Integral Economics

In my first essay on Integral Politics I stated that “politics is philosophy-in-action.” In a very similar way I would also propose that economics is psychology-in-action. Over the years my focus has been Integral Politics, and Panarchy as its operating system, but after a brief exchange with my brilliant friend, Dr. Joseph Dillard, I was compelled by him to “mine the coal” of this topic and discuss Integral Economics and in particular the importance of Praxeology to a correct and meaningful understanding of the science of economics.

Praxeology, and it’s importance for an integral understanding of economics

Praxeology is simply the study of human action. In his magnum opus, “Human Action,” Ludwig Von Mises begins, “Human Action is purposeful behavior. Or we may say: Action is will put into operation and transformed into agency, is aiming at ends and goals, is the ego’s meaningful response to stimuli and to the conditions of its environment, is a person’s conscious adjustment to the state of the universe that determines his life” (Mises, 1998). And how is that for an integral beginning to a thesis?

We act, and our actions are our ego’s response to Life Conditions.

Dr. Don Beck himself could not have said it better. Ken Wilber might put it somewhat like this: We act; using our UL Interior subjective will, we conceive of some desired end, and translate that through our agency into real world UR exterior behavior.

In other words, “I will it, so I do it.” 

This single fundamental axiom, “men act,” is the basic premise around which a Science of Economics known as the Austrian school was formed. There is no judgement of value. There is no moralistic claim of good or evil. “Mises assumes nothing whatever about the rationality of human action (in fact, Mises does not use the concept at all). He assumes nothing about the wisdom of man’s ends or about the correctness of his means. He “assumes” only that men act, that is, that they have some ends, and use some means to try to attain them. This is Mises’s Fundamental Axiom, and it is this axiom that gives the whole praxeological structure of economic theory built upon it its absolute and apodictic certainty” (Rothbard, 1997).

In contrast to this, other economic theories are either formed positively or normatively: Positively, by using empirical methodologies similar to those found in the natural sciences to analyse human behavior, often employing statistical mathematics to build predictive models. Normatively, by making value judgments about economic outcomes and designing and prescribing economic models to achieve more desirable outcomes.

The problem with the later two methodologies from an integral perspective is that they are each only partial in scope. The positivist methodology treats economics as a natural science (like physics) rather than as a social science. It is concerned only with “what is,” and this is a partial flatland materialistic view of economics.

“All the positivist procedures are based on the physical sciences. It is physics that knows or can know its “facts” and can test its conclusions against these facts, while being completely ignorant of its ultimate assumptions…. In physics, the ultimate assumptions cannot be verified directly, because we know nothing directly of the explanatory laws or causal factors. Hence the good sense of not attempting to do so, of using false assumptions such as the absence of friction, and so on. But false assumptions are the reverse of appropriate in economics. For human action is not like physics; here the ultimate assumptions are what is clearly known, and it is precisely from these given axioms that the corpus of economics is deduced. False or dubious assumptions in economics wreak havoc, while often proving useful in physics.” (Rothbard, 1997)

Contrast the positivist economist to the normativist. Whereas the positivist reduces economics to “what is” materialist (exterior) flatland, the normativist reduces economics to “what ought to be” subjectivist (interior) dreamland. Economics then becomes a tool to be used by enlightened men to bring about a desirable economic outcome on society as a whole.  However this runs into an even more intractable problem than in the case of the positivist. Namely that it ignores any need for ultimate assumptions either true or false, and instead derives its “facts” solely based on what is believed to produce the desired outcome. Yet, the real facts are so numerous, varied, diverse and ever-changing that they constantly allude the normative economist, and the policies they thus enact, fail to achieve their desired outcomes.

In the Post-Modern era, the solution has been to synthesize positive and normative economics into a “Mixed” economic model. To define “what ought to be,” and analyse “what is,” using policy to adjust the “facts” in incremental steps so that the “is” and “ought” come ever closer into alignment. This is the economic foundation of the Neo-liberal order, the “practical idealism” of the mixed economy that was cemented into our zeitgeist after World War II and continues as our conventional economic wisdom today. The only argument allowed in mainstream economic conversation today is over how much and what kinds of incremental manipulations in the economy should be taken in order to force “what is” to conform to a seemingly ever-changing set of “oughts.”

