are limiting ourselves to those concepts , interpretations and measurement data and policy recommendation which are either built upon that foundation or which are believed to be consistent with it.  This limits and is likely to be pejorative to the goal of attaining a full understanding.  This concern is especially acute for those who are of the conviction that these intellectual constructs and data analyses along with the vast majority of their prescriptive recommendations suggest an underlying and serious inadequacy of this whole approach in dealing with and explaining 'modern economies'. 

The weight of views expressed in the debate here would seem to suggest that it is the fundamental reliance upon these 'ancient truths' for arriving at an understanding and interpretation of what we actually see going on in the world around us which is at the core of why we have so far been unable to synthesise from them any credible set of policies, institutional adaptations, legal constraints, judicial sanctions and concepts of human well-being  which qualify as serious candidates for implementation along a road which will lead to us achieving and sustaining through our economic behaviours the moral precepts by which we, as opposed to the Victorian and Georgian elites of old, now aspire to govern ourselves.

The idea that self-interested economic man is an "ancient truth" is a common element in an ideology that is peculiar to the modern world as a dominant conceit in countries organized along capitalist lines (or at least among economists in these countries). The notion of self interest is in this ideology is internally related to the notion of scarcity, the bedrock of neoclassical microeconomics. Scarcity entails that human wants, each human's wants, are unlimited. Hence, the self-interested man always wants more. This was regarded by e.g. Aristotle as a vice, pleonexia. Most cultures have thought the same. Nietzsche had much of interest to say about this myth. An "understanding of human behaviour throughout the world" based on this most culturally specific of concepts is bound to be badly skewed. As I suggested in an earlier post, we are less likely to take the concept of universally self-interested man seriously if we construe 'self-interest' as an adverbial concept, not an adjectival one. The core concept is 'self-interestedly', indicating a way of pursuing genuine motives. Self interest is not itself a motive. Thus, to act ambitiously in a self-interested way is to do so with no regard for the interests of others. The motive in question is ambition, not "self-interest."

El punto de partida para entender elcapitalismo como economía moderana, es el ansía de acumulación de capital.El capitalista, o su administrador, es el hombre económico determinado historicamente, el sujeto que dinamiza la economía. Ycomo sistema dinámico, el capitalismo está sujeto a permanecer en desequilibrio, y si no hay una fuerza como el Estado que lo intervenga, está sujetoa crisis y a depresiones.

Se muestra la traducción de El punto de partida para entender el capitalismo como economía moderna, es el ansía de acumulación de capital.El capitalista, o su administrador, es el hombre económico determinado historicamente, el sujeto que dinamiza la economía. Ycomo sistema dinámico, el capitalismo está sujeto a permanecer en desequilibrio, y si no hay una fuerza como el Estado que lo intervenga, está sujetoa crisis y a depresiones.

Traducir del El punto de partida para entender elcapitalismo como economía moderana, es el ansía de acumulación de capital.El capitalista, o su administrador, es el hombre económico determinado historicamente, el sujeto que dinamiza la economía. Ycomo sistema dinámico, el capitalismo está sujeto a permanecer en desequilibrio, y si no hay una fuerza como el Estado que lo intervenga, está sujetoa crisis y a depresiones.

The starting point for understanding capitalism as a modern economy, is eager capital.El capitalist accumulation, or administrator, is historically determined economic man, the subject which boosts the economy. Ycomo dynamic system, capitalism is subject to remain in imbalance, and if there is a force like the State that intervenes, sujetoa crises and depressions is.

¿No es correcto?

Dear Ramiro

Could you permit me to request an English translation of your wise ideas presented here? The online translation is not well meaning to me.

With Regards

Israr

Dear Alan,  Thank you for advancing the discussion in regard to self-interest. I am in complete agreement with what you say.   When I came to defining the motivational aspects of human social behaviour I could find no better noun to describe the complex of factors that are involved than can be provided by the words 'Well Being', and most specifically by the phrase "the State of Well-Being".  Only by phrasing it this way can the focus be maintained upon the fact that well-being, that is the achievement, maintenance and development of one's well-being, is the prime motivator of each one of us, in all its complexities and contextual variabilities, This last nuance, that of carefully keeping a focus on well-being as a condition or state of the individual mind, clumsy though it is when you are writing and constantly having to use the term is very, very useful,

Even more importantly, I found it to be completely necessary simply because since well-being's original modern resurrection in economic writing it has been thoroughly hijacked and twisted around to describe a proxy, scalar, point-in-time, national measure.  It is aggregated from a few other generally available pieces of national accounting data.  These are thrown up by the already philosophically and culturally biased systems of commercial accounting that contribute to each countries official set of national accounts.  It has become the child of modern economics of the neoclassical variety and does little more than measure to what extent a skilled, healthy and 'flexible' labour force is being built up in each country year on year.  Well-being, as defined by UN agencies, has become no more than a "Note to the Accounts".  It serves merely to give some convenient qualitative nuance to the raw GDP figures of each country.   Its components in no way reflect how well-being is constructed as much out of the past each of us carry with us, as it does from the present that we are living and the future that is hoped for.  I can be just as assured of my food, my occupational pursuits, my shelter, my educational needs and my health in the Gulag as I can in a community whose history is a part of my history and whose experiences, pains and pleasures I share and whose hopes we dream together and within which I am free to contribute, assent, dissent and build... or not, as I choose and according to what I am prepared to sacrifice according to my needs and concepts of what constitutes my own state of well-being.  A state which is composed of all of the above, and more besides.

Best regards to all,

Robin

The

If you don't like my proposal for the two Georgist axioms, perhaps this will make more sense. Hillel the Elder (about 10 years CE., asked 3 questions:

1. If I am not for myself, who will be for me?

2. But being for myself alone, what am I?

3. And if not now, when?

This introduces an element of altruism into the explanation of the nature of ourselves, but surely it has no connection with how our society works, or does it?

Mr Khan, yes you can..

David, what is interesting to me to see in your postings is that in general you accept that the way self-interest is defined and used since the industrial revolution within Adam Smith's model needs to change.  Only that needs a better definition or the whole theory needs to be fixed, what do you think? or do you have an alternative theory to Adam Smith Theory?...

Greetings to all.

Ramiro, tu comentario es relevante si estas hablando de el Viejo modelo economico de Adam Smith...... Ya no existe desde 1987 cuando la commission Bruntland comenso el proceso de correction originalmente llamado desarrolo sustenido y que hoy es desarrollo verde...

Por eso hoy el modelo es economia verde, y tus comentarios tienen que ser ajustados al present y no estar viviendo en el pasado.

Saludos Ramiro

Lucio, no estoy hablando del pasado, el pensamiento dominante sigue pensando en el equilibrio general competitivo y en la metodología de Milton Freedman. El desarrollo sostenible es completamente una alternativa.