10
JAN
2012

Economists and Experts in the New World

Economists will play a key role in adapting the human society to the global-integral world

Key Points

  • The network of self-centered ties woven in the world since the industrial revolution has exhausted its potential and has led humanity into a global economic crisis.
  • The most prominent economists are bewildered; all attempts to resolve the economic crisis using the traditional toolbox have failed because the existing paradigms no longer match the global-integral reality.
  • Without a much needed transformation of the economic paradigms to match the laws of the global-integral world, humanity will not overcome the problems threatening its existence.
  • Learning the laws of the global-integral world is a precondition for understanding the network of connections and for building a new society.
  • Economists and experts in social science have a key role to play in adapting the economic ties among all parts of the human society in the global-integral world

“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. …I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas. …But, soon or late, it is ideas, not vested interests, which are dangerous for good or evil.”[1]

–J.M. Keynes

The Unique Role of Economists

The economic crisis is arousing anxiety among economists and decision-makers throughout the world. The global crisis is the world’s worst economic crisis since the 1930s’ Great Depression. It touches each of us and compels us to not only carefully examine the causes of the crisis, but to actively address the deformations that have grown in our imbalanced economy and correct them. The unique role of economists is to help the rest of us to understand the crisis and to lead the mending of the global economic system.

The Crisis of Economic Thought

When analyzing the causes of the crisis, it appears that the existing economic paradigms no longer suit the global reality of our lives. While the old thought patterns, which have dominated the world for more than a hundred years, seem significantly lacking, new thought patterns that match the current reality and would help cope with the crisis are simply nonexistent.

Many economists and financiers disagree on modes of action or predictions, but that only stresses the faults of the existing paradigms in addressing the world’s economic and financial challenges. Nevertheless, the crisis waits for no one. Each day, as it expands and becomes more systemic, the danger of global economic shut down intensifies.

At the end of the day, it is a crisis that stems from the gap between the currently prevailing economic thought, and the one that should be prevailing in the global-integral world we live in. As Prof. Joseph Stiglitz put it in a lecture titled, “Imagining an Economics that Works: Crisis, Contagion and the Need for a New Paradigm,” “The test of any science is prediction. And if you can’t predict something as important as a global financial crisis or the magnitude of the one that we are going through, obviously something’s wrong with your model.”[2]

A New Toolbox in Economic Research

In studying living organisms, the scientist first simplifies and explains how the various organs function, then explains about the different systems and their interrelations, thus performing analysis and synthesis. Studying the interrelations among systems, scientists from life sciences point to a unifying force that sustains all the cells in an organism. The cells absorb the beneficial and secrete what is not beneficial, thus creating a life of balance and harmony.

As a physiologist must be equipped with the right tools for that field of research, an economist needs the right tools for his or her studies. Absence of appropriate tools to build or define a new model impedes the finding of solutions to the current global crisis. The new model addresses the fact that today the system is global and connected in ties of mutual dependence. For now, that model may not be entirely clear to us due to limitations imposed by the economic theory that has evolved over the previous century.

Numerous Interconnections that Cannot Be Predicted Reliably

The purpose of every theory is to simplify reality, and theories in economics are no exception. However, every researcher knows that perfect congruence between theory and practice is seldom found. The current economic theory assumes that each person wishes to maximize one’s personal benefit, and describes a system of relations between consumers, manufacturers, firms, and countries according to that premise.

The theory surmises that each element in the system has a different set of priorities and strives to achieve the best results for itself. These elements join into more complex systems, firms, corporations, markets, and countries that function and work in a global and integral world. This last element, the global, integral world, is what poses the difficulties in building economic models that consider all the stages of decision making in the chain. This is one reason why the current economic theory is imperfect and limited in its applicability.

Inability to Quantify and Predict Human Behavior

Economics uses statistical tools that allow for isolation of variables, for detecting which connections repeat themselves, and under what conditions. Using these statistical tools, researchers learn from past events and build models of behavior over time. They can use these mathematical tools because it is possible to quantify the various parameters. However, what happens when the models need to include unquantifiable parameters in their models? Human behavior is just such a parameter, and because economics relates directly to human behavior, it renders the entire field of study limited and inexact.