One may think the synthesis of positive and normative might achieve an integrated economic science. However that assumption would be in error, because even the synthesis, although it combines Right hand Materialist, and Left hand Subjectivist methodologies, still leaves us with an incomplete approach because in the language of AQAL it is only dealing with the Lower quadrants, the LL and LR “We” and “ITS” spaces.  To understand the rest of the picture requires the diligent and formal application of Praxeology, which gives us our UL and UR “I” and “IT” spaces. This in turn adds “what I will” and “what I do” to “what ought to be” and “what is,” giving us a fully Integral Science of Economics.

Econ-AQAL

With this complete, AQAL integral model of Economics, let’s take a look at Economics through the lens of each developmental worldview. Let’s look through each lens to see what drives human action and in turn the economic forces of each stage/wave:

Survival Economics – The Economics of Beige

kinshipecon2

The Life Conditions of Beige demand an economics of pure survival. The day to day needs of self and kin must be scrounged and scraped and fought from the viscous and uncaring grasp of the forces of nature. Food and tools are made as needed, and shared. Trade with other groups is minimal, perhaps seasonal. In modern times, this economic view is held by our most destitute; the homeless and mentally ill that live on the streets.

What I will: To have food and warmth and safety, and to have the same for my kin.

What I do: I hunt, I forage, I make tools, clothing and shelter.

What Is: Harsh elements, dangerous animals, struggle against nature.

What ought to be: to survive the next winter.

Magical Economics – The Economics of Purple

tribalecon

In the Life Conditions of Purple the world is teaming with magic and spirits that must be communed with and appeased. The self is subsumed by the group identity of the tribe. I am my tribe, my tribe is me. Rival tribes can be friends and allies in one season, and bitter enemies the next as competition for resources, hunting grounds, or the whim of the gods demands. The Economics of purple is one of magic, where ultimate value is placed on communion with the ancestral spirits, or gods of the community. Communal goods, some specialization and division of labor, and largely undeveloped concepts of private property are common. In modern times, only the most remote peoples in Africa, Asia, South and Central America and so on are on this stage.

What I will: The continued survival of my tribe, to appease the gods and spirits so that they favor our tribe for all time.

What I do: I pray for healing, I dance for rain, I make offerings for a good hunt, I make sacrifices for success in war. I follow the traditions of my people, and pay homage to the spirits of nature and my ancestors.

What Is: Nature is teaming with Magic and gods/spirits that must be appeased and have real power to help or harm. Traditions that must be observed and passed on. Neighboring tribes with whom to trade and make war, or who will make war on us.

What ought to be: Our Tribe should thrive, with the help of the gods/spirits we shall continue through the generations and endless time.

Power Economics – The Economics of Red

powerecon

In the Life Conditions of Red, the weak serve the strong. Might makes right, and power and renown are the ultimate reward. In the economics of Red, status and reputation are of the highest value. Material goods are merely tokens used to signify status and are typically portable, often wearable wealth that can be displayed (bling). Ones position in various domination hierarchies, how many men serve you and have sworn loyalty oaths to you, and what stories are told about you; these are what define a man’s wealth. In modern times the economic motivation of urban gang members most closely reflects this stage.

What I will: To achieve power, riches and renown, both in this world and the next, for myself, my posterity, my chief, and my gods. To uphold my oaths, and take revenge on liars and cowards. “To crush my enemies, to see them driven before me, and to hear the lamentations of their women.”

What I do: Through skill and prowess I increase my wealth, prestige, and reputation. I may farm, I may trade, I may raid and plunder from neighboring tribes, sometimes I take slaves. I strive for the recognition of my peers, of my chief, and of the gods so that my story will be told for all time.

What Is: A fiercely competitive world. Men vying for dominance, either through physical prowess or political machination and sorcery. Omens give us signs, and ultimately fate decides what the gods have in store for us; great wealth and fame, or a cowards death and an unmarked grave. Precious metals and stones are worked into fine objects that can be used to display status, or can be given as gifts to loyal warriors or servants. Trade is mostly through barter of goods, or through force against rivals.

