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5.3.5. Parallels between Boulding and Luhmann: cybernetics and social systems

In his 1968 book Beyond Economics, Boulding identifies some of the methodological limitations of economic theory:

(i) the ceteris paribus assumption, associated with Marshall, involves isolating a problem by assuming that all other variables are held constant. The problem with this assumption, Boulding argued, is that it leads to results that are true only in a very limited domain, and there is a danger of over generalization.

(ii) the method of simultaneous equations, associated with Walras and the Lausanne School, based on the proposition that any system of variables, each of which can be written as a function of all the others, yields n of these equations that are consistent with one another (Boulding 1968: 10). This method often gives results that are mathematically correct but economically meaningless, such as negative prices.

(iii) t he study of macroeconomics, as associated with Keynes, consists essentially in using wage aggregates of economic variables as the basic parameter of simplified models, the exact properties of which can be fairly easily determined. The Problem lie in the generalizations within these models, such as the "level of employment", and the "price level". Furthermore, society has not become classless. Economic theory assumes that all individuals have the same starting point, the same possibilities. Only then can it be fair. This ignores such factors as (family) contacts, culture, and nationality, relevant to the competition to win business contracts, and parental income, relevant to receiving a university education. It also ignores the phenomenon of contracts won through bribery, which means that much business conducted outside the Western world must be excluded from the theory. Perhaps the problem is that economics in fact remains a moral science, as in the old Cambridge Tripos, "in spite of all attempts to dehumanize the science of Man" (Boulding 1968: 12).

Boulding takes as his starting point the ideas of a theory of change outlined by Schumpeter. As any pioneering scientist would necessarily do, he begins by asking what types of change occur in economics; and he concludes that there are two types: long-term and short-term. The biggest form of social change would be called a revolution. Revolution can be understood as a social reaction to a situation where there has been no hope of change for too long.

Boulding's social-dynamics perspective is inspired by Georgescu-Roegen's ideas. If economics is to be a science, it must use dialectical reasoning. But whereas Georgescu-Roegen thinks this relationship must be "extensive", Boulding holds it to be "relatively insignificant" (Boulding 1981: 20).

Boulding argues that there are two types of process at work in human history: one dialectical, involving conflict and the victory of one group over another; and one non-dialectical - incidental, cumulative, evolutionary, and continuous (Boulding 1970: v). Of these two he sees the dialectical process as merely waves and turbulence on the great historical tides of evolution and development. One of the problems with the dialectical process is that it focuses on conflict likely to lead to even greater conflict (op. cit.: 52). The process of biological evolution seems on the whole to be non-dialectical (op. cit.: 55). Boulding believes in the historical method, but whereas Boulding thinks that the future can in part be understood by studying history, Georgescu-Roegen disavows any predictions about the future (Georgescu-Roegen 1971: 335). Boulding himself acknowledges that the ability to predict is less robust than the ability to understand.

Boulding defines four processes through which we suppose that we might be able to gain knowledge of the future. These are: (i) random processes, such as throwing dice. For this method, recorded information is irrelevant. (ii) Deterministic mechanical processes, as used for instance when estimating future population figures; (iii) theological processes, in which movement through time is guided by some image or information-structure of the agents in the system at the outset; and (iv) the evolutionary process. Boulding (1970: 19) chooses to see human history largely as an extension of the evolutionary process from the biological into the social domain (an idea which goes back at least to Spencer).

According to Boulding (1981: 11) the evolutionary perspective presupposes that at any one point in time and space there will be an ecosystem, and with a given set of parameters this will move to an equilibrium where the rate of growth of all populations within it will be zero. This seems to conflict with his later critique of the equilibrium approach.113 However it is possible that Boulding, like Schumpeter before him, changed his mind. Boulding also criticized neoclassical economics for not having incorporated time and space as factors in their theories, even though obviously" all productive processes involve space and a fine vine will turn into vinegar" (Boulding 1970: 19).

"Bioevolution is characterized by constant ecological interaction, which is selection, under conditions of constant change of parameters, which is mutation" (Boulding 1981: 12). Put differently, mutation takes place in the egg, selection in the chicken (op. cit.: 65). The parametric changes can be physical, such as a change of climate, but the basic source of change is genetic mutation, that is change in the DNA sequence. Evolution is not a deterministic system, like celestial mechanics, because it is not an equilibrium system. It involves inherently unpredictable changes of parameters because of the longrun importance of improbable events (op. cit.: 69). As economic life is a subset of human activity, we should expect it to follow the general principles of evolution (op. cit.: 16). The principle of ecological interaction is the ultimate foundation of the evolutionary perspective (op. cit.: 11).

Like Georgescu-Roegen, Boulding equates human history with the evolution of artefacts. Human artefacts are of three kinds: (i) "things", material objects; (ii)organizations; and (iii) learning processes (op. cit.: 15). This is very much the Materialist perspective to economics we have argued for previously in this book. Material artefacts have developed from the flint arrowhead to the space shuttle; organizations have developed from the clan to the corporation; and people's minds have developed alongside these. Exchange is the mechanism through which this process is carried on. Exchange, which contains an element of reciprocity, makes the parties involved better off, hence more fit for competition. Labour hours and price are two examples, or forms, of exchange. Price may be seen as the expression of the balance or equilibrium of the social system of needs. Thus evolutionary economics may be more relevant as a version of economic theory in times of great transformation, like the one mankind is facing today through the globalization process.

