Contours of New Economic Theory

11. Towards NET

Contemporary Economics possesses valuable insights into many aspects and dimensions of economic activity and powerful analytical tools useful for a wide variety of specific applications, which will continue to be of value after economic theory has evolved far beyond the present boundaries, just as Newton’s and Boyle’s laws continue to hold true after the advent of Relativity and Quantum Theory. The validity of what now exists is not a valid argument for maintaining the status quo, just as the deficiency of current theory is not a valid argument for rejecting all that is of proven utility. That said, it is still important to try to envision the ways in which future theory will markedly depart from what now pertains.

It is indeed difficult to fully imagine the contours, let alone the complete content, of NET and the other social sciences which are yet to emerge. Nevertheless, it may be possible to glimpse some of the ways in which they will differ from mainstream social science as we know it today. It is ironic that the nearest distant approximation may be found in the field of management science, which is barely and very hesitantly accorded the status of a science by other social science disciplines. However imprecise, imperfect, anecdotal and lacking in quantitative supporting evidence it is today, the ‘science’ of Management may be the closest thing we now possess to a complete and effective trans-disciplinary social science. At the very least, it may provide us with an indication of the future directions in which other social sciences need to evolve.

Organization is the central principle of Management Science. Most theoretical and applied research focuses on the structure and functioning of the commercial and non-commercial organizations in their relation to the individual persons who work within them, the activities they perform, the processes and systems they utilize, the wider world of stakeholders with which they interact and relate, and the more general environment – commercial, economic, legal, political, social, cultural and ecological – within which they exist and operate.

Successful organizations of any description must necessarily take into account and address all these levels and dimensions of ‘reality’ in theory or at least in practice. The most successful are those that consciously conceive and perceive the relationship between these different aspects and view them as aspects of a single integrated whole – an organization consisting of individuals, functions, systems and activities internally coordinated and integrated with each other and also related, coordinated and integrated to differing degrees with the wider social system and environment of which it is a part.

Successful theoreticians and organizational leaders are cognizant of the fact that the overall performance of an organization depends on both the development and the integration of these three organized dimensions of reality – the psychological organization of the individual microcosm, the social organization of the collective macrocosm and all the levels of organization in between – individual department, firm, agency or other entity, industry, local or national economy, etc.

Successful leaders are also conscious of the fact that the rigid boundaries between financial, economic, political, legal, scientific, technological, social, cultural, psychological and ecological factors are purely conceptual. There are no dividing boundaries – only interrelated aspects of a single integral reality. No company can exist and function independently from the market, legal context, social and cultural environment within which it operates.

Furthermore, however abstract and lifeless it may appear when depicted on an organiza­tional chart or matrix or mechanistic diagram of interrelated systems, functions and processes, successful organizational leaders are also conscious of the fact that an organization is alive – a living organism – activated by human energy and aspirations; directed by conscious and subconscious intentions (ideas, values, beliefs, opinions and attitudes); combining individual action with coordinated collective activities; governed by an intricate combination of person­al authority and impersonal rules and procedures; expressing that energy and intention in an organized manner through knowledge, skills and technology to produce results.14

Management Science necessarily comprehends and strives to take into account theoretically and practically the contributions to value addition of knowledge, skill, structure, systems, networks, authority, information, communication, rules, procedures, laws, leadership, power, process, procedure, cooperation, coordination, integration, internal harmony among individ­uals, external relations with individuals, other institutions and the wider social environment.

From this perspective Management may be regarded as the most complex, integrated and effective social science related to wealth creation. It places central emphasis on purposeful human behavior and social processes, rather than impersonal laws of economics. It is human-centered, recognizing the central role of human intention, awareness, knowledge, skill and motivation. It encompasses market, technology, finance, organization and people within a comprehensive organizational framework. It integrates the individual, organizational and social dimensions of human activity. It recognizes the importance of both objective material and environmental factors and subjective perceptions and attitudes of people inside and outside the organization. It is global in scope without limitation by national boundaries. It consciously acknowledges and founds theory and practice on the central place of values in human performance.