What ought to be: The gods have fated certain men to gain power, prestige, fame and renown, and others are fated to serve them. It is left to each man to live and die according to the will of the gods.

Sacrificial Economics – The Economics of Blue

merchecon

In the Life Conditions of Blue (or Amber if you are a Wilberite), individual desires must be sacrificed and subordinated to the will of the higher authority. Clear lines of Good and Evil are set forth, the sinful are punished and the righteous are rewarded (in this life or the next). The economics of Blue is primarily the exchange of sin. To sin and to be rid of sin, or be forgiven for sin. Material wealth is usually but not necessarily a reflection of status, and impoverished nobility, and wealthy commoners are not uncommon

What I will: To fulfill my duty to my earthly authority, and serve my lord on earth and in heaven; to avoid blasphemy, to rid myself of sin and hopefully gain everlasting peace in the afterlife.

What I do: I adhere strictly to the doctrine of my higher authority. I bend to the higher authority’s will (or the will of His earthy representative). I sacrifice myself willingly to achieve His plan. Above all, I speak only doctrine and never blaspheme, and I pray, fast, meditate, self-flagellate, or otherwise cleanse myself of sin.

What Is: A world controlled by an all powerful authority, that punishes “evil” and rewards “good” in either this life or an afterlife. Even the highest noble can fall from grace and the lowliest serf can be a martyr or saint for the cause. Precious metals become a medium of exchange chiefly among the ruling classes, while most live hand to mouth, giving up their surplus to their lords. Some “free men” become merchants, enabling trade between communities. Eventually, technology may allow for the spread of colonial empires, which spread the dogma and authority to “savage” lands, and bring back wealth and slaves in return.

What ought to be: All men should be made to follow the will of the higher authority. Those judged to be unrighteous, or sinners against the doctrine should be destroyed. All men must be obedient and loyal to toward their betters in the hierarchy. Each man must know his place, fulfill his duty, and praise the higher authority and His doctrines.

Material Economics – The Economics of Orange

modernecon3

In the Life Conditions of Orange the will of a higher authority is replaced with the natural laws of science and reason. There is an Enlightenment, which heralds a new dawn and an exponential rise in overall wealth, material comforts, life expectancy, and so on. The Economics of Orange are based on materialism and represented by hard currency and it’s equivalent in notes, stocks, and property. Money talks in the Modern Economy, and status is almost solely based on wealth.

What I will: Use my talents and skills to advance my station in life, gain wealth and provide comfort and leisure for myself and my posterity.

What I do: I maneuver to take advantage of every opportunity, working with others or going it alone I work hard, strive and compete to be the best and gain the most I possibly can. I push ahead, bending the rules if necessary to achieve my goals.

What Is: The world is our oyster! Science and Reason have opened whole new worlds of possibility. For anyone with drive and ambition to make their mark, vast fortunes can be made. New resources exploited, and new inventions created using science and ingenuity. All corners of the earth are explored, and are coming under the settlement and management of man. Precious metal currency becomes a ubiquitous unit of exchange. Paper bank notes come into use as well as modern banking and lending practices, stock exchanges and so on.

What ought to be: All men are created equal, with equal natural rights. Every man should be free to pursue his own happiness. Even the poorest can rise to great riches with hard work, ambition, and drive. All men should be Free from religious persecution. The government should serve the will of the people. Corporations exist to make profits for their share holders.

Compassionate Economics – The Economics of Green

postmodernecon

In the Life Conditions of Green, materialism is rejected in favor of the greatest good for the greatest number. Ostentatious displays of wealth become vulgar and disgusting. Diversity, inclusion, openness and fairness are seen as ultimate virtues. Values are seen as relative, with no value system of greater worth than another. The Economics of Green are driven by empathy and human need rather than profit. NPO’s and NGO’s become a prevalent market mechanism to cater to various needs and causes, while politicians raise more taxes to pay for increasing public spending on social programs.

What I will: To care for all people, regardless of nation, race, gender, sexual orientation or ability. To make the world a better, freer, cleaner more just and humane place for future generations. To protect mother nature, the planet and all species from exploitation by man.

