Seeking Clarity in Economics

Economics is a grab-bag of different items, and if someone were interested in coming up with a new comprehensive theory of economics, it is not possible without including a huge amount of social arrangements.

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Economics is such a muddle as the main concepts have not yet been well defined or accepted as the main concepts. An incredible amount of work goes on in accounting details, while the important points remain obscure. To seek clarity in economics, these main concepts must be defined and made very explicit.

One can paint the label of economics on a wide variety of topics, and many of these topics have great amount of detail in them. One problem with making definitions is that in order to achieve clarity, there has to be some agreement on what the principal topics are, and then let the rest be subsumed under them. First some negatives need to be listed. Main topics in economics do not include: money, debt arrangements, productivity, taxation, pensions, investments, and precious metals. These are subtopics that need to be looked at as part of a larger picture. They are details, and although the details may be more involved and therefore more interesting than the big picture, they are still details. Until the big picture is chosen, they remain unconnected and rather incoherent, even if the details that are discussed are defined with precision and clarity.

The principal concepts are products of activity and consumption of those products. This is what ensures life or death, and quality of life as well. Everything else is details about how these two items are distributed among the population, and how they change with time. Production and consumption are done by individual humans. Activity is any action by a human. Some actions can be highly productive, such as the finding of a new source of food, and other activity can be destructive, such as setting fire to a new source of food. Consumption is any activity that uses up some product.  Intermediate consumption, which is used to produce some other product, is bundled under production, not consumption.

It should be obvious that starting with these definitions does highlight something essential, but it should also be obvious that economics is not a stand-alone subject. Certain details, with carefully prescribed limits, can be treated separately, but the big picture of economics includes all the social arrangements that affect production and consumption. Thus there is no subject of economics from the big picture point of view. There are a hundred little prescribed subjects of economics, but they should really be connected to the big picture of socio-economics, or whatever name is preferred for the larger subject of how production is accomplished and how it is distributed for consumption.

Socio-economics is all about the rules or customs that might be used to make arrangements for production, distribution, or consumption. It would likely be useful to creating a new economic, or rather socio-economic, theory, if there was a breakdown of the topic, so the way would be clear to connect all the myriad details in various categories of economics. Rules for production could also be called a theory of labor and capital, as those are the two components for production. Alternatively, the time of an individual can be spent in production could be the measure. Productivity, the rate of production per unit of time, can be increased by the availability of what might be called the tools of production, which could be any of a thousand things involved with construction, manufacturing, agriculture or any other subset of production.

Productivity, in some areas of production, can also be increased by some psychological effects, which can be referred to as motivation, or attitude, or interest in the production. In other areas of production, there is little variation due to psychological variables. A third area that affects productivity is the skill or talent of the individual. Besides individual variation, there is an effect due to training. Given this simple division, one of the top categories in socio-economics could be called production, and the subcategories under this, time arrangements and productivity factors.

In time arrangements, a slightly deeper description is the arrangement of who does what production and for what time. Inside this are the social arrangements that set the rules or customs for who does what task of production. On the productivity side, there is the question of who uses what tools of production, and who receives what training. If there is a social hierarchy or some way in which some individuals make decisions for others, there is the question of who makes the decisions as to who works, for how long, at what task, with what tools, and with what training. Then there is the question of who enforces these decisions, if they are not done at the individual level, and how the enforcement is accomplished.

The second of the top categories, distribution, is often linked to production, but there is no reason for this as they are separate actions that can be taken with no consideration of one another. Alternatively, there can be linkages of many different types, set up by rule or custom. To be very clear, for each unit of production, there is some distribution of it. Who gets what, under what circumstances and who decides and who enforces these choices, mirroring what has to be defined for production.

For both production and distribution, there can be more or less centralization of the decision-making. Systems can be defined with as much decision-making down at the lowest levels, and alternatively, there can be a society-wide set of rules or instead, a set of decision-makers who make choices, revising them as they choose as well. If the society is working according to certain rules, what are they, and how are they changed with time, by who and in what manner. If the society has a group of decision-makers, how are they selected and how are they changed.

Consumption is the obvious third top-level category, but it does not have as much detail as the former two. With consumption, there may be some rules as to timing, as to when consumption can be done or how much product that is distributed needs to be saved or preserved, for those items which are not perishable in short periods. Rather than put re-distribution under one of the consumption options, it seems more coherent to put it in the distribution category, and leave only the choice of consume or save under the consumption one.

Rules for either of these three top-level categories can exist, meaning that, if they are complete enough, all the individuals can understand how these processes would work, if the rules are followed. Owing to the complexity of almost any society, the rules cannot be complete, and there has to be some method by which different interpretations can be judged. There also needs to be a choice of who codifies the rules, and how the society comes to accept them.

There would seem to be a blurry division between a set of rules that require some individuals to make judgments about their implementation, and a set of individuals who make decisions in lieu of rules. How much arbitrariness is allowed, or in other words, does the set of decision-making individuals have to follow some unwritten rules or customs, or can they just decide randomly? Another aspect is the complexity of the rules. If they are very simple, all can understand and remember them, but some interpretation may be necessary frequently. If they are very complex, few can be aware of them in all their detail, and there would need to be an available source within the society to know the rules and to explain some aspects of them when a situation arose that required it.

The implications are that someone interested in devising an economic theory cannot simply do that; instead a socio-economic theory has to be devised which has multiple social arrangements within it and many separate rules. It would be mandatory for the socio-economic theory to describe the decision-making hierarchy for deciding on production, for deciding on training, for deciding on distribution, for deciding on savings of production, for deciding on the production of productivity tools and their distribution or use. It would have to describe how enforcement power was arranged for and how it could be used, with details as to what limits would be necessary. It would have to describe how rules, if there were any, were to come into being, how they would be communicated to everyone who needed to refer to them, and whether the choice would be simple rules with a set of interpreters or complex rules with a set of explainers. Then the enforcement question relative to the rules needs to be answered. Once these choices were made for a socio-economic theory, the next level of details could be examined.

These requirements seem formidable, but if they can be done, there is a further question as to how could such a socio-economic theory be judged. If there were many of them, which ones might be preferable? What are the criteria by which such a theory should be measured? There are many factors that could be used to make a prioritization of such a set of theories. Finally, what would be the use of such a theory? If any society is already functioning with one, why would the status quo not be the most attractive? One that was already accepted and tested might have these grounds for being chosen. In other words, we are back to the question of what is the goal of a socio-economic theory? Perhaps it has no answer.

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