The reason why human behavior is unpredictable is that making decisions takes into account elements that are not always rational. Only by combining different methods of research, different paradigms—such as classical economics, which relates to quantifiable elements, and behavioral economics, which relates to human nature—is it possible to study the entire system. This allows researchers to understand human behavior, see the boundaries of the system, and understand the connections that bring it into balance. Only when we achieve all that will we be able to accurately detect the causes of the imbalance that has led to the current crisis.

The integrative approach is a precondition, valid particularly today when a whole new economic system, radically different from its predecessor, is being built. The new system is founded on the laws of integration of the entire system. As in the study of organisms as closed systems, in the new economic system, an economist will be able to follows changes, define causalities, and quantify parameters for the proper functionality of the interrelations among the elements in the system.

The New Economic Theory—Global Integration

Thus far, the economic theory has managed to characterize the behavior of economic units on the level of particular units, as well as on the general level. However, the theory worked only as long as units could be looked at as particular elements. This created a natural division into segments of economic research, such as “labor economics,” which seeks to understand the dynamics of the labor market, or “macroeconomics,” which deals with the performance, structure, behavior, and decision-making of the economy as a whole. That division sufficiently explained the connections among the economic units and the dependence among them within the market of each specific country, including cases of closed markets or trade relations among different countries.

However, economics did not succeed in integrating these study units into a single, solid piece that ties all the units into one, as required in the global and connected world. The inability to connect the systems into one is the primary challenge of economics today because the disconnect makes them incongruent with the laws of integration that are manifesting in today’s interconnected world.

Today, the economic, as well as financial units exist and operate in a single global environment. They are tied to each other by necessity and depend on each other in ever-tightening connections. It is an evolutionary process that has now reached a critical point because the tools in the hands of economists are no longer effective—having been developed and perfected in a world entirely different from that of today.

Previously one could explain how connections among economic and financial units form. It was possible to express the connection among distinct elements in a quantifiable manner. Now an integrative law operates throughout the world, which takes into account all the possible connections. Matching the current economic and social systems to that law will necessarily lead to a world that aspires for balance and harmony precisely because it regards all the possible connections. Conversely, incongruence with that law will be experienced as an escalating crisis.

The Fall of the Old Paradigms that Led to the Crisis

The current economic paradigm, which has led us into this crisis, created—among other ills—a legal and moral foundation for exploitation of cheap labor, primarily in East Asia, and to over-consumption of natural resources. That foundation has led to mutual dependence from which we can no longer escape. The U.S., for instance, has become a super power of financial services and a super power of consumption. China, on the other hand, as well as India and other developing nations, have become the world’s factories. The global system is more connected than ever, and economists must build an economic paradigm that supports that mutual dependence.

Humanity has evolved from individualism, competitiveness, and manipulations into an interconnected global system, which requires economists to devise a new paradigm that reflects it. The new paradigm must take into consideration the fact that we are living in a global-integral system, and only when we understand its laws will we be able to properly establish the economic connections that will lend us a life of happiness and balance.

Globalization is no longer a great discovery. It is a known fact and economists often refer to it in their statements and speeches. Economist, Mark Vitner, described the global interconnectedness in a rather palpable manner: “It’s like trying to unscramble scrambled eggs. It just can’t be done that easily. I don’t know if it can be done at all.”[3] And yet, the solutions of economists to decision makers still rely on tools from the obsolete paradigm of the world of separate entities. They suggest such steps as cutting interest rates, pouring funds into the system (euphemism for printing money), or reducing government expenses.

Perhaps such monetary and fiscal means could help as first aid, but they are completely ineffective when it comes to treating the roots of the crisis and securing a viable, solid, and sustainable economic system. These solutions fail because they miss out on the root of the crisis—the mismatch between the functioning of the current economic system and the required functioning within the global-integral system. The bailout programs of the 2008 financial crisis relied on the old theories and hence failed bitterly, leading us to face an even more threatening version of that crisis just three years later.