What I do: I work, volunteer and support various causes that are important to me. I help people when I can, donate my time and money, and live lightly on the earth so that my posterity can inhabit a the same beautiful planet that I do.

What Is: The world is full of injustices that must be rectified. Greed is a constant threat to the welfare of humanity. The world is in existential crisis, as man has profited from its exploitation, spoiling the environment and endangering all life on earth. The poor too are exploited by the wealthy. Government and Huge Corporations game a system of their own creation for their own benefit at the expense of small businesses and individuals. The economy is truly global with multiple layers. Hard currency is replaced by central bank notes, debt, and promises to pay. Economies transition from industrial, to service and information based.

What ought to be: Power balances must be flattened, hierarchies overturned, wealth more evenly distributed. All men have a right to share in the wealth of “society” so that their basic needs are met. The earth must be preserved protected and restored. Corporations must be held accountable to the public, responsible toward the environment, and contribute to their communities.

Integral (Wisdom) Economics – The Economics of Yellow

Holisticecon

In the Life Conditions of Yellow, multiple perspectives and realities can be held simultaneously. The greatest good, becomes a conditional. One size does not fit all. Solutions to problems must be flexible and organic, natural and functionally fit for the vMeme in question. Wealth in knowledge and wisdom become priorities over material possessions. The Economics of Yellow are driven by functional fit. Integrated meshworks of diverse and varied economic modalities coexist in a Panarchic Integral Agora where order tetra-arises out of the chaos of billions of daily economic transactions of all types along all quadrants, and all lines.

What I will: To expand my knowledge about the world in all its varied dimensions. To find the links that connect all to all, to be agile and skillful in dealing with other worldviews/perspectives. To promote the peaceful coexistence of all vMemes in all their varied types through panarchic operating systems.

What I do: I teach, train and coach. I learn, study, write, share and talk. I continue an evolving conversation, gaining knowledge and wisdom with each new interaction. I pray and meditate, I make music and art, and take responsibility and stewardship over those things that I have, so that they may be passed on to others one day.

What Is: The world is a chaotic and complex mix of competing value Memes, fighting for dominance on a global stage. Societies are no longer homogeneous, with multiple competing vMemes battling for the levers of social power. Technology has made the world small, information is shared instantly around the globe, computing power, automation and bio-technology advancements continue to improve living conditions exponentially. At the same time danger from clashes between incompatible worldviews sharing the same space takes center stage. Currency becomes mostly digital and new more secure forms of crypto-currency come on line.

What ought to be: The health of each worldview is the highest priority. Each wave should be free to enact its own truth in a healthy way, while being encouraged by example to grow.

In Conclusion…

We can see that any integral science of economics must include a full four quadrant approach of UL – praxeological – “what I will,” UR – praxeological – “what I do,” LR – positivist – “what is,” and LL – normativist – “what ought to be.” It must recognize, also, that economics, from an integral perspective, is not simply the study of monetary exchange, but in fact is the study of exchange itself.

We exchange in so many ways every day. Sharing a lunch with a coworker who had none, praying for the recovery of an injured loved one, giving a token of friendship or love to another, sacrificing time or money toward something greater than yourself, working a job to afford the necessities of life, volunteering to help those in need. All of these daily transactions, these human actions, in aggregate create the fully integrated picture of our economic life.

2 Responses to Integral Economics

  1. brodoland says:

    From Joseph Dillard via Facebook (re-posted here with permission):

    Very cool and thought provocative, Bryan! Thanks for taking the time to put your thoughts down so that I can benefit from them!

    My brilliance, by the way, is due to my undying loyalty to the Mean Brown Meme and the Great Sphinxter, and, like the moon, merely a reflected light of Eric and the Great Dung Scarab Goddess herself.

    The challenge your model creates is to find an answer to the question, “How does a yellow panarchy keep rentier income from creating an oligarchy?”
    In the context of your model, I would say that Michael Hudson’s economic analysis uses orange to control the excesses of red. He would will compliance with universal law founded on normative principles of justice in the LL. He would set up a mixed economic system in which public services and banks are nationalized and private debt periodically forgiven by the state to keep assets from being conveyed, via compounding interest, to the rentier class, thereby creating a plutocratic oligarchy. In the UR he would have the laws created and in the LR they would be enforced.