12. Practical Implications of NET

It is far too early to assert with confidence the full implications and impact of NET on human economic security, welfare and well-being, but it is similar in magnitude to the consequences of the evolution of Physics during the 20th century. At this point we can only point out a few of the more obvious ways in which it is likely to make a considerable difference:

  1. NET can provide theoretical justification for recognition of gainful employment as a fundamental human right and essential condition for full exercise of economic rights in a market economy, the equivalent of the right to vote in democracy. Creating all the essential conditions to access and capacity to obtain remunerative employment of every citizen who seeks work is the optimal strategy for maximizing economic security for all, at least to the extent that social security systems are unable to fully disengage economic welfare from dependence on employment.
  2. NET will support a more fundamental shift in thinking from the preoccupation with the quest for precision and certainty which characterize the efforts of ‘Newtonian Economics’ for control to an emphasis on risk assessment, management of uncertainty and unleashing of dynamic creative social processes in an effort to maximize human security and accelerate positive social transformations.
  3. NET can lead to the development of new types of tools to measure human economic security, welfare and well-being and sustainability. The gross inadequacy of existing measures such as GDP has been well-documented and widely discussed. Yet in spite of widespread criticism, the use of GDP as a proxy for economic progress is commonly relied upon by economists and other policy makers. GDP registers in positive terms economic activity that results from destructive activities such as war, arms exports, rising costs of domestic security and policing, natural catastrophes, crime, rising medical costs and the drug trade, which reflect a deterioration in human welfare and should be deducted rather than added to national product. A measure of economic activity (flow) rather than wealth (stock) fails to take into account positive and negative changes in the total of natural and other forms of capital: thus, the depletion of non-renewable natural resources is valued at the cost of extraction or current demand without taking into account replacement value. GDP makes no distinction between revenues from speculative financial transactions that benefit the top one percent and production of essential goods and services that benefit the masses. Other implicit and largely uncontested premises relate to the value of advanced labor-saving technologies, the value of capital accumulation and savings, unrestricted market access, intellectual property rights and public debt. The Human Economic Welfare Index (HEWI) was developed in 2010-11 by Ivo Šlaus and myself to illustrate an alternative quantitative index based on a modification of GDP.15
  4. NET can restore the rightful place of money and financial markets and eliminate the theoretical justification for speculative financial activities that undermine global human welfare.
  5. NET can resolve the incessant debate regarding the apparent contradiction between private interest and public good by reconciling them within a larger formulation of human security, welfare and well-being that takes full cognizance of the mutual interdependence between these two aspects of social reality. The creative individual is the catalyst for all social innovation, development and evolution. The development and evolution of the collective ensure the greatest possible distribution of benefits to its individual members. NET can best be founded on a conception that recognizes these two dimensions as mutually complementary rather than mutually antagonistic.
  6. NET can foster the development of institutions and policies at the global level designed to foster the economic security, welfare and well-being of all human beings in all countries as the optimal strategy for the operation of the global economy and an essential requirement for the fulfilment of the full range of humanity’s political, social, cultural and psychological aspirations. Maximizing economic security, welfare and well-being for all will also contribute to maximizing the political, social, psychological and ecological security, welfare and well-being of all.
  7. NET can compel a re-evaluation of current laws and public policies to determine their contribution and compatibility with the explicit aim of maximizing human economic security, welfare and well-being. This may include that which relates to natural resource rights beneath the surface of land, taxation of natural resource mining and consumption, law and taxes on pollution, the length of protection for copyrights and other forms of intellectual property, corporate campaign financing, tax rates on payroll and capital gains and on accumulation and inheritance of wealth, right to education and healthcare, etc.
  8. NET must necessarily incorporate ecological factors in a manner that reflects the true cost of economic activities, assessed in terms of their value to present and future generations rather than the immediate costs of extraction and utilization. It needs to incorporate the concept of negative or deducted value to reflect the detrimental impact of pollution and ecological disruption on human beings and their physical and social environment.
  9. At the same time, NET can lay to rest the theoretical debate about limits to growth by making evident the unlimited potential for the future development and evolution of human beings and society. Some natural resources are finite in quantity, exhaustible and non-renewable, but the potential resourcefulness of the human mind and imagination, which ultimately determines the productivity of those resources, is not, as Harlan Cleveland, past WAAS President and a leading member of the Club of Rome, so often insisted.
  10. NET can provide theoretical and practical support for the evolution of truly representative, democratic institutions freed from the inordinate influence of money-power, which distorts, subverts and perverts public policy to serve a small élite at the expense of the public-at-large.

14. Cleveland and Jacobs, Human Choice: The Genetic Code for Social Development, 6-8
15. Garry Jacobs and Ivo Slaus, “Indicators of Economic Progress: The Power of Measurement and Human Welfare,” Cadmus 1, no. 1 (2010): 53-113 162

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