Trying to address the new problems without understanding the laws by which the global-integral system operates is only aggravating the crisis. Moreover, the incongruence of economic systems with the current modus operandi of the world puts them under immediate danger of economic collapse, revolutions, and civil wars. The Arab Spring of 2011, which is spilling into 2012, is an example of the dangers that economic pressures can pose. The clout of extremist and nationalistic elements and parties throughout the world is rising, and the protests in Europe and the U.S. can lead to violence, undermine domestic peace, rattle the political systems within countries, and even increase the chance of a full-blown war.

Economists have the duty and the responsibility to acquire a thorough understanding of the laws of the new world economy, in which laws abide by systems of human relations that are moving toward collaboration, synergy, solidarity, cohesion, and harmony. Only when economists grasp that new direction will they be able to develop proper paradigms to describe the global-integral system and how it should work. This, in turn, will lead to establishing an entirely new economy.

Misperception

To demonstrate the connection between the laws of the global-integral system and our ability to detect its characteristics, we turn to other fields of science. First, we need to realize that we do not perceive reality for what it is, but for what we believe it to be. In an online essay titled, “Objective Science: an Inherent Oxymoron,” Dr. Johnston Laurance, former director at the National Institute of Child Health and Human Development, wrote, “All scientific observation—even at the most fundamental level—is affected by the observer’s consciousness. In this regard, the statement ‘I’ll see it when I believe it’ is more apropos than its commonly stated converse.”[4] In that essay, Dr. Laurance quoted several other likeminded scientists and thinkers, such as 19th century neurologist Jean Martin Charcot, considered the founder of modern neurology: “In the last analysis, we see only what we are ready to see, what we have been taught to see. We eliminate and ignore everything that is not part of our prejudices.”

Thus, to devise the right solution to the crisis we must first adjust ourselves to it so that the tools with which we approach the problems will be the right kind of tools. Yet, are there economists who can already offer viable solutions to the crisis? Regrettably, for many years academia has taught how to produce financial wealth rather than economic balance and harmony in the human society. In order to even approach the crisis with the right frame of mind, a reeducation of many aspects of economy must take effect.

Studying about the Global-Integral Reality

The vast gap between the global-integral reality to which the human society has evolved, and the current economic paradigms, which haven’t significantly changed since the industrial revolution, is the real reason for the crisis. Understanding the gap is the first step toward solving the crisis, and this is the great challenge that economists face today.

Integral thinking, which takes into account all the possible connections among the parts of the system, can provide a researcher with tools to perform accurate calculations and predictions of any kind and at any level. It can tell economists what they need to change in the existing systems and how. But first they must rid themselves of the old thought-patterns and study the thought-patterns of the global-integral system, and the incumbent economic paradigm. The first to adopt the integral thought-pattern must be those whose role makes them the most sensitive to changes and dynamics in the human society, such as economists, politicians, and sociologist.

An Opportunity to Build a New Economy

The existing systems cannot be discarded off hand. It is a major challenge ahead of us, which entails a profound change of perception on our part. Such a change requires transformation in our thinking—from models of personal and local benefit to models that focus first and foremost on addressing the necessities of all people, replacing the pursuit of wealth, over-consumption, and status symbols with new, nonmaterial benefits, which come through contributing to the global-integral human society.

The opportunity before economists is a rare gem, a once in many generations event. Humanity is at the threshold of a new era in which new causalities appear. Economists have the privilege of being the pioneers who will adjust the structure of the human society to the new reality. Those among them who are wise enough to build the new economy in line with the principle that we are all connected in a global-integral network will be well rewarded. The fate of the world rests on their ability to make that change and lead humanity to global prosperity and abundance.


[1] John Maynard Keynes, The General Theory of Employment, Interest and Money, (U.K., Palgrave Macmillan, 1936), pp 383-4

[2] http://www.dictionaryofeconomics.com/resources/news_lindau_meeting (see Stiglitz’s lecture, minute 1:36)

[3] Associated Press, “Recession will likely be longest in postwar era,” MSNBC (March, 2009), http://www.msnbc.msn.com/id/29582828/wid/1/page/2/

[4] Laurance Johnston, “Objective Science: An Inherent Oxymoron” (April 2007), http://brentenergywork.com/OBJECTIVE_SCIENCE_ARTICLE.htm

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