    Other thoughts:
    “I will it, so I do it,” implies conscious intent. But of course life and economics are both filled with unintended consequences of our actions, things we did not will, but are precipitated by our decisions. Jared Diamond’s Collapse is full of examples of collective and economic actions that are intentional, but disastrous. How do we explain such?

    Typically, by saying either that there are “parts of ourselves” that are out of our control and will things that we don’t want, or alternatively, that we often will things that are not in our own best interest, like addictions, or we will things that we know that are in our best interest but are not in the interest of the collective, or some combination of the above.

    So the axiom, “I will it, so I do it,” appears to be different from Mises, “Men act,” which does not imply either a conscious self or intentionality. It could be “Velociraptors act” and imply the same amount of consciousness or agency.

    So first, which of these formulations is the integral economic one? They are different, are they not? The first, “I will it, so I do it,” is positive, in that there is both consciousness and intent.

    This is certainly a different meaning of “positive” than you give, as the use of empirical methodologies, but it does still appear to be positive. “Positive” is different that “positivist.” If you mean “positivist,” then I would think there are many ways one can make affirmative claims without falling into the positivist camp. For instance Kant or Husserl. But if we migrate from positive to positivism, then arriving at flatland economics makes sense. My issue would be whether “positive” necessarily implies positivism.

    “I will it, so I do it,” is also inherently normative, because the psychological assumption is that even when indulging in self-abuse or suicide, we are acting in what we believe is our own best interest. For instance, we “deserve” punishment. So intention inherently involves value judgments, does it not?
    You quote Rothbard as saying, “For human action is not like physics (indeed!); here the ultimate assumptions are what is clearly known, and it is precisely from these given axioms that the corpus of economics is deduced.” This is interesting, because it again reminds me of Continental Rationalism: a priori reasoning from axioms, yes? But what if the ultimate assumptions behind human action are not clearly known? Or what if those assumptions are wrong? Or what if they are simply unnecessary filters that stand between us and clear economic observation, as in phenomenology?

    The point of reducing economics to neither exterior positivism or interior normativism seems to me to be both important and correct. Belief certainly filters reality, as we know from the realm of cognitive biases, and that in turn certainly is going to skew whatever normative approach we take to economics. Some of this is probably unavoidable, but it can certainly be reduced, and Mises and Rothbard are attempting to do that, yes?
    The way you describe the neoliberal order reminds me of Karl Rove’s famous comment about “creating reality,” meaning making facts conform to our beliefs. I really like that approach, in the same way that I like unicorn rainbow farts.

    I hear your LL and LR subjectivist and materialist dichotomy, but where I am confused is you started off by drawing a dualism between UL intention/will and UR action, with the implication that normative (LL) approaches were associated with the former and positivist UR (because science deals with the objectively observable) and LR (because there are sciences of physical, social, and psychological systems) with the latter. So is it true that “what is” can be confined to the LR? Is not the UR equally observable as fact? Similarly, praxeological “what I do” is also done in relationship, LR. So can it be limited to the UR? I think I understand your distinctions, though, and I may be quibbling.

    Thanks again for your thoughtful essay. I am sure Frank will look forward to publishing it at Integral World.

    Like

    • brodoland says:

