Dear Orio,
… A CRAZY IDEA: Ever since you told me about Wealth of Nations, I am very fascinated by it. I realize that standard economists do not accept your ideas. But your idea is essential! You are right that one needs people with experience of real economy rather than only famous university professors. It is necessary to think totally differently (as Einstein did in physics, and famous physicists could not). As I read and reread what you wrote and as I participated in e-discussions of WAAS organized by Garry Jacobs with talks by Bernard Lietaer, Gunter Pauli and R. Wray on employment, a crazy idea came to me: how about you, Garry Jacobs (he is a businessman working in the USA and in India - you met him in Zagreb in 2005 and then in 2007 at a smaller meeting) and Bernard Lietaer (he is concerned with money, complementary currency and
employment) and me joining in an endeavor of working on the wealth of nations. My role would be to ask questions, mainly foolish questions and constantly keep you all in the out-of-the-box thinking mode. The three of you have various experiences and ideas. If needed we can involve other people. This could be a project worthwhile as a report to the Club of Rome and to WAAS - an excellent way to connecting the two, rather than only through membership. Please let me know what do you think.
cordially ivo
Human Centered Economics
Dear Ivo
I read your proposal to Orio with very great interest. Far from a crazy idea, I believe it is an idea whose time has come. Your proposal for a working group is excellent. I am very glad you propose to take up the formulation of questions. That is of greatest importance, perhaps even more important than the answers we come up with.
I am tempted to propose a name for the shift from the old to the new paradigm indicating a shift in perception from a physical-mechanical process governed by impersonal laws of nature to a social-psychological creative process determined by conscious living beings -- from Newtonian Economics to Human-centered Economics. Human-centered has a dual significance: human beings are the principal initiator and determinant of the process and human development in its fullest sense, rather than merely wealth creation or even welfare, is the ultimate aim towards which it evolves.
Best regards
Garry
New Economics
Dear Jeff, Jose, Ivo and Garry,
for the last several months I could not quite catch up with many things: I spent a total of 3 months in hospital.....interesting experience !
I would like now to come back to some of the key issues in your correspondence.
The first one has to do with the debate on new economics ( in particular the email of Garry of october 30 to Ivo on "Stiglitz Soros article"): I have been studying this issue for the last 30 years, working in parallel in the chemical industry, teaching at the University, managing a Techno-Economic division at the Battelle Institute in Geneva and finally setting up what is now the Geneva Association ( 1973-2001 ) , the first world insurance research center( www.genevaassociation.org ). I did not have time to really get involved with economists establishment centers, altough I have known and organized initiatives individually with some of them.
This to explain why my ideas are "out of track" in rethinking economics. Here some basic premises ( If you are patient have a look at the annexe with more details ):
- first, one should remember then when "economics" was founded ( Adam Smith ), the first question was : how to produce more wealth
- therefore economists for over a century were supply oriented. Later they shifted over demand and haven't really followed in depth the evolution of supply : I discovered this at the time of the criticisms to the first report to the Club of Rome, based on :" how can one pretend a slow down in the economy , in a world with plenty of R&D, making supply more and more elastic and resilient ". Inflation demonstrated in the Seventies that prices were not enough to get short-term supply equilibrium , and a great largely unexpected development happened in another field (electronics ) .....
- Supply means production systems and today they are well beyond the industrialisation phase : services account for about 80% of the "production factors"
- The service based production system concern : first a research phase, where results are linked to probabilities ( often for long period of time ) ; production of tools and material items beeing more and more technologically advanced , require higher and higher capabilities to control vulnerabilities ( which are also linked to probabilistic events, and require maintenance services ) ; then we have the important distribution phase ( storing, selling, financing,etc. ) which also require maintenance and organization services ; products and systems then finally enter a PERIOD of utilisation ( THIS is when we get real value ) which is based on two levels of uncertainty : the period of ulilisation and the quality of performance (including accidents, performance costs); at the very end we have final disposal phase ( largely linked, but not exclusively, to the ecological and environmental issues) which in fact represent a kind of ex-post production costs
- Important to consider : there are no products without services and there is no service without proucts: in the industrial revolution phase clearly products were a priority ; in the present phase the grow of ( modern ) services is linked to the technological development, and they became the major reference in the production of wealth
- in this context, the traditional discussions about supply-demand equilibrium have only a limited sense. Value is linked and dependent on a probabilistic system. Equilibrium systems look more and more like an ideology. A clear reference are the operations of insurance contracts, which are marginalised by economic theory, even if Kenneth Arrow tried to assimilate them( wrongly ) to the banking activities to make them palatable for "normal" thinking.
Sorry to submit such dense ( and incomplete ) summary : but I get very little reading so much about "efficient markets" ( of course they MUST be efficient ) as if it would be enough to discuss IN GENERAL if they should more or less regulated; about asymmetric and incomplete information ( information where the value of products and services depends on FUTURE performance, is ALWAYS imcomplete ) ; behavioural economics is trying to find psychological explanations against obvious practical inconsistencies ( imagine what Karl Popper would say.....)
Happy new year !
Orio ( Vic )
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