According to Boulding (1985: 7) it was his year at the International Christian University in Japan in 1963-4 that led him to a renewed interest in evolutionary theory, which produced A Primer on Social Dynamics in 1970 and Ecodynamics in 1978. In 1970 he also wrote a book on Economics as a Science, in which economics was treated as an ecological science. We see how both Schumpeter and Boulding were open and akin to Asian ideas and analysis for understanding social economic behaviour through a direct cooperation with Japanese economists.

Even before that, in Beyond Economics (1968), Boulding defined a general theory of growth, which said that all growth phenomena have something in common. The phenomena can be classified into: (i) simple growth, the growth or decline of a single variable or quantity by accretion or depletion; (ii) population growth, that is births and deaths; and finally (iii) structural growth, as when a butterfly emerges from a chrysalis (Boulding 1968: 64). Growth phenomena in the real world usually involve all three types (op. cit.: 65). In the same book Boulding defines "social systems" as whatever is not chaos (op. cit.: 98). The best way to reduce the complexity of human history to manageable, systematic form is to break up the social system into subsystems (op. cit.: 101). The same logic is applicable to the human sciences.

The idea of the social world as made up of systems is an idea he held on to. In his 1985 book The World as a Total System we find the same idea of the social sciences as systems: "The social system is so interconnected that any division of it is a little arbitrary, but, as we shall see, we can conveniently divide it into the economic system, the political system, the communication system, and the integrative system" (Boulding 1985: 29). The same idea is also central to the philosophy of the German sociologist Niklas Luhmann, who published his classic Soziale Systeme the same year. Social evolution is also a central idea for Luhmann:114 "What evolves is simply meaningful possibilities, each possibility that is selected yielding new eligible possibilities". Only to the extent that money guides our choices does economics have strong predictive power in the social sciences, Luhmann concludes.

Boulding (1985: 31) divides the world into three kinds of system: physical, biological, and social. Social systems are an evolutionary development out of biological systems. They involve biological organisms that have the powers of communication, consciousness, and the ability to produce artefacts (op. cit.: 71).

One of the great differences between the socio sphere and the biosphere is the much greater importance of decisions in social systems for determining the future (op. cit.: 82). There are many ways of classifying social systems. Luhmann divides them into:

1. Subsystems of society:

a) Religion

b) Law etc.

2. Social systems proper:

a) Interactive

b) Organizational systems

3. Other systems.

Boulding, on the other hand, classifies social systems according to the nature of the relationships (1985: 83), into:

1. the threat system

2. the exchange system

3. the integrative system

The world economic system is seen as interacting closely with the political system and with organizations like the church, families, clubs, and so forth (op. cit.: 89).

Another biological idea which interests Boulding is Man's limited ability to understand his own environment. What we know is a function of what we can imagine. That is to say that our brain, not the external environment, controls and sets limits to what we are capable of understanding.115 This view, that we increase our knowledge of the world by studying the brain, not only by studying external reality, may be called a neurological approach to the social sciences. "We construct images in our minds of the world or even the universe as a succession of constantly changing states through time" (Boulding 1981: 9). Boulding shows great interest in this cognitive approach to the social sciences (cf. Boulding 1985: 9; 1956).

The belief that an image is true often derives from authority, or from evidence. In some cases we resolve the ambiguity of evidence by experiment. That only applies, however, to systems which are stable, repeatable, and divisible, such as chemical systems, where, for instance, all hydrogen atoms are essentially similar. We cannot do experiments on unique events or on the past (Boulding 1981: 10).

Boulding explains (1950: viii) that "the first focus of my dissatisfaction with economics is in the theory of the firm, or the economic organism, and its immediate relationships and interactions". This leads him to a "relationship" perspective on economics. We find the same parallel between the relational perspective of marketing by Gummesson and the Nordic School and Kotler's mechanistic and marginalist perspective on marketing (see e.g. Gummesson 2002). As such this Nordic school is very much founded in the European continental intellectual tradition.

Boulding's second focus of dissatisfaction (1950: ix) was with Keynesian macroeconomics, with "the failure to distinguish between the exchange of payment and the process of production". This led him to the process perspective on economics. Both concepts belong to what we should now call evolutionary economics.

We can follow the change in Boulding's perspective on economics through his books, from the more mathematical contributions he wrote while he was in Michigan, to the anything-but-mathematical writings of his Colorado years. What started as mere echoing of the status quo in economic thought developed into a strong, highly-differentiated contribution to the discipline of economics, turning him into a strong independent thinker, but also an outsider. Unlike many other evolutionary economists discussed here, Boulding never limited himself to any one perspective but continued to move in many different intellectual directions at once. This may have been his biggest weakness as an economist, in that he was unable to complete and present a coherent system of economic thinking.

To sum up, the academic community of evolutionary economists in America can be divided into two: on one side economists of the Midwest, inspired by the English-language economics literature, such as Veblen and Boulding, and on the other side the European diaspora, including Kiel School economists and men like Schumpeter and Georgescu-Roegen. Of the five groupings defined in this book, the third, fourth, and fifth can be described as evolutionary economists, while the first and second were groupings which made direct contributions to the discipline of evolutionary economics.

The purpose of this historical trajectory has been to show how the study of Geoeconomics can be based on the same ideas which are often referred to as an evolutionary approach. As such the study has a methodological foundation as a part of the study of economics. This does not mean of course that the evolutionary approach needs to lead to the study of geoeconomics. Instead geoeconomics can also be said to belong to critical theory and the normative sciences. The last chapter is basically about a number of normative examples and how to understand them.

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