| THE INTEGRITY PAPERS - James N. Rose | Genre Group - Buchanan | http://www.ceptualinstitute.com |
COMER Columns
Articles published in "Economic Reform"
the Journal of the 'Committee on Monetary and Economic Reform'COMER Column #5 Vol. 13, No. 1, January 2001.
A Systems View of Economic Reform
In the absence of a systems approach, adequate economic reform is simply not possible.
For centuries our societies have mostly been bound to habits of economic thought and practice linked to paradigms of competition and conflict. Such values entail a kind of free-for-all in which opposition is fragmented and the winners gain the power to set the rules.
Yet the winners have been mostly unconscious of the larger stage, of values required for the development of civilised human life on this planet over the long run. We are still enmeshed in old structures which make for fragmented aims and misleading comparisons, where"higher ideals" too often have no effect on the real world. We need a platform for growth and renewal that has some real chance of positive results. (1)
Hazel Henderson has written about the importance of our "mental tool boxes: our belief systems, cultural conditioning, assumptions, worldviews, concepts and habits of thought". (2) And she makes the case that, without such conditioning, we would more easily recognise that economics is, far from a science, simply "politics in disguise".
If we would reform politics, to take a longer and more inclusive view, we need to reflect consciously on basic human needs and values. We cannot afford to repeat old routines simply because they are familiar, or permit ourselves to be guided by economists who cling to outmoded assumptions for security in a world grown beyond simple understandings.
While we need to analyse, and take things apart, we also need to fit them together in better way, and this requires a systems approach, guided by a conscious choice of values. Systems methods include a growing resource of concepts and practices which have great advantages over traditional tinkering with superficial symptoms in isolation.
Hazel Henderson writes: "Economic models are linear, and economists often do not see what systems theorists and ordinary citizens find obvious: what goes around, comes around... The truth [is that] economics is not a science, in spite of the prize money given to the Nobel Committee by the Central Bank of Sweden to bolster the prestige of economics with its own prize. Economists regularly recommend Nobel awards to each other for insights that are trivial when viewed from a broader systems perspective." (3)
The implication may be that the criteria by which currently ascendant neoclassical economics must be assessed are not to be found within the discipline of economics as such, but in the context and conditions of economic studies and in reality. In previous columns we have emphasised the vital importance for any system of inquiry for the inquiring mind to move beyond current assumptions, to embrace a wider or metasystem perspective. Any discipline can become trapped in a self-contained world of its own assumptions and views of what it sees as reality, so that all its thought and observations are self-referential and self-confirming.
The path to advance for civilisation, as Whitehead observed, may require that intellectual leaders break through the limitations of their current abstractions. Standard neoclassical economics presents just such a challenge.
Hazel Henderson has for many years taken a systems approach, confronting economic orthodoxies, articulating the realities of choice in the real world. Systems sciences begin with the need for clear observation of facts and circumstance, and a clear vision of the needs and purposes to be met. Such studies may lead to some relatively esoteric fields - complexity, chaos theory and others - but such specializations need not concern us here. Academic studies, whether in economics or systems theory, often tend to drift away from a base that is relevant to real problems, and an insistence of basic systems models on real world feedback is essential in minimising this risk of irrelevance.
It too often happens that economists look for solutions in abstract theories when clearer observations of realities - of more relevant data and feedback mechanisms - are needed. The management of complexity and uncertainty requires a clear vision - purpose and goals - and methods of priorising and assessing the relevance of information to those purposes. The real issues are those of responsibility and choice, not salvation in the guise of an arcane technique. The challenge of systems science to economics does not lie in theory but in practice, in dealing with the world according to how the world actually works rather than how we think about it.
Choices for human action are not complex or chaotic but relatively simple and consist of a small number of possible alternatives for achieving desired results. Arcane techniques which obscure real needs, objectives and alternatives should be considered suspect.
In the absence of a system-based approach, the risk of collecting a lot of useless information is very great, while remaining ignorant of what is important. Of course there are powerful groups and institutions in any society whose interests are well served by public ignorance.
The economic and political importance of this may be illustrated by the history of Chile in the early 1970's. At the invitation of Salvador Allende, the management scientist and cyberneticist Stafford Beer was asked to set up an information system operating in real time to facilitate government decision-making (3). Chile had many problems, but the military intervention by the forces of Pinoche, with American support, applied the drastic remedy of bombing the palace and killing Allende. One of the lessons which may be drawn from this is that new methods may be greatly feared and irrationally opposed, sometimes on the grounds of ignorance but also because such methods might be more effective, a clear threat to the established powers.
Information and response in real time may be vital for success. Social and economic affairs usually involve cycles, and interventions based upon routine statistics gathered on a monthly or quarterly basis, or with longer time lags, may come at precisely the wrong phase of the cycle. But real time capabilities require an approach which takes account of information and timing requirements. Policy based upon data that is late and has lost relevant meaning is worse than wishful thinking because it is more misleading.
In no sphere of our economic life are systems methods more important than in establishing possibilities with indicators for sustainable development. It has become clear that our survival and quality of life depend upon reliable information about the natural, physical and social world in which we live. And it is just as clear that popular indicators like the gross domestic product are inadequate; they inform us only about monetary flows and not about the state of the environment, the destruction of resources or the quality of life. In this regard the initiative of Joe Jordan, M.P. - Bill C-469 - The "Canada Well-Being Measurement Act" (4) which has been introduced in the House of Commons is worthy of support.
As William Krehm (5) has emphasised, to consider economics and its reform requires attention to context - to the dominant ideas and assumptions of our culture, to the powers that be in society, to the interests and lives of citizens and to the realities of earth and biosphere on which we all depend. Without a systems framework and approach no such reform can be clearly conceived and effectively brought to life.
References
(1) Beer, Stafford. Platform for Change. John Wiley and Sons, 1994
(2) Henderson, Hazel. Building a Win-Win World: Life Beyond Global Economic Warfare.
Bettett-Koehler Publishers (1996) p. 4.
(3) Henderson, H. op. cit., pp. 66 and 68.
(4) See: http://www.cyberus.ca/choose.sustain
(5) Krehm, William. "Re- embedding the Economy into Society and Society into the Biosphere".
COMER Aug/00)