      My reply on Face Book:
      Thank you Joseph. Your critique is always insightful and challenging. In fact, do you mind if I re-post your critique/questions and my response in the comments section of my blog page? I will try to tackle the points you make one by one. Hopefully I am thorough and don’t miss something.
      1. I am not sure that I agree with you that Michael Hudson is “using orange to control the excesses of red.” Red is not so much interested in the accumulation of wealth per se, but rather the accumulation of in-group status, reputation and renown (fame and infamy). In an Orange COG society wealth governs status, so Red endeavors to be wealthy or to appear wealthy by any means in order to attain that status. Hudson seems more concerned with tempering Orange’s excesses using a Green Normative approach. Orange is far less concerned with status, and far more concerned with the accumulation of assets and capital, which can then be employed to generate income (rent as you put it).
      2. “I will it, so I do it” indeed demands conscious intent. That statement can be logically deduced from the a-priori axiom “men act” as Mises does in “Human Action.” Of course he spends many hundreds of pages dealing with the subject in far more detail than can be accomplished on my blog! In my capacity as an “amateur enthusiast” of the topic, I cannot do it full justice, but briefly I will summarize. Mises identifies three prerequisites for human action: Firstly, a feeling of uneasiness. Secondly, the image of a more satisfactory state. Thirdly, the expectation that purposeful behavior has the power to remove or at least alleviate the felt uneasiness. Those three prerequisites are the UL interior “will” that necessarily presages physical action in the UR space.
      3. Yes, any action (either individual or collective action) is subject to unintended consequences (which is the results of human (re)action). And that is precisely where normative (what ought to be) and positive (what is) analysis adds value, but it is never perfect. Again, Hudson’s solution appears to be derived firstly from a normative approach. He has his idea of “what ought to be” and from that he looks to positive (what was) historical data, and on that basis deduces mechanisms which he believes will deliver the desired outcome. But his problem is that the historical data are woefully incomplete. He sees the bits of history that confirm his normative assertion, and constructs his theory around those. That approach is still only partial and therefore doomed to failure.
      4. Certainly there are parts of ourselves that are out of our control to one degree or another. I cannot control my heartbeat and tell it to stop. However I can take action to speed it up or slow it down. And yes, people take actions which are not in their best interest (at least from another perspective), but people ALWAYS take actions which they believe will alleviate whatever unease they are currently struggling with (even if those actions are ultimately self-destructive). That is what Praxeology demands. As I said above, “I will it” and “I do it” are directly derived from the a-priori “men act.” Saying “velociraptors act” is somewhat beside the point. Their agency, or the agency of any animal, is limited by their consciousness.
      5. My thesis is that in order to formulate an integral economic science, we must include all four quadrants (i.e. both praxeological quadrants, plus the normative and positive ones). Pure Praxeology itself covers only the “I” and “It” spaces. Mises and Rothbard actually acknowledge that fact and they do apply a normative and positive analysis to their praxeology which in turn has resulted in what we call the Austrian School of economics. However since their worldview was rooted in Orange cognition, it is limited in that regard. Therefore, I think an “Integral School” of economics could be formed by taking Praxeology and applying an Integrally informed Normative and Positive analysis. I think such an economic model would necessarily need to be an integrated meshwork of stage appropriate economic modalities, which is really just another way of saying a panarchic economic model.
      6. I use the term “positive” in the economic sense, (see Keynes, Friedman et.al.). I believe it is related to philosophical “positivism”
      7. Surely yes, intention inherently involves value judgments, and value is purely subjective in nature, thus why Praxeology is so critical. “I will it so I do it” is not normative because it says nothing about what “ought” to be done, it simply refers to objective (UR) action, driven by subjective (UL) will.
      8. Regarding the what-if questions in regard to the Rothbard quote. Firstly I would say that the point of an a priori axiom is that it is “a priori,” self-evident, and needs no further proof. The ultimate assumption in Praxeology is “men act.” That’s it. It is self-evidently true that men act. Everything else MUST be logically derived from that axiom. There are no further “assumptions” beyond that first a priori one.
      9. Yes, praxeology helps us to more accurately predict the effects of a given set of constraints placed upon an economy. Invariably such constraints are applied due to some normative analysis, or normative/positive hybrid analysis. Mises and Rothbard (and the Austrian School in general) have been extremely good at correctly predicting the results of state economic manipulation, however that may be because the current economy is largely driven by the same vMeme that informs the Austrian School’s normative approach, namely Orange. I don’t make that claim, but it wouldn’t surprise me.
      10. As far as my distinctions between upper and lower quadrants; you have to keep in mind that Praxeology studies individual human action. Of course we can infer a lot about the collective by studying the individual but still need a separate tool kit to get the full picture. Praxeology itself (in contrast to Austrian Economics as a whole) makes no normative “ought” claims, nor does it make any analytical models of “what is” to predict future actions. Praxeology only concerns itself with the actions of men and the motivations behind those actions. i.e. total Individual interior and exterior phenomena.
      Thanks again for the thoughtful response and questions!

      Like

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