What is economy?

Summary of the classical view of economy: “Economy is the production and distribution of goods and services filling the needs or wants of people (directly or indirectly).” Important terms: value, price, supply, demand, market.

The various classical critical views (Marxism, communism) build on the classical view of economy. They either (1) criticise the profit distribution by claiming that the profit is a result of the workers labor inherent in the goods and due to them (value theory) or (2) make the market or money responsible for negative effects of economy and want to revolutionize the system to get rid of the market or market&money or (3) want to go to an utopian need-oriented economy. Anyway the classical view of economy is accepted as the framework for economic thinking.

Helmut: I want to suggest an alternative view of economy: “Economy is the organisation of the distribution of labor.” Important terms: exchange, fairness, cooperation, risk, competition, synergy. – and compare this view to the classical view. imho the alternative view offers a number of advantages and chances which makes it superior to the classical views.

The Classical View of Economy

(1) Economics - a social science concerned with the production, distribution, exchange, and consumption of goods and services. http://encarta.msn.com/encyclopedia_761562677/Economics.html

Economics is concerned with the production and distribution of goods and services. Goods would be defined as anything that anyone wants or needs. Services would be the performance of any duties or work for another; helpful or professional activity.

… from http://www.mcwdn.org/ECONOMICS/GoodService.html (not an endorsement of this site, in general, but rather an apprectiation that they got this part right for our current uses.)

One of the fundamental assumptions of any Economic system is the concept of Value. We may start exploring this with an initial Observation that …

Criticism of the Classical View of Economy

We all have everyday knowledge about economy, about products produced by corporations and sold to us at shops … and hundreds of variations and detail. The definition above seems to correspond to this experience but looking at it critically, one can see that it actually means nothing: “goods and services” corresponds to “objects and actions” which is the most general dichotomy to divide phenomena in the universe - everything is either one or the other or part of it. The term “for the needs of people” also sounds good, but this is a subjective term and can be made to correspond to everything that happens caused by humans - humans do things because they want to, so we can interpret any activity as being related to “some need”.

So the classical definition can not be used to make a difference between things or activities related to economy or not. This can be shown by examples:

A useful definition of economy should enable us to answer these questions clearly and give supporting arguments. The classical definition does not and is therefore useless for any theoretical or scientific work regarding economy.

Questions to test Views of Economy

If someone plugs an an apple from a tree and eats it - is this economy or not?

CV (Lion): probably yes, there are all aspects of economy.
AV: No, there is no aspect of work distribution.

If someone molests children or pays to be allowed to - is this economy or not?

CV (Lion): Sex with children? Economy? I don’t see why not.
AV: No, it’s not economy, because it can’t be subject to public negotiation of work distribution. It also isn’t taxed, so it is not part of classical economy, too.

If someone writes free software that other people use without paying - is this economy or not?

Has economy to do with money or not?

Criticism of the alternative view

The alternative view underemphasizes the generality of concepts that deal with “goods” but not “labor”. For instance, how is real estate distributed? Or, to take an extreme example, what if some kind of wonderful works of art (or entertainment, if you think art must be produced by humans) were not manufactured, but simply fell from the sky into convenient spots?

Classical theories of supply and demand will help us predict the price of the real estate or those works of art even though no labor was expended in producing the them (the answers to the three questions “how many works of art fell from the sky? how many people want them? for each of these people, how much is that person willing to trade in order to own them” can be used in conjunction with the theory of supply and demand to predict the price of the works of art).

So, although price can often be seen as a symbol used in the social calculation of the distribution of labor, it is not always like this.

It is true that within AV labor is top-level while “goods” or “value” is not. This is an advantage relative to CCV (classical critical view) because this has to complicately claim the importance of labor into the system by use of a doubtful “value theory”. But AV doesn’t need this.
It is not clear what CV does with respect to “goods” and “price” except the trivial statment that rare goods or higher demands mean higher prices, which is quite natural and doesn’t need much economic theory.
With AV the price ia a free negotiable measure of exchange, which - like any price - may be fair or unfair. Societies need to control fair prices and they do (e. g. by laws against fraud). Societies usually also try to avoid monopolies because they tend to unfair prices. – The role of private property in AV has not yet been worked out. It seems that economy doesn’t necessarily need large-scale private property, especially of great works of art (which should as human inheritage probably be in a museum) or large real estates (which should be available for communal economic organisation, if they needed and better used that way).

