What can economists tell us about love and power,
why people are loyal, how groups form and how they get their members to
abide by the group's norms of acceptable behaviour? Not much.
Everyone knows conventional economics is built on a stick-figure conception of humans and the way they work.
Until now. An economics professor at the University of Queensland, Paul
Frijters, has attempted the remarkably ambitious project of developing a
unified theory of human behaviour, turning the mainstream model of the
economic system into a model of the socio-economic system.
With
help from Dr Gigi Foster, of the University of NSW, he's set it all out
in the book An Economic Theory of Greed, Love, Groups and Networks.
We'll find out soon enough what the rest of the economics profession
makes of it.
He starts with the principles of mainstream
economics, then adds and integrates selected ideas his research has
determined have considerable power in explaining human behaviour.
The
bit he starts with, which comes straight from the mainstream, is the
assumption that humans are carefully calculating maximisers of their
personal benefit. Or, as Frijters prefers to put it, ''humans are mainly
motivated by greed''.
This conception of ''homo
economicus'' - economic man - emerged in the Enlightenment period. In
the early Middle Ages, by contrast, materialism was seen in society as
strongly immoral, Frijters explains.
Even so, it's a quite
one-dimensional conception of human behaviour. We're a lot more
complicated than that. This assumption accounts for much of the
criticism of conventional economics (including from yours truly).
So
the ''core concepts'' Frijters adds to the conventional assumption of
''greed'' aim to broaden the model's explanation of human motivations
and behaviour.
The first concept he adds is ''love'', by
which he means love for other humans, but also love for one's beliefs.
''Love is defined as a form of unconditional loyalty, and will be said
to be present whenever a person would be willing to help advance the
interests of the object of his love, even if the object of his love
would not notice the help and even if the loving person would receive no
observable reward,'' Frijters says. So love includes the ideas of
altruism and loyalty.
''Selfish materialism is extremely
powerful in explaining many of our laws, our customs, our politics, and
our choices as consumers. Yet selfish materialism alone cannot lead to
the kind of human organisations we see in reality.
''I
expect to see love as a major player involved in almost every facet of
an individual's decision making ? Love within companies should be an
integral part of how teams of people actually get things done within
organisations.''
Another major criticism of the simple
model of conventional economics is its assumption that each of us acts
only as an individual, unaffected by the behaviour of those around us.
This means no ''economic actor'' has more power than another.
In
truth, humans are a group animal whose self-image is inextricably
linked to the groups of which they are part. And the reality is that the
dominant power relations in modern societies aren't between one
individual and another, but rather between individuals and groups.
So
the second feature Frijters adds to the mainstream view is groups and
the power they generate. Each of us is a member of any number of groups,
affecting our family life, social life and working life. Beyond that,
our religion, ethnicity and nationality make us members of more, often
powerful, groups.
It's because groups generate and exercise
power that they need to be added to the model. Power is the ability to
influence the behaviour of others. Part of this power comes from the
development of norms of acceptable behaviour within the group. Many of
us feel considerable loyalty to the groups we're in, which partly
explains why we confirm to group norms.
Frijters argues
there are five basic types of social groups: small hierarchies, with a
clear leader, a few of high rank and a group of underlings totalling no
more than a few dozen individuals in all; small circles of reciprocity,
with people who are equals and share a common goal; large hierarchies,
where members don't know each other; large circles of reciprocity; and
networks.
Networks are his third addition to the mainstream
view. They are facilitators of exchange - of goods and services, or
just information. They exists because of the need to overcome
''frictions'' in markets arising from the information and transactions
costs the simple mainstream model assumes away.
Individuals
search for goods, buyers and suppliers within networks of small size or
large anonymous networks such as the internet.
So how does
Frijters' model improve on the answers to questions from the mainstream
model? What questions does it answer that the mainstream can't?
On
the common questions of whether international trade should be
encouraged or protected against, what governments should do about
monopolies and how to discourage firms from polluting, his model doesn't
much change the conventional answers.
But it can answer
some questions the conventional approach can't. With its assumption of
calculating, self-interested behaviour, the old approach can't explain
why people go to the bother of voting when the chance one vote will
change the outcome is minuscule.
Frijter's model says people vote because they're idealistic and identify with the group that is Australian voters.
Nor
can the old approach explain why people don't avoid or evade paying tax
a lot more than they do. Rates of ''voluntary compliance'' are, in
fact, surprisingly high (though not as high as in the old days).
Frijter's
model says people feel loyalty to the group of fellow Australians and
conform to the social norm that paying taxes is a form of reciprocity
that's reasonable to expect of members of the group.
And
this is no idle question. He says getting people to pay taxes is
probably the single most important ingredient supporting our system of
governance.