Preliminary Theses of the Alternative View of Economy

0. Economy is not fundamentally about filling needs.

1. Economy is the - inevitable for us - organisation of the distribution of labor.

2. The fundamental aspect of economy is the exchange. Exchange is used as a purely technical term and does’t imply trading or thinking about value.

3. Cooperation is the conscious and planned exchange. Cooperation is fundamental for life and exists everywhere (e. g. communication is cooperation by exchange of information)

4. The reason for exchange and cooperation is the advantage that comes from it (synergy).

5. There are a minimum of four perspectives of cooperation: the two partners (e. g. named Alpha-partner and Beta-partner), the partnership itself and the enclosing Wholeness (e. g. the society). The ideal cooperation results in advantages for each of these perspectives.

6. The side-effects of the distribution of labor and cooperation are dependencies and risks. Some partners can live with these, but not every partner wants to do this in every situation.

7. Partners can reduce risks by looking for alternative partners. If they succeed they create the situation of competition for their partners. Competition can also be caused by other reasons, e. g. accidentally, in agreement or because some cooperation has been disturbed.

8. Positive behaviour in competition focuses on increasing the own abilities and attractivity for the cooperation partner. It resembles a fair sports contest. It strengthens the partners and the wholeness.

9. Negative behaviour in competition wants to weaken the competitor (fight), damage him (violence), make him unable to compete (war) or create a monopoly (domination). All this hurts the wholeness. It’s the natural control function of the society in its own interest to prevent such negative behavour in competition.

10. The fundamental aspects of economy - repeated from (1) - are labor and the fair distribution and exchange of labor and economic advantages that come from cooperating. To controll this is the central function of society. This is also the core of a new “Ethic of Economy”.

Economic problems

1. Ecological problems enforce a reduction of economic growth rate, especially in terms of energy and resource consumption. Can a “growth of quality” be defined and made independent from “extensive growth”?

2. Growing unemployment in the western states. What economic mechanisms are available to increase employment without increasing the production of goods (which is trivial and counterproductive to 1.)?

3. What happens when intelligent robots are produced that cheaply replace human labor. Does the majority of humans then become superfluous because of a successful corporation? What kind of thinking will guarantee all humans an existance and a living in this situation?


Hans, you are probably the economic expert among us. May I ask you to draw the classical picture of economy? – Helmut

Hans, it’s probably a bit unfair but before I start criticising (I hope that this will be interesting to all of us) the “concept of economy”, I would want you to extend the definition. What are “goods and services”? – Helmut

Helmut; I thought it best to take advantage of existing work that appears to suit our purposes, and will try to continue to do so, unless there is some reason not to build on existing knowledge. – Hans

Hans, do you agree to the summary? I removed “consumption” because I think it is debatable whether this is part of economy. I removed “exchange” because the idea of value and the money system replaces the need for direct exchange of goods or services. But if you think these terms are essential, we can add them to the summary. I added “directly or indirectly” because I know from other discussions that with practical examples this always must be added as an afterthought. – Helmut

Reason for this page

Helmut: I want to criticise, actually crash the classical view of economy (all classical views) and replace it by a different view. This is based on recent discussions in German communities. I now want to put the intermediate results of these discussion to the critical test of the cw community. I am happy if there are defenders of this classical view (these classical views).

My general view is that when there are alternative, reasonable definitions for a subject like this that in practise both end up encompassing mostly the same thing, that both should be accepted as different “facets” or “perspectives” on the subject.

I don’t quite get the distinction, or where it leads. One focuses on the components of the system (goods & services, distribution, needs,) the other focuses on how they connected together (the organization of those things.) Or at least, that’s how I make sense of the puzzle over on my end.

The importance? Not clear to me.

Of the examples:

  • someone takes an apple from a tree, and eats it – is it economy? I think so; There is an availability of apples. There is the desire for an apple. There’s a cost in energy at picking the apples. There’s a strategy for retrieving the apples. The apples are goods, the distribution is the picking, the need is the desire.
  • sex with children – economy? I don’t see why not. Are you suggesting that because something is illegal, it is not an economy? (Shall we throw out illegal drug trade, as well? Is it economy before it’s illegal, and then the day it turns illegal, suddenly not an economy any more?)
  • does economy have to do with money? – sometimes yes, sometimes no, I would think that depends on your distribution system.

I agree; the word “Economy” does not say much. I suspect that it just activates certain types of thinking, and deactivates other types of thing, on a very fuzzy basis, without a clear meaning or specific results.

I’d be more interested in the explanations that come out of the organization-centric concept of Economy.

Ok, I’ll add some theses of AV.

I hope to be able to show how “functional” in a technical sense this framework is and how efficiently it can be used to give clear answers or create innovations.

Economy definitions are many and we could debate them at great length. Personally, however, I feel the need to ask “Why?” (would we do so).

I ask this not because such a debate is without interest, but rather because I have an Economic interest in the way I use my Time. I value it highly. I can even express how highly I value it by setting a Price on each hour that I “work”, as well as setting a value on the economoc costs of my “play”. By doing so, these respective Values that I set on my time allocations, help me assess the state of my current situtation and thereby decide on what adjustments I wish to make in my future allocations or ‘plans’.

There are very many points that can (and inevitably will) be made on a page like this. Whatever we wish to accomplish with these posts should be clearified, lest we ramble on, merely expressing individual opinions.

I quite like Helmut’s start at an answer “…how efficiently it can be used to give clear answers or create innovations”.

I have just started to read: http://www.benkler.org/wealth_of_networks/index.php/Main_Page and I feel that it is really a great resource on the ‘The Economy and The Internet’ subject.

there is a difference between benkler and us : he is writing about wikis, we are writing wikis .
and there is a difference in writing here . you may write about money and economy, or you may write it ;)

Hans, the question “Why?” is very justified. I feel three reasons:

First I think that we (as humans) are deep in economic problems (globalisation, ecology, running-out of oil, need for zero-growth eventually) and lack the intellectual means to solve them. The only answer given (free market/economy) is ritual and not credible. (see positive and negative behaviour in competition for reasoning)

The second reason is TheHumanAsaMedium, where I feel to connect some German communities with similar needs here, although the US public consciousness seems to have extreme problems to think in terms of “beyond money” making economy almost a religious thing. This means: The topic is in the air.

The third reason is the CommunityWikiBank which needs orientational knowledge to succeed, even if we only look at the first step, its experimental setting. (my suggestion is derived from the basic view of economy given above, that the bank can produce advantages and money by organising the exchange of labor)

Helmut, I wish we could agree on using Daniel Quinns “BeyondCivilization” as a MemePool to discuss this topic.

I won’t mind ordering and reading it, if you think it is that important. But it will take 3-4 weeks to become effective with me. I do not know how it should become effective for the discussion except if you add and explain all the important memes.

In general I’m not optimistic neither in “taking a book as basis” because books are written for many reasons (e. g. to entertain, to be sold, be defendable, to build an image) which are not problem-oriented, nor for “beyond civilization” as a semantic meme, because I don’t think there is a “beyond” except in the case of some atomic total world destruction - all other options seem to be “changed civilization” which doesn’t seem spectacular because civilization changes every day.

Ah,… I think I’m seeing it, Helmut:

The business environment is a social construction for the benefit of society, yes?

It’s not something that exists on it’s own, in this lawless dimension, just for the benefit of whomever can figure out how to take advantage of it; This is what you are saying, right?

I feel like I’m seeing something, and I’m having a hard time putting it into words. This suggests that language can be built and formed.

keywords: prioritization, priority, value, economy, public will, the social institution of business, counting what is not counted, direction, hive vs. individual, valuation, price of time, the cost / expense of ethics, punishing the ethical - aka TragedyOfTheCommons, business ethics

a link: "far less emphasis on business being an institution of society whose final end is to serve the common good."

MarkDilley’s interest in “bringing in the newcomers” also seems connected to me, as well.

I believe I can see a case for urgency in the conversation, given CyberneticEconomy.

I also want to tie in “UnconsciousChoice?,” and perhaps even WhatDoPeopleWant?.

Lion, you can put it that way (“social construction”) although I think it is not necessary to define a causal relationsship in a situation of intertwingularity (Ted Nelson). However economy developed, it is a phenomenon on the social basis of society and must not harm society, otherwise the rules of the game must be changed. The point is, that the game of economy together with some accompanying myths are not really visible as something constructed and invented that can be refactored or reinvented anytime in case of a need. I think there is a need and therefore I think that we must transcend the barriers of traditional thinking and language terms to grasp the phenomena themselves.

Neat! OK! I get it!

It should say that at the top of the page somewhere.


Define external redirect: UnconsciousChoice WhatDoPeopleWant